CEO on the hot seat: Paul Pressler, Gap
Sales trends are moving in the wrong direction as is the stock. Pressler is making some of the right moves, but can he get the merchandise right?
By Jon Birger and David Stires, FORTUNE

NEW YORK (FORTUNE Magazine) - Gap's clothes have lagged the trends, and its product mix has been off, which has dragged down same-store sales 13 of the past 14 months; the stock fell 30 percent in the past year.

An exodus of executives, inconsistent marketing messages, heavy discounting, tired-looking stores, and tough competition have earned CEO Paul Pressler the nickname "DMW" -- for dead man walking.

Opportunities

To revive the Gap brand, Pressler's hired a new fashion director and marketing chief. And he's testing a more colorful store concept to replace Gap's stark boxes.

He's made sure that the stores are starting the year with lean inventories; that, combined with a new system to source goods closer to stores to speed deliveries, should help reduce the need for discounting.

Stock outlook

Gap (Research) has a strong brand, and the stock is cheap; it trades at a P/E of just 13.5, vs. an average of 20 for specialty retailers. But we would be cautious right now.

Pressler has proved he can cut costs and improve operations but has yet to show his mastery of merchandise. Retail analysts have been underwhelmed by Gap's spring lines but are hopeful the fall collections will be stronger. Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.