Gap Bets on Michael Francis to Rescue Old Navy Sales

Gap Inc. shares jumped as much as 24% after the company named retail veteran Michael Francis the next leader of Old Navy and raised its full-year earnings forecast, even as the largest brand posted a 4% comparable sales drop and overall sales guidance narrowed.

The move, effective November 2, hands the cash-cow banner to the executive who helped shape Target’s cheap-chic image and later advised Walmart. Investors treated the leadership change and profit beat as proof the turnaround under CEO Richard Dickson can still deliver.

Francis Takes the Helm on November 2

Gap appointed Francis President and Chief Executive Officer of Old Navy effective November 2, succeeding Haio Barbeito. Barbeito shifts to an advisory role through late January 2027.

Francis joined Gap in March 2026 as Old Navy’s chief customer officer and head of marketing shared services. His résumé runs more than four decades: 26 years at Target, including a long stretch as executive vice president and chief marketing officer; a short stint as president of JCPenney; chief global brand officer at DreamWorks Animation; and a decade as strategic advisor to Walmart’s C-suite and board.

At Walmart he supported nearly $200 billion in revenue growth through the retailer’s shift into omnichannel, e-commerce, membership and advertising. Gap said he previously consulted with the company on portfolio work.

Old Navy is poised for its next chapter of growth, and Michael is uniquely equipped to step into this operating role. 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.

Richard Dickson, President and CEO, Gap Inc.

Francis said he is honored to lead the team and focused on sharpening customer focus, cultural relevance and the experience at every touchpoint.

Q2 Numbers Show a Split Portfolio

For the quarter ended August 1, Gap reported second-quarter net sales of $3.7 billion, down 2% from a year earlier. Comparable sales fell 1%. Store sales dropped 3%; online sales fell 1% and made up 35% of the total.

Old Navy’s decline marked its first negative comparable sales since the second quarter of 2023. The Gap brand notched its eleventh straight positive quarter. Banana Republic logged a fifth consecutive gain. Athleta remained under pressure.

Reported operating income more than doubled to $676 million. Adjusted operating income was $259 million. Diluted EPS hit $1.38; adjusted EPS came in at $0.52, beating estimates and excluding the tariff recovery.

Seasonal Misses and Traffic Slowdown Hit Old Navy

Dickson told analysts the women’s summer assortment was the core problem. Dresses, shorts and swim drove roughly three points of the comp pressure. Pricing and assortment choices hurt the value equation. An unanticipated traffic slowdown compounded the miss as the quarter progressed.

“We didn’t execute well on our seasonal assortment,” Dickson said. Marketing also fell short of driving visits. August trends improved once fall product arrived, giving management confidence the second half can rebound.

Old Navy still accounts for more than half of Gap Inc. revenue. TTM figures show the brand near $8.6 billion of the company’s roughly $15.3 billion total. Any prolonged soft patch quickly shows up in the consolidated numbers.

The Fix List Already Underway

Management outlined a concrete set of near-term actions already rolling into stores and marketing:

• Rewired marketing, including a Fall denim campaign with Cardi B that is lifting traffic and a follow-on “Cardi’s Cardi” knits push
• Partnership with creator MrBeast for multipart Back-to-School content
• Nationwide launch of Old Navy Beauty Co. this week after a successful pilot
• Introduction of Old Navy Sport with elevated shop-in-shops and technical storytelling
• Expanded Fanatics licensed sports merchandise starting with football season
• Heavier emphasis on denim (third-largest U.S. brand), knits, sweaters and active as seasonal categories recede
• Pricing resets and sharper fashion content to restore the value equation

Francis inherits these levers plus the broader customer-experience and storytelling brief he already held. Dickson said the pair have worked closely on second-half plans.

Tariff Refunds and the Earnings Raise

A large one-time item powered the reported profit numbers. Gap recorded a $417 million adjustment related to expected recovery of tariffs paid under the International Emergency Economic Powers Act. It received $95 million in refunds plus $5 million interest in the quarter; the rest is expected in the third quarter.

Adjusted figures strip that benefit out. Even on an adjusted basis, the company raised full-year EPS guidance to $2.35-$2.45 from $2.30-$2.40. Reported full-year diluted EPS is now expected around $3.77-$3.87.

Gross margin on a reported basis jumped to 52.8%. Adjusted gross margin was 41.4%, up 20 basis points. Merchandise margin strength at the Gap brand helped offset higher promotions at Old Navy. Average unit retail rose across all brands.

