Gap’s 15% Jump Masks Old Navy’s 4% Sales Problem—and a New CEO’s Real Test
Old Navy did $2.1 billion in quarterly sales and still went backwards 4%. That is why Gap replaced its CEO: brand momentum means nothing when customers stop walking in.
Old Navy did $2.1 billion in quarterly sales and still went backwards 4%. That is the sort of number that gets a chief executive politely thanked, shifted into an advisory role and replaced by the bloke who was hired to understand why customers were drifting away.
Gap Inc. has appointed Michael Francis as President and CEO of Old Navy from November 2, 2026, replacing Haio Barbeito, who will move into an advisory capacity. Wall Street liked the announcement and Gap’s upgraded earnings outlook enough to send the shares up 15% in extended trading. Fine. Markets enjoy a good executive reshuffle. But a share-price pop is not a turnaround. It is a down payment on one. ([gapinc.com](https://www.gapinc.com/en-us/articles/2026/08/gap-inc-announces-leadership-transition-at-old-nav))
This is not a promotion. It is a repair job.
Richard Dickson, Gap Inc.’s CEO, has made a sensible call: the company’s biggest brand cannot be allowed to become the thing holding the whole portfolio back.
In the second quarter ended August 1, 2026, Old Navy’s comparable sales fell 4%, after rising 2% a year earlier. Its sales also fell 4%, to $2.1 billion. Gap’s namesake brand, meanwhile, posted a 10% comparable-sales increase and $844 million in sales, while Banana Republic grew comparable sales 3%. Athleta went the other way, down 12%. ([prnewswire.com](https://www.prnewswire.com/news-releases/gap-inc-reports-second-quarter-fiscal-2026-results-302862234.html))
That leaves Dickson with an awkward but familiar multi-brand retail problem: one brand has rediscovered a pulse, another is wobbling, and the largest business is the one that must work if the group is going to compound value rather than just make attractive earnings-call noises.
Francis was already inside the tent. He joined Gap in March as Old Navy’s Chief Customer Officer and head of marketing shared services, after a career spanning more than four decades in retail, marketing and transformation. He spent 26 years at Target, including more than a decade as chief marketing officer, was president at JCPenney, held a senior role at DreamWorks Animation, and advised Walmart’s leadership for a decade. ([gapinc.com](https://www.gapinc.com/en-us/articles/2026/08/gap-inc-announces-leadership-transition-at-old-nav))
In plain English: Gap has put a brand-and-customer operator in charge of a mass-market retailer whose problem is not a lack of clothes. It is a lack of sufficiently compelling reasons for families to choose these clothes, at these prices, from this retailer, now.
That distinction matters. Most struggling consumer businesses do not die because their executives forgot the corporate values. They die because customers can get a better version of the same promise somewhere else.
The numbers explain why Dickson moved now
Gap’s overall second quarter was not a disaster. Net sales were down 2% to roughly $3.7 billion and company comparable sales were down 1%, but adjusted earnings per share came in at $0.52. The company raised its full-year adjusted earnings-per-share outlook to $2.35 to $2.45, up from $2.30 to $2.40. ([prnewswire.com](https://www.prnewswire.com/news-releases/gap-inc-reports-second-quarter-fiscal-2026-results-302862234.html))
But read past the headline profit number before you start clapping.
Reported gross margin was boosted by a large expected recovery of tariffs imposed under the International Emergency Economic Powers Act. Gap recorded a $417 million adjustment to cost of goods sold related to that recovery, including roughly $512 million of tariff refunds partly offset by a $95 million vendor appreciation commitment. The cleaner operating read is the adjusted gross margin: 41.4%, up only 20 basis points year on year. ([prnewswire.com](https://www.prnewswire.com/news-releases/gap-inc-reports-second-quarter-fiscal-2026-results-302862234.html))
That is not criticism of Gap for taking money it believes it is owed. Any competent management team would. It is a reminder that one-off accounting relief is not the same thing as a durable commercial fix.
The durable issue is Old Navy. Its women’s seasonal assortment underperformed and traffic slowed unexpectedly, according to Gap. Reuters reported that dresses, shorts and other summer categories did not sell strongly enough, while management is now banking on fall product—especially sweaters and denim—to draw shoppers back. ([prnewswire.com](https://www.prnewswire.com/news-releases/gap-inc-reports-second-quarter-fiscal-2026-results-302862234.html))
There is the real job description for Francis: make the customer want the product before the finance team has to rescue the result with sharper pricing, more promotion or a better tariff outcome.
