Gap Stock Jumps as Michael Francis Takes Over Old Navy
Key Highlights
- Gap named Michael Francis as the new CEO of Old Navy, placing an experienced retail executive in charge of the company’s largest brand.
- Gap shares jumped about 15% in extended trading following the leadership announcement and stronger earnings outlook.
- Old Navy comparable sales fell 4% during the second quarter, highlighting the challenge facing its new CEO.
- The Gap brand posted a 10% increase in comparable sales, marking its 11th consecutive quarter of growth and beating analyst expectations.
- Gap raised its fiscal 2026 adjusted earnings-per-share forecast to $2.35-$2.45.
- Quarterly revenue declined 2% to $3.65 billion, while adjusted earnings of 52 cents per share exceeded analysts’ expectations.
- Gap is increasing its focus on marketing and cultural relevance, including Old Navy campaigns involving Cardi B and MrBeast.
The announcement came alongside stronger-than-expected quarterly earnings and an improved full-year profit forecast, giving investors fresh reasons for optimism about Gap’s ongoing turnaround.
Gap shares rose about 15% in extended trading following the announcement. The rally reflected both the Old Navy leadership shakeup and stronger performance across other parts of the company.
Michael Francis Takes Over Old Navy
Gap is turning to Michael Francis as it attempts to restore momentum at Old Navy, which remains a crucial part of the retailer’s business.
The appointment comes as Gap CEO Richard Dickson continues a broader effort to improve the performance and cultural relevance of the company’s brands, including Gap, Old Navy, Banana Republic and Athleta.
That strategy has increasingly focused on updated merchandise, stronger marketing and partnerships designed to reconnect the company with younger consumers.
Old Navy has emerged as one of the biggest challenges.
Comparable sales at the brand fell 4% during the second quarter, compared with a 2% increase during the same period a year earlier. Athleta also struggled, posting a 12% decline in comparable sales.
Dickson said new leadership could help unlock Old Navy’s potential as the company works to improve its product offering and brand positioning.
Gap Brand Continues Strong Growth
While Old Navy struggled, the Gap brand delivered significantly stronger results.
Comparable sales at Gap increased 10% during the second quarter, beating analyst expectations for growth of roughly 8.8%. The result marked the brand’s 11th consecutive quarter of comparable sales growth.
That performance provides an important contrast within the company.
Gap has gained momentum through merchandise tied more closely to current fashion trends and expanded marketing campaigns. The challenge now is whether management can reproduce some of that success at Old Navy.
The company has already increased its marketing push around the brand. Recent initiatives have included a partnership with rapper Cardi B and a back-to-school collaboration with YouTube creator MrBeast, efforts intended to strengthen Old Navy’s relevance among younger shoppers.
Gap Raises 2026 Profit Forecast
The leadership announcement coincided with an improved earnings outlook.
Gap raised its fiscal 2026 adjusted earnings-per-share forecast to between $2.35 and $2.45, increasing both ends of its previous guidance by five cents.
At the same time, the company revised its expected annual sales growth to between 1% and 1.5%, narrowing its previous forecast of 1% to 2%. Analysts expect growth of around 1.1%.
The company said its outlook incorporates consumer spending patterns as well as broader economic and geopolitical conditions, including risks associated with tariffs and energy prices.
Gap Earnings Beat Expectations Despite Revenue Decline
Gap generated $3.65 billion in quarterly revenue for the period ending August 1, down 2% and slightly below analysts’ expectations of approximately $3.69 billion.
Profitability nevertheless came in ahead of forecasts.
Adjusted earnings reached 52 cents per share, compared with analysts’ expectations of 48 cents per share.
Higher average selling prices also helped improve margins across Gap Inc.’s brands. Adjusted merchandise margin increased by 80 basis points during the quarter, excluding a benefit associated with tariff recoveries.
The combination of stronger margins and improved profitability helped offset concerns surrounding weaker revenue and declining sales at Old Navy and Athleta.
Can Michael Francis Turn Around Old Navy?
The Old Navy CEO change now places Michael Francis at the center of one of Gap’s most important turnaround efforts.
Old Navy remains the company’s largest brand, meaning even modest improvements in sales could have a significant impact on Gap Inc.’s overall performance.
Management appears to be betting that a combination of new leadership, stronger products and more culturally relevant marketing can reverse the brand’s recent decline.
The company expects its fall assortment, including sweaters and denim, to perform better after dresses, shorts and other summer products failed to generate the sales management had hoped for during the second quarter.
Investors responded positively to that strategy, but Old Navy’s upcoming quarters will provide the first meaningful test of whether the leadership transition can translate into stronger sales.
What the Old Navy Shakeup Means for Gap Stock
The sharp increase in Gap shares suggests investors see the leadership change as another step in the retailer’s broader recovery.
The Gap brand itself has already demonstrated that the company can generate sustained comparable-sales growth. Applying similar merchandising and marketing discipline to Old Navy could strengthen the group considerably.
However, the company still faces several challenges.
Consumers remain cautious about discretionary spending, Athleta continues to report declining comparable sales, and tariffs and other macroeconomic pressures could affect costs and margins.
For now, Gap’s improved profit outlook and strong performance at its namesake brand have given investors additional confidence.
The next challenge is considerably larger: turning Old Navy, the company’s biggest brand, back into a reliable growth engine.
Leave a Reply