Gap Dumps CEO After Poor Holiday Season

An exterior of a Gap store is seen in a San Mateo, Calif. file photo from Jan. 4, 2007. Gap Inc. Chief Executive Officer Paul Pressler resigned Monday following a miserable holiday shopping season that hurt the retail chain's fourth quarter profit. (AP Photo/Paul Sakuma, File) (Paul Sakuma - AP)

The Fishers hold the key to any possible sale because they own more than 25 percent of the company's stock.

Gap shares fell 10 cents to close Monday at $19.90 on the New York Stock Exchange, then gained 50 cents in extended trading after Pressler's departure was announced.

Although she considers a sale of the entire company unlikely, Banc of America Securities Dana Cohen said Gap might auction off Banana Republic, the one part of its operations where sales have been rising recently.

A sale of Banana Republic might fetch about $2.5 billion, Cohen estimated. Alternatively, she believes Gap could raise about $500 million by spinning off the brand in an initial public offering of stock.

After nearly 30 years of steady growth, Gap's fortunes began to sag in 2000. The malaise led to the departure of Gap's longtime leader, Millard "Mickey" Drexel, and Pressel's arrival from Walt Disney Co., where he oversaw the world's best-known theme park.

Gap bounced back during Pressler's first 18 months on the job, and he won high marks for closing poorly performing stores and instilling more financial discipline. Those improvements, coupled with the recent speculation about a takeover bid, helped boost Gap's stock by about 60 percent during Pressler's tenure.

But Pressler never demonstrated a great deal of fashion sense or the ability to hire people who did _ a shortcoming that damaged Gap's brand as more shoppers defected to merchants that offered more hip choices or lower prices.

"The back end of the house was something that Paul did a phenomenal job," said Bobbie Lenga, managing director of the retail practice at executive recruiter Russell Reynolds Associates. "But he is not a strong product person. Product is what drives the business."

Lenga expects Gap to have a tough time finding a dynamic new leader because turning around the company will be an extraordinarily difficult assignment.

The possible candidates include Vanessa Castagna, who has engineered turnarounds at two department stores: J.C. Penny Co. and Mervyns. Castagna is scheduled to leave her current job at Mervyns on Feb. 1.

Lenga believes Paul Charron, former CEO of Liz Claiborne Inc., could be lured out of retirement to run Gap.

Coming off a lackluster 2005, Pressler vowed to turn things around in 2006 and projected earnings in the same range as the previous year.

Instead, Gap's deterioration worsened as the year progressed, prompting Pressler to lower his earnings guidance three times.

The final straw apparently came earlier this month when Pressler warned that Gap's profit for fiscal 2006 will end up about $300 million, or 40 cents per share, below the target he set at the year's outset. The company plans to release the official results March 1.

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AP Business Writer Anne D'Innocenzio in New York contributed to this report.