Gap Stock Gets a Dressing Down As Banana Republic Head Quits

Jeanne Jackson is leaving to lead Walmart.com.
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Shares of

Gap

(GPS) - Get Report

dropped sharply Thursday after the company said the head of its

Banana Republic

chain of stores had resigned.

The San Francisco-based clothing retailer said after the market closed Wednesday that Jeanne Jackson, president of high-end Banana Republic, is leaving for considerably less chic but much bigger

Wal-Mart

(WMT) - Get Report

, where she will head Walmart.com.

Gap shares were down 3 7/16, or 7%, to 44 7/16 in midafternoon trading. (Gap shares finished down 3 5/8, or 8%, to 44 1/4.)

Dana Eisman Cohen, an analyst with

Donaldson, Lufkin & Jenrette

, cited Jackson's defection, the unpredictable performance of retail stocks of late and Gap's high share price in downgrading the stock to a market performance from a buy.

"This challenges the company's bench strength, particularly given that this announcement comes on the heels of a recent change at the core Gap division," Cohen said in a note she put out Thursday. Robert Fisher, president of the Gap division, resigned in October.

Cohen added that losing the chief executive at what has been one of Gap's best performing divisions is "not something to ignore."

Jackson, who headed Banana Republic for the last five years, a period in which the chain saw tremendous growth, will be temporarily replaced by a committee of executives through a newly created office of the president. The executives who will succeed her are Jerome Jessup, executive vice president of product design and development; Gary Muto, executive vice president of merchandising, and Amy Schoening, senior vice president of marketing. Gap said it would name a new president for the unit "at a later date."

Other analysts were not as troubled as Cohen over Jackson's departure, citing Gap's commitment to developing a strong reserve of able executives.

Gap also said sales in stores that have been open at least a year rose 4% in February over the same period a year earlier.