Gap CEO Will Have to Fight for Street Cred

Gap's(GPS) new chief executive will have to overcome much skepticism on Wall Street that a Canadian drugstore leader can heal an ailing U.S. apparel chain.

Gap's shares were up more than 5% Friday on news that the company's exhaustive six-month search for a CEO had finally come to an end. Late Thursday, the San Francisco-based retailer named Glenn Murphy, former head of Canada's Shoppers Drug Mart, to its top spot.

While the appointment puts to rest all the speculation leading up to it, and consequently eases the tension on Wall Street, Gap must now quell doubts that Murphy can pull the lumbering giant out of its two-and-a-half-year sales slump.

Several analysts question why Gap chose a man with no apparel experience when its previous CEO, Paul Pressler, had been roundly criticized for the same thing.

Pressler, who came to Gap in 2002 after an illustrious 15-year career at Disney(DIS), improved the apparel chain's operations but never had a handle on how to fix the merchandise. He left Gap in January and was replaced by Bob Fisher, son of the company's founders, while the board searched for a permanent CEO.

"The last time [Gap] selected a skilled manager with no apparel history, it didn't end well," wrote Todd Slater, an analyst for Lazard Capital Management, in his research. "While we hate to cast aspersions on the board's pick before getting to know the guy, the gut merchant in us wonders why this time will be different, especially given a more challenging competitive landscape."