More upheaval at Gap as Old Navy president leaves

Gap’s ongoing attempts to right itself suffered a further setback Tuesday, when it said the president of its Old Navy chain would leave the company effective immediately.

Though the decision appears to have been mutually arrived at by the Old Navy president, Dawn Robertson, who had been in the job less than 16 months, and Gap’s (GPS) Chief Executive Glenn Murphy, her departure shows that the specialty apparel retailer still has a long way to go to turn itself around.

Robertson, 52, known for her high-energy management and even higher sense of style, made some progress breathing new life into Old Navy by upping the fashion quotient, speeding up merchandise deliveries and jettisoning its trademark campy advertisements in favor of sleeker marketing.

Despite those improvements, Robertson has so far failed to deliver the bump in sales and traffic counts that Murphy is looking for, suggesting that she may have overreached in her broader vision to reposition Old Navy away from its roots as a discount store for the family and make it more appealing to twenty-something shoppers looking for fashion at a price. “A lot of strategies were put in place under Dawn, and so far the results are mixed,” said Gap spokeswoman Stacy MacLean. “We were disappointed with fall and holiday.”

MacLean said Robertson’s departure was not just motivated by a lack of financial progress but also included other factors, such as cultural fit. Sources said the Robertson and Murphy differed philosophically over how to run the company.

Robertson is known for a strong personality that can be infectious and motivating — “like a cheerleader on steroids,” said one person who has worked with her– but also difficult to contain. Her preference for designer clothing, Gucci and Chanel are favorites, may also have contrasted with the more laid-back style of Gap’s San Francisco headquarters, where khakis and button downs are the norm.

Asked whether Old Navy would stick with Robertson’s strategy, MacLean said the company planned to move forward with some elements of the plan and proceed more cautiously with others. “We think a faster pipeline is in the interest of our customers,” she said, referring to Robertson’s initiative to speed up the delivery of merchandise to stores. “But we do not want to alienate our core customers in any way.”

In late January, Old Navy hosted a fashion show in New York to introduce the press to its new image. Designer Todd Oldham, whom Robertson had hired as creative director, edited the line, which included safari themes. Many of the updated looks are just hitting stores now, leading some observers to wonder whether Robertson was given enough time to achieve her goals. Because of long lead times, it is often difficult to affect a turnaround in retailing in less than two years.

The shakeup at Old Navy, largely unexpected by Wall Street analysts, is the latest in a series of management changes aimed at improving sales at Gap, which in addition to Old Navy also operates the Gap and Banana Republic chains. Gap shares lost 47 cents, or 2.39 percent, to close at $19.23 Tuesday.

Former CEO Paul Pressler was let go in January 2007, just three months after he hired Robertson, who had previously served as a managing director of Myer, an Australian department store chain. Marka Hansen was moved from her post atop Banana Republic to run the Gap division, and one of her deputies, Jack Calhoun, was placed in charge of Banana Republic in October. Gap today named Tom Wyatt, a seasoned apparel executive, who joined the company in 2006 and was most recently running its outlet division, as the interim head of Old Navy while it searches for a permanent replacement.

Robertson was to receive an annual salary of $900,000 (she was paid $242,308 for the three months she worked during fiscal 2007) plus a signing bonus of $300,000. Though Robertson’s contract calls for repayment of the bonus if she were to leave voluntarily within two years, MacLean, the Gap spokesman, said the company has no plans to recoup the money.

Analysts seemed divided over what Robertson’s departure would mean for Old Navy, with some worrying that too much change could be troublesome for the chain. “When you are on a course, and then all of a sudden you correct and go in another direction, that can be a negative too,” said Christine Chen of Needham & Co.