Gap CEO Syngal steps down as margin squeeze intensifies

Gap Inc said on Monday that Chief Executive Sonia Syngal will step down from her post as it grapples with weak demand for its casual clothing and a stock price slump.

The company also warned that margins would remain under pressure in the second quarter due to rising costs, sending its shares down nearly 4% after hours. Chief Executive Bob Martin has taken over as interim CEO, while former Walmart Canada top boss Horacio Barbeito has been appointed to lead Old Navy through difficult times for the company's biggest brand. "I think this is a necessary change given the problems Gap has had recently. The appointment of a permanent CEO at Old Navy is positive in terms of Gap's need to stabilize that part of the business," Morningstar analyst David Swartz said. Gap had pointed to execution issues at Old Navy earlier this year, saying the shift from more casual to formal and party wear had left the brand's selection "out of sync" with the shift in tastes. To clear inventory and make room for new products, Gap is ramping up promotions in the second quarter, a move expected to negatively impact gross margins, the company said Monday. The company estimates its adjusted operating margin percentage will be zero or slightly negative, compared with a 10.2% increase last year, and expects net sales to fall in the high single-digit range. Syngal, 52, is leaving the company just months after he cut his annual results forecasts amid pressure from weak demand in the face of the highest inflation in decades. Gap did not provide a reason for Syngal's sudden exit. Syngal led Gap's Old Navy before being appointed CEO in March 2020. Gap's stock has fallen more than 75% from its May 2021 high and traded at its lowest level in more than two years in June.