Art Peck became the CEO of The Gap, Inc. (NYSE:GPS) in 2015. First, this article will compare CEO compensation with compensation at similar sized companies. Then we'll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.
How Does Art Peck's Compensation Compare With Similar Sized Companies?
Our data indicates that The Gap, Inc. is worth US$6.7b, and total annual CEO compensation was reported as US$21m for the year to February 2019. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.5m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. When we examined a selection of companies with market caps ranging from US$4.0b to US$12b, we found the median CEO total compensation was US$6.8m.
It would therefore appear that The Gap, Inc. pays Art Peck more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see, below, how CEO compensation at Gap has changed over time.
Is The Gap, Inc. Growing?
Over the last three years The Gap, Inc. has grown its earnings per share (EPS) by an average of 16% per year (using a line of best fit). The trailing twelve months of revenue was pretty much the same as the prior period.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. You might want to check this free visual report on analyst forecasts for future earnings.
Has The Gap, Inc. Been A Good Investment?
Given the total loss of 24% over three years, many shareholders in The Gap, Inc. are probably rather dissatisfied, to say the least. It therefore might be upsetting for shareholders if the CEO were paid generously.
We compared the total CEO remuneration paid by The Gap, Inc., and compared it to remuneration at a group of similar sized companies. Our data suggests that it pays above the median CEO pay within that group.
However, the earnings per share growth over three years is certainly impressive. However, the returns to investors are far less impressive, over the same period. One might thus conclude that it would be better if the company waited until growth is reflected in the share price, before increasing CEO compensation. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Gap.
Important note: Gap may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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