Gap Appoints New Old Navy CEO Amid Sales Decline
- appointed industry veteran Michael Francis as the new CEO of Old Navy on Thursday to revitalize the brand following a decline in comparable sales.
- attempts to stabilize demand across its portfolio, which includes Gap, Old Navy, Banana Republic, and Athleta.
- Comparable sales at Old Navy fell 4% in the quarter ended August 1, compared with a 2% increase a year earlier, according to Reuters.
Gap Inc. appointed industry veteran Michael Francis as the new CEO of Old Navy on Thursday to revitalize the brand following a decline in comparable sales. The leadership change coincided with Gap Inc. raising its annual profit forecast and reporting a quarterly profit that exceeded analyst expectations, which drove company shares up 15% in extended trading, according to Reuters.
The appointment comes as Gap Inc. attempts to stabilize demand across its portfolio, which includes Gap, Old Navy, Banana Republic, and Athleta. Richard Dickson, three years into his tenure as CEO of Gap Inc., stated on a post-earnings call that the new leadership at Old Navy will be instrumental in unlocking the brand's full potential.
Old Navy Sales Decline and Performance Metrics
Comparable sales at Old Navy fell 4% in the quarter ended August 1, compared with a 2% increase a year earlier, according to Reuters. The company attributed the slump to poor sales of summer apparel, specifically dresses and shorts.
Old Navy is the largest brand in the company. In contrast to the struggles at Old Navy, the Gap chain saw a 10% rise in comparable sales during the second quarter, marking its eleventh consecutive quarter of growth. This figure surpassed the 8.8% rise analysts had expected, based on LSEG data reported by Reuters.
Athleta also saw a decline, with comparable sales falling 12% in the quarter, following a 9% decline last year, according to Reuters.
Gap Inc. Financial Results and Annual Outlook
Gap Inc. reported an adjusted profit of 52 cents per share for the quarter, beating expectations of 48 cents. However, revenue for the quarter ended August 1 fell 2% to $3.65 billion, narrowly missing analysts’ estimate of about $3.69 billion, according to Reuters.
The company increased its adjusted annual earnings-per-share projection by 5 cents on both the high and low ends, creating a range of $2.35 to $2.45. This outlook excludes the impact of tariff refunds. According to Reuters, Gap Inc. reported a $417 million adjustment for net tariff recovery during the quarter, along with $95 million in refunds and $5 million in associated interest income.
Despite the profit beat, the company lowered its fiscal 2026 sales growth forecast to a range of 1% to 1.5%, compared to the previous estimate of 1% to 2%. According to Reuters, Gap Inc. noted that this adjustment accounts for the broader geopolitical and economic environment as well as consumer trends, while acknowledging risks from U.S. tariffs and energy prices.
Strategy for Brand Revitalization
To combat inconsistent sales, Gap Inc. has focused on merchandise focused on current trends and expanded marketing campaigns. Richard Dickson noted that the company is leveraging partnerships with Grammy-winning rapper Cardi B and collaboration with YouTuber MrBeast on a back-to-school campaign to reach younger shoppers, according to Reuters.
The company expects its fall assortment, from sweaters to denim jeans, to draw in more shoppers at Old Navy. Average unit retail price rose across all Gap Inc brands in the quarter, which lifted the company’s adjusted merchandise margin by 80 basis points, excluding a net benefit tied to the recovery of tariffs, according to Reuters.
According to Reuters, eMarketer analyst Suzy Davidkhanian suggested that the leadership shift at Old Navy indicates an effort by the company to apply the same cultural appeal attracting customers to Gap to its biggest brand.