(Reuters) -Gap Inc said on Monday that Chief Executive Sonia Syngal will step down just over two years into the role, as the apparel seller wrestles with weak demand for its casual attire and a slump in its stock price.
It also warned that margins would stay under pressure in the second quarter as costs spiral, sending shares of the company down about 4% after hours.
Executive Chairman Bob Martin will step in as interim CEO, while ex-Walmart Canada top boss Horacio Barbeito has been tapped to lead Old Navy through tough times for the company's biggest brand.
"I think it's a necessary change given Gap's recent problems. The addition of a permanent CEO for Old Navy is positive as Gap's needs to stabilize this part of the business," Morningstar analyst David Swartz said.
Gap had earlier this year flagged execution issues at Old Navy and said a shift to formals and partywear from more casual attire had left the brand's selection "out of sync" with the change in tastes.
To clear out inventory and make room for new products, Gap has ramped up promotions in a move that is expected to negatively impact gross margins in the second quarter, the company said on Monday.
It forecast adjusted operating margin percentage to be zero to slightly negative, compared with a 10.2% rise last year, and expects net sales to decline in the high-single-digit range.
Syngal, 52, is exiting the company just months after it slashed its annual results forecast due to pressure from weak demand in the face of decades-high inflation.
Gap did not provide a reason for her sudden exit.
Syngal headed Gap's Old Navy before being named as the CEO in March 2020.
Gap's stock has tumbled more than 75% from highs in May 2021, and in June traded at its lowest in more than two years.