Gap Inc. announced on Thursday that Michael Francis, the company’s chief customer officer for Old Navy since May 2023, will assume the role of CEO for the struggling retail brand, effective November 2. The transition replaces Haio Barbeito, who will transition to an advisory position after serving as Old Navy’s CEO since 2022. The leadership change aims to reignite momentum in Old Navy’s sales performance, which contributes nearly 60% of Gap’s total revenue.
The appointment follows a “planned and thoughtful transition” strategy aimed at optimizing Old Navy’s market position, according to Gap CEO Richard Dickson. “We’ve been working — from fixing fundamentals to building momentum — and the leadership change ensures we’re better positioned for accelerated growth,” Dickson stated in a CNBC interview.
Gap’s stock rose 12% in extended trading following the announcement, reflecting investor confidence in the strategic overhaul. The move comes after Old Navy reported a 4% year-over-year decline in second-quarter net sales to $2.1 billion, alongside a comparable sales drop to negative growth for the first time since Q2 2023. Analysts had anticipated a smaller 2.4% decline in the period.
The retailer attributed the poor performance to an “unanticipated slowdown in traffic” and criticized its summer marketing efforts for lacking a direct product message. However, Dickson noted that Old Navy has since seen “significant improvement” in both traffic and sales volumes through August. The incoming CEO, Francis, emphasized a continued commitment to sharpening customer focus, enhancing cultural relevance, and innovating the customer experience across all channels.
Globally, Gap Inc. reported mixed second-quarter results for the period ending August 5, with earnings per share beating estimates at 52 cents versus the expected 48 cents. However, total revenue fell short at $3.65 billion, missing the $3.69 billion projected by analysts. Net income reached $501 million, or $1.38 per share, up from $216 million a year earlier, aided by $512 million in tariff refunds. Excluding one-time items, earnings aligned with adjusted expectations.
The company attributed its revenue shortfall primarily to Old Navy’s seasonal product assortment. Gap’s flagship brand, in contrast, delivered strong performance with a 10% comparable sales increase — surpassing the 8.6% consensus estimate — driven by “culturally relevant storytelling” in key categories like denim and kids’ wear. Banana Republic saw comparable sales rise 3% to $478 million, meeting expectations, while Athleta faced a 12% comparable sales decline, totaling $264 million in revenue.
Gross margin expanded by 11.4 percentage points during the quarter due to tariff refunds, which also enabled reduced product costs. Gap received $95 million in refunds in Q2 and expects additional funds in Q3. The company revised its full-year net sales growth outlook to 1–1.5%, down from 1–2%, while raising its adjusted earnings per share guidance to $2.35–$2.45 from the prior $2.30–$2.40 range.