Cash returns remained aggressive. Year-to-date the company returned $726 million to shareholders through share repurchases and dividends. Inventory ended flat at $2.3 billion. Cash and short-term investments stood at $2.5 billion.

Sales Guidance Narrowed While Gap Brand Accelerates

The company cut its full-year net sales growth outlook to 1%-1.5% from 1%-2%. Old Navy comparable sales are now assumed flat to down 1%, versus the prior flat-to-up-1% range. Gap brand comps are expected in the high-single to low-double-digit range, better than the earlier high-single-digit view.

Dickson framed the outlook as balanced, factoring in consumer and macroeconomic visibility while noting risks around energy prices and U.S. tariffs. A later Section 301 rate update is expected to provide about $15 million of net tariff relief concentrated in the fourth quarter.

On X, traders pointed to heavy short interest near 15% of the float as a contributor to the sharp squeeze once the CEO news and EPS raise hit. Several posts framed the move as a bet on the fix rather than celebration of the quarter itself. One widely shared take noted that Old Navy sales fell while the stock jumped, with investors “betting on the fix before the numbers prove it.”

What Francis Inherits and the Stakes Ahead

Barbeito, who joined from Walmart Canada and led Old Navy since 2022, leaves a brand that has added nearly half a billion dollars in annual revenue since Gap’s broader transformation began. It remains the No. 1 specialty apparel brand and retailer in the U.S. by the company’s Circana-based claims.

Francis’s brief centers on storytelling across commercial and marketing channels, the omni-channel experience, in-store elevation, and deeper ties with the family customer. Those families have faced pressure; analysts such as GlobalData’s Neil Saunders have argued Old Navy has not always given them enough reasons to buy.

The Gap brand’s cultural flywheel (Hailey Bieber denim collaboration, music-driven campaigns, store remodels) shows what disciplined product-plus-storytelling can do. Banana Republic has stabilized under new leadership. Athleta is still rebuilding. Old Navy’s scale means its recovery or continued lag will decide whether the portfolio’s overall growth stays in the low single digits or accelerates.

Francis starts November 2 with fall product already landing better and several new categories live. The market has priced in a successful handoff. The next several quarters will show whether the Target-honed customer instincts translate at the value end of specialty apparel.

Frequently Asked Questions

When does Michael Francis become Old Navy CEO?

Francis assumes the role of President and Chief Executive Officer of Old Navy on November 2, 2026. Haio Barbeito transitions to an advisory capacity immediately and remains eligible for separation benefits under Gap’s Senior Executive Severance Plan through January 30, 2027.

How much of Gap Inc. revenue comes from Old Navy?

Old Navy consistently contributes more than half of Gap Inc.’s total sales. Trailing twelve-month figures place the brand near $8.6 billion out of roughly $15.3 billion companywide, or about 56 percent, making it the clear cash engine of the portfolio.

What were Old Navy’s exact second-quarter 2026 results?

Old Navy posted net sales of $2.1 billion, down 4 percent year over year, with comparable sales also down 4 percent. Management attributed roughly three points of the decline to the women’s seasonal assortment (dresses, shorts, swim) and the balance to weaker-than-expected traffic.

What is Michael Francis’s background before Gap?

Francis spent 26 years at Target, including more than a decade as EVP and chief marketing officer where he helped build the cheap-chic positioning. He later served as president of JCPenney, chief global brand officer at DreamWorks Animation, and strategic advisor to Walmart’s leadership for about ten years, supporting nearly $200 billion in revenue growth during its omnichannel expansion.

Did Gap raise or cut its full-year 2026 guidance?

Gap narrowed full-year net sales growth guidance to 1 percent to 1.5 percent from the prior 1 percent to 2 percent range, reflecting Old Navy’s softer second quarter. At the same time it raised adjusted earnings-per-share guidance to $2.35-$2.45 from $2.30-$2.40, excluding tariff-recovery items.

Disclaimer: This article is news reporting and analysis based on Gap Inc. public filings, earnings materials and contemporaneous coverage as of late August 2026. It is for informational purposes only and does not constitute investment, financial or trading advice. Readers should consult a qualified financial advisor or licensed broker before making any investment decisions regarding Gap stock or related securities. Figures, guidance ranges and leadership timelines reflect the sources available on the publication date and may change with subsequent company updates or market conditions.