Gap on Thursday announced a new CEO for its Old Navy banner, effective Nov. 2, as the retailer tries to reinvigorate sluggish sales performance at the brand.
Michael Francis, who was appointed the chief customer officer at Old Navy in May, will take over the reins from current CEO Haio Barbeito, who will become an advisor to the company. Barbeito has held the position since 2022.
Gap CEO Richard Dickson told CNBC the move was "a planned and thoughtful transition" to better equip Old Navy for its next chapter.
"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 in an interview. "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."
Shares of Gap jumped 12% in extended trading Thursday.
In the company's fiscal second-quarter earnings report, Old Navy posted net sales of $2.1 billion — down 4% year over year. Comparable sales were also down 4%, versus comparable sales growth of 2% during the same period last year. Wall Street analysts were expecting a decline of 2.4% for the most recent period, according to StreetAccount.
It marked Old Navy's first negative same-store sales figure since the second quarter of 2023 and was due in part to "unanticipated slowdown in traffic," the company said. The brand contributes nearly 60% to Gap's overall revenue.
Dickson told CNBC that Old Navy specifically saw disappointing results from its summer marketing, which he said "lacked a direct product message." But he added that the brand has already begun to see "significant improvement" in its traffic and sales this past month.
Incoming CEO Francis said in a statement 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."
Overall, Gap reported mixed results for its fiscal second quarter, beating analysts' estimates for earnings per share but underperforming revenue expectations. Gap Inc. comparable sales were down 1% for the period, including a 3% year-over-year decline in in-store sales.
"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."
For the full fiscal year, Gap narrowed its net sales growth outlook from a range of between 1% and 2% to a range of between 1% to 1.5% due to the lag at Old Navy. Still, the company hiked its expectations for adjusted earnings per share from a range of $2.30 to $2.40 for the full year to a range of $2.35 to $2.45.
Here's how the company performed in the quarter ended Aug. 1 compared with what Wall Street was expecting, according to a survey of analysts by LSEG:
Gap reported net income of $501 million, or $1.38 per share, compared with $216 million, or 57 cents per share, the prior year. Sales sank slightly to $3.65 billion from $3.73 billion in the year-ago period.
Adjusting for one-time items — in particular the impact of tariff refunds of approximately $512 million — Gap reported earnings per share of 52 cents.
