Gap Shakes Up Management of Namesake Brand-- Update2

By Suzanne Kapner And Tess Stynes 

Gap Inc. overhauled the leadership of its struggling namesake brand and said its profit would be weaker than expected this year.

The retailer, which is working to shore up its core business as it brings on a new chief executive, said Jeff Kirwan, 48 years old, will become the global president of the Gap brand, succeeding Stephen Sunnucks, who will leave the company Dec. 19.

Mr. Kirwan was most recently the parent company's president for Greater China.

Art Peck, the incoming CEO, who will succeed Glenn Murphy in February, said he was eager to improve the performance of the Gap brand, following a string of weak results. The Gap chain's sales, excluding newly opened or closed stores, fell 5% in the fiscal third quarter ended Nov. 1. The company said it isn't expecting an improvement this year.

"Jeff and I have a high degree of urgency about the situation at Gap," Mr. Peck said. "I'm anxious to get him in there working with the team to get the brand back on track."

Gap's shares dropped nearly 5% in after-hours trading Thursday after ending the regular session up 1.5% at $40.14.

The company said it now expects earnings of $2.73 to $2.78 a share this fiscal year, which ends in early 2015, down from its previous forecast of $2.95 to $3 a share. Gap warned that the holiday shopping season once again will be highly competitive this year and heavy on discounts.

Last month, Gap said Mr. Murphy would step down as CEO at the company, where he reversed a long-running sales slump but more recently has struggled to reinvigorate its eponymous brand. Mr. Peck, a nine-year veteran who leads Gap's digital division, was tapped as his successor.

The company also changed the leadership of its Banana Republic brand, where sales, excluding newly opened or closed locations, were flat in the latest quarter. Andi Owen, 49, who leads the Gap outlet division, will take over from Jack Calhoun as global president for Banana Republic, effective Jan. 5. Mr. Calhoun will leave the company on Feb. 1.

Gap reported quarterly profit of $351 million, down from $337 million a year earlier. Sales were essentially flat at $3.97 billion. The company's operating margin shrank to 13.9% from 14.5%.

Comparable-store sales at its Old Navy unit grew 1%.

Write to Tess Stynes at [e-mail]

Access Investor Kit for Gap, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US3647601083

Subscribe to WSJ: http://online.wsj.com?mod=djnwires