He succeeds Robert J. Fisher, who has served as interim CEO since Paul Pressler left the company and its board in January amid declining in-store sales and rumors the company may be putting a few brands on the block.
Mr. Fisher, son of Gap Inc. founder Donald G. Fisher, will remain on the company's board of directors.
'Improving store experience'
Mr. Murphy, 45, "has revitalized major retail brands by offering new products and significantly improving the store experience," Mr. Fisher said in a statement. "He's well qualified to return Gap Inc. to the level of sustained performance we all expect."
Mr. Murphy's 20-plus years of retail experience extends across three sectors. Senior roles at Canadian food company Loblaw Cos. and Chapters, a major Canadian book retailer, augment his experience in the health and beauty category. Like Mr. Pressler, however, he lacks experience in the apparel market.
The company estimates Mr. Murphy's annual compensation at $12 million, though a large chunk of that will be performance-based, including annual bonuses targeted at 150% of annual salary. He'll play a large role in jump-starting brand cachet and instilling long-term management changes in a retailer whose total sales have fallen swiftly for three consecutive years.
The company, whose portfolio includes the Gap, Banana Republic and Old Navy clothier brands, as well as online shoe shop Piperlime, posted full-year revenue of $15.9 billion for the year ending February.
Mr. Murphy enters the role at a crucial time in Gap's fashion calendar -- the back-to-school rush, followed immediately by the holiday gift season. Both quarters accounted for nearly half of Gap Inc.'s annual revenue in 2006 –- and more than half its ad spending, which TNS media intelligence pins at $294.3 million.