Gap names Michael Francis as new Old Navy CEO after brand's Q2 same-store sales fell 4%

Gap Inc. announced a new chief executive for its Old Navy brand on Thursday, as the retailer reported a decline in comparable sales for the most recent quarter and seeks to revive sluggish performance at its largest banner.

Michael Francis will take over as CEO of Old Navy effective November 2. He succeeds Haio Barbeito, who has held the role since 2022 and will transition to an advisory position within the company.

Francis was appointed chief customer officer at Old Navy in May.

Leadership Transition

Gap CEO Richard Dickson described the move to CNBC as "a planned and thoughtful transition" aimed at positioning Old Navy for its next phase of growth.

"We've been working — from fixing fundamentals to building momentum and ultimately looking to accelerate growth, and so there's not a change in strategy," Dickson said. "We're just going to continue to execute better, continuously improve our core business, while we drive some accelerators that we're really excited about."

Quarterly Performance

In its fiscal second-quarter earnings report, Old Navy posted:

• Net sales: $2.1 billion — down 4% year over year
• Comparable sales: Down 4% , versus growth of 2% in the same period last year

Wall Street analysts had expected a decline of 2.4%, according to StreetAccount.

The drop marked Old Navy's first negative same-store sales figure since the second quarter of 2023. The company attributed the decline in part to an "unanticipated slowdown in traffic."

Old Navy contributes nearly 60% of Gap Inc.'s total revenue.

Factors Behind the Decline

Dickson told CNBC that Old Navy's summer marketing "lacked a direct product message," leading to disappointing results. However, he noted that the brand has already begun to see "significant improvement" in traffic and sales over the past month.

Incoming CEO Michael Francis said in a statement that the brand would "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."

Gap Inc. Overall Results

Across all its brands — Banana Republic, Athleta, Old Navy and the namesake Gap banner — the company reported:

• Comparable sales: Down 1% for the quarter
• In-store sales: Down 3% year over year

Gap reported mixed results, beating earnings estimates but missing on revenue.

| Metric | Actual | Expected | |--------|--------|----------| | Adjusted EPS | $0.52 | $0.48 | | Revenue | $3.65 billion | $3.69 billion |

• Net income: $501 million ($1.38 per share), compared with $216 million ($0.57 per share) a year ago
• Sales: $3.65 billion, down from $3.73 billion in the year-ago period

Adjusting for one-time items — including approximately $512 million in tariff refunds — Gap reported adjusted earnings per share of $0.52.

"Ultimately, our slight miss on total company was really due to Old Navy's seasonal product assortment," Dickson said. "We know we didn't execute well on our seasonal product, but if there's good news in this, seasonal is behind us."

Full-Year Outlook

Gap narrowed its net sales growth outlook for the full fiscal year from a range of 1% to 2% to a range of 1% to 1.5% , citing the lag at Old Navy.

However, the company raised its expectations for adjusted earnings per share from $2.30 to $2.40 to $2.35 to $2.45.

Bright Spot: Gap Banner

At the namesake Gap brand, comparable sales soared 10% for the quarter, outpacing Wall Street expectations of 8.6% growth. Net sales jumped 9% to $844 million. The company attributed the gains to "culturally relevant storytelling" across categories including denim, fleece, and kids and baby.

"On balance, we're running a very disciplined organization with a playbook that is working," Dickson said. "These things take time. I think, pointing to Gap as the lead success story of our playbook, you can see the ability for us to actually deliver relevance and revenue, and we're well on our way."