MKM Partners Roxanne Meyer maintains a Neutral rating on Gap's stock with a fair value estimate of $18.
UBS analyst Jay Sole maintains at Neutral, $18 price target.
KeyBanc Capital Markets analyst Edward Yruma maintains at Sector Weight.
MKM: 'Surprising' Timing
Peck's departure announcement was "surprising" as it coincides with the pending spin-off of the Old Navy brand, Meyer said. In fact, the company hosted an analyst day presentation in September which detailed the two companies and Peck himself likely spearheaded the project.
Gap also guided its third-quarter earnings per share to a range of 50 cents to 52 cents, which is short of the Street's estimate of 55 cents per share. The guidance also includes a poor 4% comp decline at the Old Navy business.
Perhaps more important, management lowered its fourth-quarter EPS outlook by 40 cents at the high-end which likely implies a poor start to the quarter gets worse as the quarter progresses.
"While macro was in part blamed, we'd note that the consumer appears to remain strong and that growth is occurring at companies where product is relevant and innovative," the analyst wrote in a note.
Meyer said Peck's tenure at Gap has been mostly a failure and the Old Navy spinoff bought the CEO "more time" but the third- and fourth-quarter outlook was "likely the final straw."
UBS: Positive Move?
The argument could be made a CEO change is a positive move as the company can find a new leader that is a "better fit" for the company, Sole said. However, the market will likely determine the CEO shuffle is a "net negative" as it may be difficult to find a leader with the necessary vision, operational expertise, and deep company knowledge to make a separation of Old Navy a favorable move.
Nevertheless, Sole said the strategic rationale behind the separation of Old Navy remains as true now as it did before. A reversal of the spin off decision would create a "big distraction" at a time when management needs to focus on fundamentals.
KeyBanc: Deeper Issues
The departure of Peck and a poor guidance likely suggests "deeper tactical issues" inside Gap, Yruma said. All three brands under Gap's umbrella showed "disappointing" comps but the weakness at Old Navy is especially notable given the pending spin off.
"Despite potential long term value creation via the impending separation, operational performance seems to present more opportunity for downside," Yruma wrote in a note.
Gap's stock closed Friday's session down 7.6% at $16.68.
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