Gap on Thursday said it is installing a new CEO at its Old Navy banner, a move aimed at reviving a brand that posted its first quarterly same-store sales decline in two years.
Michael Francis, who joined Old Navy as chief customer officer in May, will take over as CEO on Nov. 2, the company said. Current CEO Haio Barbeito, who has held the role since 2022, will stay on as an advisor.
Gap CEO Richard Dickson described the transition as “planned and thoughtful,” telling CNBC the company is not changing strategy at Old Navy.
“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.”
Old Navy’s weak quarter
Old Navy, which accounts for nearly 60% of Gap’s total revenue, reported net sales of $2.1 billion in the fiscal second quarter, down 4% from a year earlier. Comparable sales also fell 4%, a sharp reversal from the 2% growth the brand posted in the same period last year and worse than the 2.4% decline analysts had expected, according to StreetAccount.
The drop marked Old Navy’s first negative same-store sales figure since the second quarter of 2023. Gap attributed the miss partly to an “unanticipated slowdown in traffic.”
Dickson said Old Navy’s summer marketing “lacked a direct product message,” leading to disappointing results. But he added that the brand has already seen “significant improvement” in traffic and sales over the past month.
Incoming CEO Francis said in a statement that Old Navy 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.”
Mixed results at the parent company
Overall, Gap delivered mixed fiscal second-quarter results, beating earnings estimates but missing on revenue. Total comparable sales fell 1%, including a 3% decline in in-store sales.
For the quarter ended Aug. 1, Gap reported net income of $501 million, or $1.38 per share, up from $216 million, or 57 cents per share, a year earlier. Revenue slipped to $3.65 billion from $3.73 billion.
Adjusted earnings per share came in at 52 cents, reflecting a one-time benefit of roughly $512 million in tariff refunds.
“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.”
Bright spots: Gap brand, Banana Republic
While Old Navy struggled, the namesake Gap brand posted comparable sales growth of 10%, exceeding the 8.6% Wall Street expected. Net sales jumped 9% to $844 million, helped by what the company called “culturally relevant storytelling” in denim, fleece, and kids and baby categories.
Banana Republic also gained ground, with comparable sales up 3% to $478 million in net sales, beating the 2% growth analysts had projected. Gap said the brand “continued to make progress” on its assortment.
Athleta, however, continued to slide, with comparable sales down 12% and net sales of just $264 million. Gap said the brand “remains focused on disciplined execution to rebuild the brand profitably.”
Guidance and margins
Gap narrowed its full-year net sales growth outlook to a range of 1% to 1.5%, down from its prior forecast of 1% to 2%, citing the drag from Old Navy. At the same time, the company raised its adjusted earnings per share guidance to a range of $2.35 to $2.45, up from $2.30 to $2.40.
Gross margin improved significantly during the quarter, thanks to an 11.4-percentage-point boost from “expected recovery of tariffs.” Excluding that impact, gross margin rose just 0.2% year over year. Gap said it received $95 million in tariff refunds during the quarter, which it used to lower product costs, with the remainder expected in the third quarter.
Dickson said the company continues to see a “resilient but discerning” consumer, with sales growth across all income cohorts.
Source: www.cnbc.com — https://www.cnbc.com/2026/08/27/gap-q2-2026-earnings.html
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