What happened
Week to date, shares of Gap (GPS 5.59%) were down 8% through Thursday's close, according to data provided by S&P Global Market Intelligence. That drop added to a tough period for shareholders, with the retailer's stock declining 11% so far in 2023.
This week's slump came as Wall Street continued to digest news of falling sales and an impending management shake-up.
So what
Gap revealed on March 9 that sales trends took a step lower in late 2022. Comparable-store sales fell 5% in the fourth quarter, in fact, as the company swung to an operating loss. That revenue result met management's expectations, but Wall Street wasn't thrilled to see Gap generate a $69 million operating loss for the past year compared to an $810 million gain in 2021.
The company is also seeing big changes in its management team. Several additional executives, including the CEO of the Athleta business, are departing. Gap is currently searching for a replacement in this key job in addition to evaluating candidates for the CEO role. Given its weak operating results, the executive turnover has Wall Street feeling less certain about its rebound hopes.
Now what
Gap is focused on making it as easy as possible for the new CEO to quickly implement a turnaround plan once they step into the position. The retailer is reducing inventory, partly through promotions, and slashing costs to reduce losses. These moves should help boost profitability in the coming quarters, but they are only a part of a wider growth strategy that will also target steadier market share gains.
Investors don't have many good reasons to buy into that bullish outlook, especially since there's so much turnover happening in Gap's executive ranks. Wall Street doesn't like this uncertainty, and so it's no surprise that the stock is still under pressure even as the wider market rallied this week.
