(AP)
Updated: 2007-07-27 08:56

  A photo provided by Gap Inc. shows Glenn Murphy, whom Gap named to be
the new chairman and chief executive officer of the clothing retailer.[AP]

Gap Inc. said Thursday it has named Glenn Murphy, a former top executive of Canada's largest drug store chain with no fashion industry experience, to be the new chairman and chief executive of the troubled clothing retailer.

Murphy, 45, whose retail experience spans more than 20 years, most recently served for six years as the chairman and CEO of Shoppers Drug Mart and led that chain through an unprecedented period of growth, Gap said. Before that, Murphy was president and CEO of Chapters, Canada's leading book retailer, and held various management positions at Loblaw Companies Ltd., Canada's largest food distributor and supermarket chain.

Gap's choice of someone from outside the clothing world may seem unusual, but that doesn't mean it's bound to fail, analysts say.

"Apparel is a different world than books and drug stores, but the skill set can transfer," said Patricia Edwards, a retail analyst in Seattle for Wentworth, Hauser and Violich. "I think he's got as good a shot as anyone from the apparel industries, but the trick is making sure you've got the right people on the fashion side working for you."

"Besides," Edwards added, "it looks like he's good at turnarounds, and that's what Gap needs right now."

Gap spokesman Greg Rossiter said the company's CEO search included clothing retailers, but when the board members met with Murphy, "they were very clear that he was the right leader for the company."

San Francisco-based Gap began looking for a new leader in January after the company jettisoned Paul Pressler in the wake of a dismal holiday season that deepened the company's slumping sales.

Robert Fisher, the company's former chairman and son of Gap founder Donald Fisher, served as CEO in the interim. Fisher will stay on the board of directors.

In a statement, Fisher called Murphy "a decisive leader with great retail instincts" who revitalized major retail brands. "He's well qualified to return Gap Inc. to the level of sustained performance we all expect," Fisher said.

Shares of Gap gained 34 cents, or 2 percent, to $17.25 in extended trading on the news. In regular trading, the stock closed at $16.91, down 77 cents or 4.4 percent.

Gap, which owns 3,100 stores under the Gap, Old Navy and Banana Republic brands, has been mired in a sales funk since the spring of 2004.

The once-iconic American brand suffered as more shoppers defected to merchants that offered more hip choices or lower prices. Pressler vowed to turn things around in 2006 but failed. Instead, Gap's deterioration worsened.

After Pressler, a former top executive Walt Disney Co., ended his nearly 4 1/2-year stint at Gap, Fisher began shaking things up. He dismantled some of the administrative bureaucracy that he thought stifled creativity and saddled the company's stores with an unappealing selection of clothes.

Fisher also started granting more autonomy to each of the company's three chains and launched an initiative to hire new fashion designers.

"Alongside some of the most talented people in the apparel industry, we'll work to re-establish each brand's leadership position and set the company along a path of sustained earnings performance," Murphy said in a statement.

Murphy declined phone interviews Thursday but noted in a separate statement to The Associated Press that he's had the opportunity to work with three different companies whose founding members were still involved.

"Having met with the Fisher family, I can see some parallels here, and I'm excited to build on their legacy of innovation," he said.

Murphy is expected to begin his new CEO duties in the next week. He will be paid $1.5 million annually, with a sign-on bonus of $1 million. He will also receive a prorated target bonus for 2007 and annual performance-based bonuses targeted at 150 percent of his annual salary.

His employment package includes 4 million stock options, half of which will carry a premium price, and a target award of 1 million performance shares, dependent on the company's improved earnings over time.

Gap expects Murphy's fiscal 2008 compensation, at target performance, to be about $12 million.