Our Second Nominee for CEO of the Year: Glenn Murphy

My praise and contempt for CEO actions is pretty well known around these parts. I've been running a weekly series looking at CEO gaffes for nearly nine months now (with seemingly endless material, may I add), and recently I've begun highlighting incredible CEOs who deserve a pat on the back. Last year I even listed my top 10 CEOs of the year and my 10 worst CEOs of the year.

However, this year we're changing things up a bit, and we're putting the ball in your court! This year The Motley Fool community is going to decide who the best CEO of the year is, and which CEO should be banished to a distant island.

Each week, over the remaining seven weeks, I'm going to highlight one CEO who's worthy of being the best CEO of 2012, as well as a CEO who could easily be called the worst of 2012. In total, you and your community members will have eight great CEOs and eight terrible ones to choose from when voting commences in November. For reference, here is last week's best CEO nominee.

In the meantime, I encourage you to get the discussion started on the CEO of the Week board. Although I do have all CEOs hand-picked already, these selections are by no means set in stone. If you can offer me your top picks for best and worst CEO, as well as your reasoning, you may just find your nomination in the spotlight.

Without further ado, I give you the second nominee for CEO of the Year: Glenn Murphy, CEO of Gap (NYSE: GPS  ) .

Why Glenn Murphy?

  • Made Gap relevant again: I personally never thought I'd say this, but Gap is once again relevant in the retail world. Gap has been handily outperforming its peers, reporting same-store sales growth of 4% in the second quarter, and a 5.6% increase in sales in its most recent quarter. Growth has come from both its namesake Gap brand and Banana Republic brand, and drove the best first-half same-store sales growth in nine years!
  • The right merchandise and the right people: For the longest time, having the wrong merchandise in its stores and being unable to put the correct people in charge doomed Gap. That doesn't seem to be a problem anymore, especially with Gap's recent appointments of Jill Stanton, former vice president of global apparel for Nike (NYSE: NKE  ) , to advise the Old Navy brand, and its hiring of global marketing genius Seth Farbman in 2011. Hiring experienced people is making a big difference.
  • Actual innovation: Yes, I did just say Gap and innovation in the same sentence -- don't fall over. Gap has successfully been pushing its products online, through both its website and social media, to double the efforts of its increasingly effective marketing campaign. It's also been experimenting with new product in its stores more so than in the past, which has given the company a broader appeal to consumers.
  • Margin expansion: One of the biggest complaints I've had with Gap over the years is that it couldn't control its margins. Whether it was rising cotton prices, high inventory levels that led to huge discounts, or just the wrong product, Gap always seemed to lag its peers. Perhaps Murphy's greatest accomplishment in 2012 has been the reduction in discounts at its flagship Gap stores, which, may I add, come during a time when consumer spending growth is slowing. Gap's peers Aeropostale (NYSE: ARO  ) , Abercrombie & Fitch (NYSE: ANF  ) , and Wet Seal (Nasdaq: WTLSA  ) have all struggled with excessive discounting and have seen margins suffer because of it.
  • Performance: Normally, Gap would make it onto the dunce-cap list for its performance, but not in 2012. Glenn Murphy's turnaround has Gap shares up 97% on the year -- good enough to be one of the S&P 500's top five performers this year! Despite the run-up, Gap shares are still trading for a reasonable 15 times forward earnings and sales are expected to tick higher by 10% per year over the next five years, according to Wall Street estimates.
  • Giving back to shareholders: Finally, Glenn Murphy and the Gap board did a good job of rewarding shareholders in 2012 (in addition to the 97% return in Gap's share price). On top of approving $1 billion in additional funds to be used for share repurchases, Gap boosted its annual dividend 11% to $0.50. Although Gap's yield of 1.4% isn't going to light your world on fire, its quarterly payout has risen by 47% in just the past two years and could head higher as its margins expand.

Is Glenn Murphy the CEO of the year? That's going to be up to you and the rest of The Motley Fool community to decide. In the meantime, come back on Tuesdays and Thursdays for the next seven weeks for the latest CEO nominations, and be sure to hit up the CEO of the Week board to voice your opinion to the community.

Gap has definitely made its mark on the retail world in 2012. Find out the identity of three other stocks that our analysts at Motley Fool Stock Advisor feel are poised to rule the retail world. Click here to get your copy of this latest special report, for free!

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He loves giving credit when credit is due. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

Motley Fool newsletter services have recommended buying shares of, and creating a diagonal call position in, Nike. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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