Gap names Michael Francis as Old Navy CEO, aiming to boost struggling sales

Apparel retailer Old Navy is being thrown another lifeline. On Thursday, August 27, parent company Gap Inc. announced Michael Francis as president and CEO of Old Navy. Francis is relatively new to the company, having joined in March as chief customer officer, Old Navy, and head of marketing shared services. His upcoming position will begin on November 2, with current CEO Haio Barbeito transitioning into an advisory role.  “Old Navy is poised for its next chapter of growth, and Michael is uniquely equipped to step into this operating role,” Gap president and CEO Richard Dickson said in the announcement. “Michael is one of the most respected commercial, brand and customer leaders in retail. His experience building iconic brands, cultivating customer connections, and driving transformation at scale will help Old Navy strengthen its relevance, accelerate growth, and deliver even greater value for customers.”  Making a difference at the largest U.S. retailers Francis helped cultivate Target’s “cheap chic” image in the early 2000s, which at the time helped set the Minnesota-based retailer apart from low-priced competitors like Walmart and Kmart. Francis spent 26 years at Target in roles like executive vice president and chief marketing officer. He then spent another decade at Walmart supporting its revenue growth. Now, Old Navy is looking to Francis to support its own turnaround.  The announcement coincided with Gap’s second quarter earnings report, which highlighted Old Navy’s struggles. The brand’s net sales fell 4% year-over-year (YOY) to $2.1 billion. The company said this figure reflected “expected pressure in the women’s seasonal assortment in addition to an unanticipated slowdown in traffic.”  Meanwhile, Gap’s net sales were up 9% YOY to $844 million. The company also owns Banana Republic (up 1% YOY) and Athleta (down 12% YOY).  Shares of Gap Inc. (NYSE: GAP) rose more than 18% during premarket trading on Friday. The stock has largely struggled this year and was down more than 17% year to date as of Thursday’s close.

Gap Soars On Old Navy CEO Shake-Up As Jefferies Sees "New Catalyst" For Stock Shares of major U.S. clothing retailer Gap, whose brands include Old Navy, Banana Republic and others, jumped the most in 16 months in premarket trading after the company reported stronger-than-expected profit and upgraded its earnings outlook. The company also named retail veteran Michael Francis as Old Navy's next CEO. Francis spent 26 years at Target, where he helped engineer the retailer's "cheap chic" strategy, before advising Walmart on its marketing operations. He joined Old Navy in March as chief customer officer. The leadership shake-up comes after Old Navy's comparable sales fell 4% last quarter, twice the 2% decline expected by analysts tracked by Bloomberg. Gap CEO Richard Dickson blamed mispriced and poorly curated assortments of dresses, shorts and swimwear, along with marketing that failed to generate store traffic. "What we did not anticipate was the degree to which our marketing would fall short in driving traffic," Dickson told analysts. "We are not satisfied with this result." Gap lowered the upper end of its 2026 net-sales outlook and reduced its forecast for Old Navy's comparable sales. However, the retailer raised its full-year earnings-per-share guidance after higher prices at Gap and Banana Republic, along with improved operating efficiency, supported margins. Shares jumped as much as 15% in premarket trading following the earnings and leadership announcements. If the gains hold through today's cash session, it would mark the stock's biggest intraday advance since April 2, 2025. Shares have traded within a tight range since the end of 2023, bouncing between support near $20 and resistance near $30. Since the Dot-Com era of 2000, the stock has largely traded sideways. Short interest in the stock stands at around 12.6%, equivalent to roughly 29.9 million shares sold short. Days to cover stands at around 5.7. Bloomberg data show eight "Buy" ratings, 12 "Neutral" ratings, and zero "Sell" ratings. The average 12-month Wall Street price target is around $27. Jefferies analyst Corey Tarlowe offered his initial take on the earnings: Gap Brand Keeps Winning; Old Navy Missed But Improvements Underway GAP delivered a mixed Q2, with profit ahead of cons despite weaker-than-expected sales. Gap brand continued to significantly outperform (+10% comp), while Old Navy's -4% comp reflected assortment and marketing missteps that mgmt believes are largely behind it. Encouraging August trends, raised FY26 EPS guidance ($2.35-$2.45), incremental tariff relief, and an upcoming Old Navy leadership transition could support a stronger 2H outlook. Raising PT to $24. What We DID LIKE in the Quarter 1) Gap Brand Momentum Remains Exceptional. Gap delivered comp growth of +10%, marking its 11th consecutive quarter of positive comps. Strength remained broad-based across departments, while customer acquisition, market share gains, and lower discounting highlight the durability of the reinvigoration strategy. 2) Profitability Outperformed. Despite top-line pressure from ON, adj. GM expanded 20bps to 41.4%, while merch margin increased 80bps on stronger pricing, lower discounting, and tariff mitigation efforts. Adj. OM of 7.1% exceeded expectations, demonstrating continued cost discipline. What We DIDN'T LIKE in the Quarter 1) Old Navy Stumbled and Athleta Remains a Drag. Old Navy (ON) comps declined 4%, driven by weakness in women's seasonal categories and softer traffic. Mgmt acknowledged issues around assortment, pricing, and marketing execution, prompting a reduction in FY26 comp expectations to flat to down 1%. Athleta comps fell 12% as management maintained a cautious inventory posture while continuing its turnaround efforts. While profitability and inventory productivity improved, meaningful sales recovery remains elusive. What We See Ahead 1) Old Navy Recovery Is the Key Debate. Mgmt cited improving August trends as seasonal product headwinds faded and new fall marketing gained traction. Strength in denim, active, sweaters, and knits, alongside initiatives such as Sport, Beauty, and Fanatics, should support sequential improvement in 2H. The announcement of Michael Francis as Old Navy's next president and CEO also introduces a new catalyst to help accelerate improvements at the company's largest brand. 2) Raising the Earnings Outlook. Mgmt raised FY26 adj. OM guidance to 7.4%-7.6% and EPS guidance to $2.35-$2.45. Incremental tariff relief, continued AUR growth, cost savings, and buybacks should support earnings growth through year-end. 3) New Growth Vehicles Emerging. Mgmt continues to invest in beauty and accessories, including the nationwide launch of Old Navy Beauty, Gap's fragrance relaunch, and a new accessories platform. While the near-term financial contribution should be limited, these initiatives could provide incremental opportunities for traffic, engagement, and margin over time. Details From the Call and Callback Mgmt repeatedly emphasized ON improvement and stronger August trends as key underpinnings of its outlook and confidence. CNBC quoted incoming Old Navy CEO Francis as saying 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." Now it is Francis' turn to prove he can bring cash-strapped shoppers back to Gap's largest brand. Tyler Durden Fri, 08/28/2026 - 08:05