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No Fat Cats Here: CEO Pay at Gap, Ann Taylor and Urban Outfitters Measures Up

It's about as sexy as a dress cut down to there, at least for those who get turned on by numbers. But there's nothing like the details in an SEC filing for a tantalizing look at the inner financial workings of fashion retailers -- especially their executive pay packages.

Amid plenty of fine print disclosing over-compensated fat cats, there are actually some who earn reasonable pay for their efforts. For instance, did you know that for top brass at Gap (GPS), Ann Inc. (ANN), Urban Outfitters (URBN), staying on top of aggressive growth initiatives during the downturn is paying off?

Fall into the pay gap
Glenn Murphy, chairman and CEO of Gap took one for the team back in 2009 amid a tough retail environment. After two consecutive years ($1.2 billion and $3.2 million respectively) of losses across all brands including Old Navy and Banana Republic, Murphy volunteered to cut his pay by 15 percent or $225,000.

Since then, Murphy's helmed Gap's restoration with an impressive degree of success. In 2010 the company continued rebuilding its stable of basics (hooray for 1969 Premium Denim without the premium price tags!), expanding e-commerce and locations abroad (selling online in 65 countries makes more sense than foreign franchises) and rebranding (a lukewarm effort that at least drew enough critical fire to make people sit up and think about Gap stores again).

For his efforts, the compensation committee ignored the fact that stock prices remained flat and pushed his salary back to pre-2009 levels. In addition to his $1.5 million paycheck, he also snagged a special bonus of $635,000 for sticking it out with lower pay during the tough days.

Oh Ann!
Ann Inc., the retailer formerly known as Ann Taylor, also paid homage to its chic-in-charge Kay Krill. For her efforts supervising the company's makeover, Krill took a 13.4 percent increase in her total compensation last year, with a bonus and stock awards in keeping with a rise in the company's earnings.

Indeed, everything was looking up for AT at the end of 2010: total net sales were nearly $2 billion, compared with net sales of $1.8 billion in the full year of fiscal 2009. Savvy strategies boosted gross margin up a record 55.8 percent in fiscal 2010, an increase of 140 basis points compared to 2009.

The move back to relevance for covet-worthy career separates and sigh-inducing casual threads was felt all the way to e-commerce where promotions (often up to 40 percent off) induced plenty of spending -- accounting for 75 percent increases at both anntaylor.com and loft.com. With numbers like that, Krill's package seems positively modest especially considering her car allowance has dropped like a rock, too. Last year, AT put up just under $10,000 for toting Krill around town, down from $36,000 in 2009, according to the filing.

Urban renewal

Rounding out this retail crew is Glen Senk, CEO of Urban Outfitters, better known as the guy who's heading up a full-court press for the chain's continuing growth. The company's proxy statement lists Senk's total compensation for fiscal 2011 at just north of $2.5 million -- a far cry from fiscal 2010 in which Senk snapped up nearly $30 million, most coming from stock awards worth about $27 million. That gives him a total of 1.2 percent of the company's common stock.

The stock price itself is lower today than it was a year ago but that didn't deter the compensation committee from rewarding Senk. For his part, Senk's been nothing but bullish over the past year, riding a revenue rise to launch Urban's new wedding branded boutique BHLDN, opened 46 new stores, and continued to explore options in Latin America, Asia and Europe. Urban's namesake brand even introduced a collection of offerings from a clutch of European designers, putting the retailer head-to-head with such e-commerce giants as ASOS.

For all that investment in top line growth, profits continue to rise, breaking records in the fourth quarter. For the year ended January 31, 2011, gross profit margin improved by 62 basis points on improved merchandise margins and positive comps. Total sales were up to about $2.2 billion over 2010's $1.9 billion.

The annals of apparel retail are littered with examples of brands that expanded much too quickly. Gap is finally recovering from its missteps in the early 2000s. In this stage of growth, however, each CEO would do well to exercise more cautious optimism. If they feel they must expand, a focus on e-commerce is in everyone's best interest. Shipping is a lot more cost effective than leasing, managing, and merchandising entire stores.

Image via Andrey Andreev from Fotolia.com
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