Gap Inc. on Thursday named Glenn Murphy as its new chief executive and chairman, giving a respected former Canadian drug chain chief with no significant fashion industry experience the mandate to turn around the world's largest apparel retailer.

Murphy, 45, is relatively unknown in the United States and his appointment generated mixed reactions from Wall Street. Shares of Gap, which ousted its previous CEO six months ago, rose 2 percent.

I like the hire, said Susquehanna analyst Thomas Filandro, who argued that Murphy was good at rethinking brands. I want to hear what he intends to do.

But C.L. King analyst Mark Montagna was more cautious.

The problem is the guy does not have an apparel background, Montagna said. That tells you that those people they asked in the apparel world all said no (to the job).

Murphy most recently served as chairman and CEO at Shoppers Drug Mart, the largest drugstore chain in Canada that operates more than 1,000 stores and had fiscal 2006 sales of $7.8 billion. Murphy, a Canadian, earlier held positions at Loblaw Cos. Ltd., a retail and wholesale food company in Canada.

Shoppers Drug Mart's stock nearly tripled to C$51.15 between the time Murphy took it public in November of 2001 until he left in March of this year.

THE RIGHT LEADER?

Gap previously had said it would prefer a candidate with apparel retailing experience, but spokesman Greg Rossiter said the board realized after meeting Murphy that he is the right leader.

Gap estimates that Murphy's fiscal 2008 compensation at target performance will be approximately $12 million.

He's done some really unique, very effective work in their stores that have resonated with customers, Rossiter said. That's part of how he's been able to double their earnings per share.

Filandro said hiring a CEO who can inspire the apparel executives running the individual chains to see their brands in a different and novel way could be better than hiring a merchant. Gap owns Gap, Old Navy and Banana Republic chains.

There's not a clear view of what these brands represent in the marketplace today, Filandro said, adding that Murphy has excellent leadership skills and a proven track record of rethinking brands.

Still, analyst Montagna predicted that Gap shares would not necessarily react to the long-awaited announcement.

No one's ever heard of the guy, Montagna explained, although he added that it appears Murphy did creative things at Shoppers Drug Mart.

Gap has been searching for a new leader since January, when Paul Pressler, the company's third CEO, resigned after serving less than five years. Although critics praised Pressler's debt reduction, inventory control and technology improvements in operations, his failure to turn around a trend of declining sales at established stores since 2000 -- a key gauge of financial health for retailers -- ultimately cost him his job.

Nonexecutive Chairman Robert Fisher, 52, the son of company founder Donald Fisher, has served as interim CEO since Pressler's departure. The Fisher family and its limited partnership have a combined stake of 37 percent in Gap Inc.

2007 'TRANSITIONAL YEAR'

While acknowledging that uninspired fashions have been the root of Gap's problems, Fisher has cautioned that no quick fix is in sight and calls 2007 a transitional year.

Overall same-store sales at Gap Inc. have declined or been flat in every month but three since June 2004. The company operates over 3,000 stores around the world.

Gap shares rose 2 percent in extended trade to $17.25 after closing at $16.91 on the New York Stock Exchange.

(Additional reporting by Gina Keating and Nichola Groom)

Canada Retail