Gap names new Old Navy CEO after weak quarterly sales

• Old Navy's Q2 net sales fell 4% to $2.1 billion, worse than the expected 2.4% decline, attributed to an 'unanticipated slowdown in traffic' and weak summer marketing that 'lacked a direct product message'
• Gap Inc. narrowed its full-year net sales growth outlook from 1-2% to 1-1.5% due to Old Navy's underperformance, though the company raised its adjusted EPS guidance
• Gap's namesake brand showed strong performance with comparable sales up 10% (beating 8.6% expectations), while Athleta struggled with a 12% decline in comparable sales

Gap Names New Old Navy CEO Amid Sales Decline

Gap Inc. announced Michael Francis as the new CEO of Old Navy, effective November 2, replacing Haio Barbeito who has led the brand since 2022. The leadership change follows disappointing quarterly performance at the retailer's largest brand.

Key Financial Results (Fiscal Q2 ending August 1):

• Old Navy net sales: $2.1 billion (down 4% year-over-year)
• Old Navy comparable sales: down 4% versus expectations of a 2.4% decline
• Total Gap Inc. comparable sales: down 1% across all brands
• Company-wide revenue: $3.65 billion vs. $3.69 billion expected
• Net income: $501 million ($1.38 per share)
• Adjusted EPS: 54 cents, beating estimates of 50 cents

Market Implications:

Old Navy, which contributes nearly 60% of Gap's total revenue, reported its first negative same-store sales since Q2 2023. CEO Richard Dickson attributed the weakness to poor summer marketing and seasonal product execution, though he noted improvements in September traffic and sales.

Other brand performance varied significantly: Gap banner saw comparable sales surge 10% (exceeding 8.6% expectations), Banana Republic rose 3%, while Athleta dropped 12%.

Gap narrowed its full-year net sales growth outlook to 1%-1.5% from 1%-2%, but raised adjusted EPS guidance. The company received $512 million in tariff refunds during the quarter, with $95 million applied to lower product costs and the remainder expected in Q3.

Management characterized the CEO transition as "planned and thoughtful" with no strategy change, focusing on execution improvements and core business strengthening.