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Gap Inc. has tapped a new chief executive for its largest brand as it confronts soft sales at Old Navy. The appointment aims to steady the retailer’s biggest revenue driver while the company adjusts its full-year outlook and digests a large tariff-related accounting benefit.
New leadership at Old Navy
Michael Francis will become CEO of Old Navy on Nov. 2, Gap said, taking over from Haio Barbeito, who will move into an advisory role. Francis was named Old Navy’s chief customer officer in May and will assume responsibility for reversing the banner’s recent weakness.
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Gap CEO Richard Dickson described the change as “a planned and thoughtful transition” designed to prepare Old Navy for its next phase. In a statement, Francis said the brand will “continue to sharpen our customer focus, strengthen the brand’s cultural relevance, enhance the customer experience across every touchpoint and build on the momentum already underway.”
Why the move matters
The leadership shift follows a difficult quarter for Old Navy. In the fiscal second quarter ended Aug. 1, the brand reported net sales of $2.1 billion, a 4% decline versus the prior year, and comparable sales fell 4% — the first negative same-store sales figure for Old Navy since Q2 2023.
Gap attributed the drop in part to an “unanticipated slowdown in traffic.” Dickson told CNBC that summer marketing “lacked a direct product message,” though he added the company has already seen “significant improvement” in traffic and sales in the most recent month.
Company results and market reaction
Overall, Gap’s fiscal second quarter delivered mixed results. Adjusted earnings per share came in at 52 cents, beating the 48-cent consensus from analysts surveyed by LSEG, while revenue totaled $3.65 billion, slightly below expectations of $3.69 billion.
Net income rose to $501 million, or $1.38 per share, up from $216 million, or 57 cents, a year earlier. Reported sales slipped to $3.65 billion from $3.73 billion the prior year. Gap said earnings were affected by one-time items, notably tariff refunds approximating $512 million; the company recorded a net 11.4-percentage-point benefit to gross margin from expected tariff recoveries.
Investors reacted positively to the update: Gap shares jumped about 12% in extended trading after the results and the Old Navy leadership announcement.
Guidance and the outlook
Because of Old Navy’s lag, Gap narrowed its full-year net sales growth forecast to a range of 1% to 1.5%, down from a prior range of 1% to 2%. At the same time, management raised its adjusted EPS outlook slightly to $2.35–$2.45 from $2.30–$2.40.
Dickson said the company is running “a very disciplined organization with a playbook that is working” and emphasized that seasonal assortment issues are now behind the business.
Performance across the portfolio
The namesake Gap banner outperformed expectations: comparable sales rose about 10% and net sales climbed 9% to $844 million, gains the company credited to “culturally relevant storytelling” across denim, fleece, and kids and baby categories.
Banana Republic reported comparable sales up 3% and net sales of $478 million, ahead of analyst projections. By contrast, Athleta saw comparable sales decline 12%, with net sales of $264 million; Gap said Athleta remains focused on rebuilding the brand profitably.
Tariffs and margins
Gap said it received $95 million in tariff refunds during the quarter and expects the remainder of the refunds in the third quarter. The tariff recovery materially boosted gross margin; excluding the tariff benefit, gross margin improved just 0.2 percentage points year over year.
Dickson added that consumer demand appears “resilient but discerning,” with sales growth visible across income cohorts even as the company works through brand-level execution issues.
