Gap names new Old Navy CEO as earnings beat and guidance lift shares
Michael Francis will take charge on Nov. 2 after Old Navy sales fell, as Gap raises its profit outlook and trims its sales forecast.
By Marcus V. Thorne · Markets Editor
· 2 min read
Gap named Michael Francis as Old Navy’s next president and chief executive, effective November 2, as the group reported a 4% decline in comparable sales at its largest banner. The Gap Old Navy CEO change came alongside an adjusted earnings beat and a higher full-year profit outlook, sending the retailer’s shares 12% to 15% higher in extended trading in contemporaneous reports.
Francis succeeds Haio Barbeito, who has led Old Navy since 2022 and will move into an advisory role, according to Gap and CNBC. Francis had been Old Navy’s chief customer officer since May.
The appointment addresses a weak quarter at Old Navy, where second-quarter net sales fell 4% from a year earlier to $2.1bn and comparable sales also declined 4%. A year earlier, comparable sales had increased 2%. Gap attributed the result to pressure in its women’s seasonal assortment and an unexpected slowdown in customer traffic.
Richard Dickson, Gap’s chief executive, described the handover to CNBC as a planned transition rather than a change in group strategy. He said Old Navy’s summer marketing had not communicated its products directly enough, while adding that traffic and sales had improved in the preceding month. Those improvements are management’s assessment, rather than independently established results.
Why did Gap shares rise after naming a new Old Navy CEO?
The market response followed a combination of the management change, better-than-expected adjusted earnings and raised profit guidance. Gap reported adjusted diluted earnings per share of 52 cents for the quarter ended August 1, above the 48-cent consensus estimate cited by Reuters and CNBC. Revenue was $3.65bn, below the $3.69bn analyst estimate reported by those outlets.
For the full fiscal year, Gap lifted its adjusted earnings-per-share outlook to $2.35 to $2.45, from $2.30 to $2.40. It simultaneously narrowed its forecast for sales growth to 1% to 1.5%, from 1% to 2%, a revision Gap attributed to the lag at Old Navy.
At group level, net sales declined 2% to about $3.7bn and comparable sales fell 1%, according to the company’s earnings release. Store sales were down 3% and online sales fell 1%; digital sales represented 35% of net sales.
Performance varied markedly among the group’s banners. Comparable sales increased 10% at the Gap brand and 3% at Banana Republic, while Athleta recorded a 12% decline. Gap said the namesake brand’s net sales rose 9% to $844m, compared with a 4% fall at Old Navy.
Reported net income was $501m, or $1.38 a share. Gap said its adjusted earnings measure excluded the impact of expected refunds of tariffs imposed under the International Emergency Economic Powers Act and related interest income. Excluding that tariff-recovery benefit, adjusted gross margin was 41.4%, up 20 basis points from a year earlier.
This story draws on original reporting from CNBC.
