Gap Inc. named Michael Francis as the new chief executive of Old Navy, its largest revenue contributor, marking a leadership transition intended to address recent sales challenges at the banner. Francis, who joined Old Navy as chief customer officer in May, will assume the role on November 2, replacing Haio Barbeito, who has led the division since 2022 and will transition to an advisory position. The appointment triggered a 12% surge in Gap’s stock price in extended trading.
Old Navy’s recent performance prompted the executive change. The banner reported net sales of $2.1 billion in the fiscal second quarter, representing a 4% decline year over year, with comparable sales also down 4%. This marked the brand’s first negative comparable sales figure since the second quarter of 2023. Wall Street analysts had anticipated a more modest 2.4% comparable sales decline. Gap’s leadership attributed the underperformance to an unexpected traffic slowdown and ineffective summer marketing that lacked clear product messaging. Old Navy accounts for approximately 60% of Gap’s total revenue.
Gap’s overall fiscal second-quarter results were mixed. The company reported net income of $501 million, or $1.38 per share, compared with $216 million or 57 cents per share in the prior year period. Total net sales declined to $3.65 billion from $3.73 billion year over year. However, adjusting for one-time items including approximately $512 million in tariff refunds, the company reported 52 cents in earnings per share. The namesake Gap banner performed strongly, with comparable sales rising 10% and net sales climbing 9% to $844 million. Banana Republic’s comparable sales increased 3%, though Athleta experienced a 12% decline in comparable sales.
Gap adjusted its full-year outlook in response to Old Navy’s performance. The company narrowed its net sales growth guidance to a range of 1% to 1.5% from the prior range of 1% to 2%. However, Gap raised its adjusted earnings per share expectations to a range of $2.35 to $2.45 from $2.30 to $2.40. Leadership indicated that tariff refunds, with $95 million received during the quarter and the remainder expected in the third quarter, contributed significantly to improved gross margins. Gap executives expressed confidence in the company’s strategic approach and noted that seasonal product challenges, viewed as a primary factor in Old Navy’s quarterly miss, were behind the company.
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