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Yahoo Finance anchors discuss the leadership change at Gap and what it means for the stock.
- Let's also talk about Gap here this morning. Problems mounting for the company. CEO Sonia Syngal is stepping down from her role effective immediately. The executive was once considered key to a possible turnaround here.
Over that time period, I mean, we had seen some major partnerships that Gap was able to take advantage of. Of course, speaking of the notorious gay, if you will. But at the end of the day, it still comes down to the brands that had done well for them, Old Navy, Athleta, and growing out that business, but where else had this business continued to struggle. It was in some of the other subsidiaries that quite frankly weren't as flashy in this fast fashion era as they perhaps needed to be to hold on to some of the customers that are flocking to the other competitors out there. An H&M Zara even, but for Gap, you're seeing that directly being priced in to today's move as well as some of the downgrades that have come along with this too.
- I'll do what I can to contain myself here, but you're looking at, essentially, a company in crisis mode. And that's a story we ran with on yahoofinance.com. Encourage everybody to take it a listen. A source telling me that, essentially, single was pushed out. The board viewed that it was time for a change.
And this comes after several earnings warnings from this company, and you got the sense that she and her entire management team. Look, you're having an executive chairman of the company take over, not the CFO, which I think is very telling and a sign a lack of confidence and not just the work that Syngal was doing, but also her whole leadership team, which might get changed as a result here. But, look, several earnings warnings from Gap. Another Warning today in that buried at the bottom of their press release. Sales down, high single digits percentage in the second quarter.
They came into this quarter with inventory up 34%. You have to think it's now even higher because of that. Just a complete sense of mismanagement of the business. Not being able to read the room, not being able to navigate through the COVID crisis. Look at the results here from Gap compared to what we saw from Levi's last week. It is night and day. Here you have Gap just struggling at the bottom, and you have Levi's and its management team best in class navigating through this environment.
And I'll add this. You now have the executive chairman Bob Martin running this company. He has been on the board since 2002. In large part, he is amongst a bunch of folks they're to blame for the mismanagement of this company.
And I go back to January 2020. That is when Gap came out and said they are not splitting off the division, splitting up the company, siphoning off Old Navy, siphoning off Athleta. At the time Gap, shares were down over about 20 bucks. There are about $8 a share right now. It is the likes of Bob Martin and many other executives that have been on that board for more than five years. They have destroyed value at this company.
- Well, and you also had-- you and I were discussing this before the show this morning. The Fisher family, which founded the company, still controls the company. And so, while you can look to the board, they control the company, they help influence the decisions, including the likes of who's going to be sitting in the CEO seat. So you also have to look to them.
I mean, this was not just Sonia Syngal's issue, right. The issues at Gap, to your point, are long-standing. And just for a long time, Gap has been chasing instead of leading in the retail space and in terms of really being attuned to what customers want. I want to go back to the forecast for just a minute here because I've been looking at some of the analysts' commentary this morning, and they are saying more markdowns are coming for Gap. Which is, obviously, not good news.
The retail cycle has been so fascinating during the pandemic. Pre-pandemic, we were all used to sales all the time. The retail industry was stuck in that place. Gap, in particular, you know, I don't know about you guys. I was getting the gap emails constantly about the sales. Pandemic happens that promotional cadence largely ground to a halt. And for the first time in years, retailers were able to sell things at full price.
Now, we are snapping back again to what it was like in pre-pandemic for many of these retailers. And obviously, for ones like Gap that are positioned with this excess of inventory and are behind the curve fashion-wise, they're in the worst spot.
- Well, the spot that they find themselves in and the only kind of entity that sends more emails than Gap is Target at the end of the day. So that's a rivalry that they have to be concerned about. Because Target's also trying to get rid of inventory as well, that can directly rival with anything that Gap is going to put out there.
- Well, you've got to look at Urban Outfitters. You got to look--
- Of course.
- --at American Eagle. You got to look at Abrico-- like all of those--
- And it's more fun to wear that.
- --specialty retailers are going to be in focus.
- Let's be clear. This can't continue. And now they appointed a new leader of Old Navy, the Walmart-- the CEO of Walmart Canada. You do not bring in the CEO of Walmart Canada, where he managed, I believe, 70,000 employees, if a spin-off of Old Navy is not back on the table. It has to be because they're going to have to raise cash. This can't continue.
- Yeah. Well, the stock's not trading like anything positive is on the hori--