NEW YORK (CNN/Money) - Gap Inc. chief executive and president Millard "Mickey" Drexler is retiring, kicking off a search for a successor to guide the nation's largest apparel chain out of a slump.

Gap (GPS: Research, Estimates) has been struggling with double-digit percentage sales declines in recent quarters as it tried to put more fashionable items on its shelves and fewer basics, alienating its core 20-to-30-year-old customers. Meanwhile, discount chains such as Target Corp. and Wal-Mart Stores Inc. have diverted sales with their lower prices during an economic downturn.

Merrill Lynch cut Gap to "neutral" from "strong buy" following Tuesday's announcement. Gap shares fell $1.45 to $14.55 in before-hours trading Wednesday.

Gap Chairman Donald Fisher and several board members were appointed to lead a search for Drexler's replacement. Drexler, who has been with the company for 19 years, will continue as CEO and President until the board names a successor, the company said in a statement.

Gap Inc. President and CEO Millard Drexler plans to retire as soon as the board names a replacement.

"In launching a search for a new CEO and President, the board will be looking for someone with broad experience and leadership skills to move us forward, create sustainable growth for Gap, Old Navy and Banana Republic, and drive long-term shareholder value," Fisher said.

The company plans to name a new Gap brand president this summer.

Drexler is credited with much of Gap's success in the last decade, as the company struck a chord with consumers during an emerging casual office dress trend with its khaki pants, polo shirts and other wardrobe basics.

But the company fell out of favor in the last few years as Drexler tried to offer more fashionable items some analysts called far-out, in an effort to compete with other specialty chains that had begun to steal some of Gap's thunder with basic apparel offerings of their own.

UBS Warburg retail analyst Richard Jaffe said in a research note Tuesday that he is maintaining his "buy" rating on the stock, noting Drexler's recent efforts to return basics to the stores.

"We continue to believe that the company has been making incremental improvements in its product offerings at all divisions," Jaffe said. "We believe that fall and holiday assortments are largely complete, and that most marketing and merchandising decisions have been made and implemented."

Last week, the San Francisco-based retailer reported fiscal first-quarter earnings that were sharply lower than a year earlier. Sales fell in all of Gap's major lines, including a 20-percent drop at U.S. Gap stores, a 19 percent drop at Gap international stores, and an 18 percent decline at Old Navy stores.