Earnings Up at Gap Inc.

Last Updated Aug 24, 2007 5:12 PM EDT

Earnings Up at Gap Inc.Yesterday Gap Inc. reported that second quarter net income jumped 19% due to belt tightening measures including job cuts and a decrease in inventory. The company also plans to buy back $1.5 billion in shares. New CEO Glenn Murphy, who's been on the job for just four weeks, answered questions during a conference call about his vision for the future of the company.

Much of the questioning seemed to be less about the company's earnings and more about the strengths and weaknesses of Murphy, former chief of Shoppers Drug Mart. CNBC's Retail Detail blog reports Murphy's response to criticism that his experience selling "replacement items" such as drugs may not be applicable to the aesthetic driven apparel business,

Murphy's response: "there is enough common ground in retail between sectors that I can bring a nice complimentary skill set" to the existing design and merchandising team. The underlying message there: Murphy will be a corporate executive executing strategic and financial direction (real estate strategy, store execution, etc) but that he is more than aware that he needs to defer to the design team on issue of merchandising and the visual design of the branded product.
In order to get the best out of his design team, Murphy is giving them creative freedom and making efforts to retain talent. Wall Street's response to his comments was favorable and stocks rose 2% in after-hours trading.

Murphy's decision to acknowledge the gap in his skill-set and to take measures to find and retain the best talent to compensate for this lack, seems like a promising beginning to his tenure at Gap Inc. He's also a good example to managers. If you have weak points (and everyone does), acknowledging them frankly and taking measure to build a team which will complement your strengths is far wiser than trying to bluster your way through.

(Image of Gap ad by doobybrain, CC 2.0)

  • Jessica Stillman On Twitter»

    Jessica lives in London where she works as a freelance writer with interests in green business and tech, management, and marketing.