Key facts
- Gap appointed Michael Francis as the new CEO of Old Navy to revitalize the brand.
- Gap raised its annual profit forecast to $2.35-$2.45 per share, an increase of 5 cents.
- The company's namesake brand achieved a 10% comparable sales increase in the second quarter.
- Old Navy's comparable sales declined by 4% in the second quarter.
- Athleta's comparable sales fell by 12% in the second quarter.
Gap's shares surged approximately 14% in premarket trading following the appointment of industry veteran Michael Francis as the new CEO of its Old Navy brand, a move aimed at revitalizing the struggling division. Despite improvements at other Gap brands under CEO Richard Dickson, Old Navy has continued to lag, with comparable sales declining 4% in the latest quarter.
Old Navy, Gap's largest brand, has faced challenges in key women's apparel categories. Analysts suggest that economic pressures on the family demographic served by Old Navy, coupled with a lack of compelling reasons for consumers to purchase, contribute to the brand's difficulties.
Gap also raised its annual profit forecast, projecting adjusted earnings per share between $2.35 and $2.45, an increase of 5 cents. This optimism is partly driven by the namesake Gap brand, which reported a 10% comparable sales increase in the second quarter, marking its tenth consecutive quarter of positive performance and exceeding analyst expectations. In contrast, Athleta's comparable sales fell 12% in the same period.
For the second quarter, Gap reported revenue of $3.65 billion, a 2% decrease year-over-year, but its adjusted profit per share of 52 cents surpassed analyst estimates of 48 cents. The company narrowed its fiscal 2026 sales growth forecast to 1%-1.5% from 1%-2% due to economic uncertainty.