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Fri, May 24, 2002 - Page 21 News List

Gap hunts for leader with corporate sense

NY TIMES NEWS SERVICE , NEW YORK

More than anything else, it was Millard Drexler's sixth sense for fashion that helped Gap develop into a US$14 billion dollar company over the last two decades. He fueled the movement toward casual dress in the US workplace by making khakis seem urbane and artistic, and white T-shirts as appropriate with US$3,000 suits as French cut dress shirts and ties.

When Gap Inc went wrong, everyone at the company's headquarters said it was because Drexler's fashion sense was off course. There was too much magenta leather and there were not enough demin skirts.

But when Gap Inc announced that Drexler was resigning as chief executive and they were searching for a replacement the company was clear: merchandising experience was a low priority.

"We are looking for someone with experience running multiple divisions and with general operations as well as marketing experience," Don Fisher, the company founder and the chairman of Gap's board of directors, said on Wednesday. "They have to have consumer goods experience, some connection with the customer. If we find it with retail experience it would be preferred," he said, but not necessary.

Gap's basic reasoning is that its business is increasingly unwieldy.

When Drexler, who is known as Mickey, joined the company in 1983, it had US$480 million in sales and 500 stores. Now it has three of the biggest brands in the business -- Banana Republic and Old Navy are wholly owned divisions -- and 4,200 stores around the globe.

"Frankly, this company is so large that it needs a different style management than Mickey was giving it and he recognized that," said Fisher. In the future, Fisher said, he hoped that Gap Inc headquarters would handle issues like information technology, dealing with Wall Street, and how best to manufacture its products in the complicated global market, and leave merchandising to the executives in charge of individual brands.

Still, while branching outside of merchandising for leadership has become increasingly popular for retail and even fashion-based companies like the Gap, it is not without pitfalls. "It is an interesting dilemma," said Kirk Palmer, chief executive of the New York-based research firm that bears his name. "With the industry graduating to a different level of complexity, we need leaders who are broader than the merchandising component to take us to the next level." Still, he said, "I can't name a company in retail-fashion-apparel who has placed a non-merchandising chief executive with a successful track record."

In fact, the most visible retailing executives without industry experience -- most notably Robert Nardelli, who moved to Home Depot after being passed over for the top job at General Electric; Philip Marineau, who took the top post at Levi Strauss & Co after being chief executive of Pepsi Cola North America; and Mark Sarvary, a former president of Nestle Frozen Foods, who recently resigned from the top job at J. Crew -- have had very mixed records so far.

Home Depot has had substantial earnings growth, but investors have become concerned that it is being outpaced by its rival, Lowe's. Levi Strauss has been posting sales declines for several years despite Marineau's prediction that sales would start increasing as soon as 2001. Sarvary, for his part, was criticized by company staffers for not understanding industry basics like differences in fabrics and style terms, and sales have slumped over the last 18 months.

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