Haio Barbeito leaves behind a stronger foundation—but that is not enough
Barbeito did not inherit a pristine business. He became Old Navy’s CEO in August 2022 after running Walmart Canada and holding earlier CEO roles across Walmart’s operations in Argentina and Chile. Gap credits him with helping build the foundation for its broader transformation, and says Old Navy’s annual revenue has grown by nearly $500 million since that transformation began. ([sec.gov](https://www.sec.gov/Archives/edgar/data/39911/000162828026018573/gap-20260131.htm))
That should be acknowledged. Leadership changes do not always mean somebody has failed spectacularly. Sometimes the business genuinely needs a different tool for the next phase.
But boards and CEOs need to stop pretending that every handover is merely a graceful evolution. Timing tells you what is really happening. Francis was announced as Chief Customer Officer in May. Less than four months later, he has the top job, effective November 2. That is a rapid escalation of responsibility, and it says Dickson has concluded that customer relevance needs to sit at the very top of Old Navy—not beside it in a marketing box. ([gapinc.com](https://www.gapinc.com/en-do/articles/2026/05/old-navy-appoints-michael-francis-as-chief-custome?utm_source=openai))
I like that decision because it kills a common management cop-out: appoint a brilliant customer or brand executive, then force them to lobby the operator, merchant, supply-chain chief and finance boss for every meaningful decision. That structure lets everyone attend the meeting and nobody own the outcome.
If Francis is accountable for Old Navy’s profit and loss, he can connect the dots properly: product choice, customer insight, campaign timing, store experience, digital merchandising, inventory depth and price architecture. That is how a retailer becomes coherent. Not through another slide deck about “putting the customer at the centre.”
The overlooked angle: Gap is betting on an internal succession, not a retail celebrity
The lazy view is that Gap has hired a marketing veteran to make prettier ads. I think that misses the point.
Francis knows Old Navy’s current business from the inside. He was hired into a role covering the brand’s end-to-end customer strategy and Gap’s shared marketing services. By the time he takes over, he will have had about eight months to see where the customer journey, merchandising choices and operating reality fail to line up. ([gapinc.com](https://www.gapinc.com/en-do/articles/2026/05/old-navy-appoints-michael-francis-as-chief-custome?utm_source=openai))
That is a much better starting position than parachuting in a glamorous outsider who needs six months to learn the acronyms, another six to blame the prior team and another year to announce a transformation program with a logo.
The contrarian point, though, is this: marketing relevance cannot repair bad economics forever.
Gap has leaned into cultural marketing to revive the Gap brand, and it appears to be working. Reuters pointed to Old Navy’s collaborations with Cardi B and MrBeast as part of the effort to reach younger shoppers. Those things can earn attention. Attention is useful. But attention that does not turn into repeatable full-price demand is just expensive entertainment. ([investing.com](https://www.investing.com/news/stock-market-news/gap-lifts-annual-profit-forecast-on-strength-of-namesake-brand-4880153))
Francis must prove three things quickly.
First, Old Navy can create a sharper product point of view without abandoning its value promise. Second, its stores and online experience can make that promise easy to understand. Third, traffic can recover without buying it back through discounts that wreck margin.
The good news is that Gap is not operating from a weak balance sheet. It ended the quarter with $2.5 billion in cash, cash equivalents and short-term investments, and had returned $726 million to shareholders year to date through dividends and buybacks. The bad news is that a healthy balance sheet gives executives room to act; it does not give customers a reason to care. ([prnewswire.com](https://www.prnewswire.com/news-releases/gap-inc-reports-second-quarter-fiscal-2026-results-302862234.html))
The real second-order implication for operators
This move should make every founder and executive uncomfortable in a productive way.
When a business says it is “customer-led” but appoints somebody to own customers below the person who owns the P&L, it is often lying to itself. Not maliciously. Just structurally.
Customers experience one company. They do not experience your marketing department, your product team, your operations unit and your finance committee separately. They experience the product, price, delivery, service and feeling of the transaction as one thing. If those functions report into separate empires, the customer gets the gaps between them.
Dickson’s decision gives Francis a clean mandate to close those gaps. The appointment also raises the standard for Dickson himself. He now owns the outcome of a more direct strategy: Gap brand as the cultural-growth engine, Old Navy as the scaled family-value engine, and no hiding behind the idea that a portfolio is healthy when its biggest component is slipping.
That is how accountability ought to work. One clear owner. A measurable commercial problem. A defined date. No corporate fog.
What this means for you
If you run a business, do this tomorrow:
1. Find your Old Navy. Identify the largest revenue line that is underperforming, not the small project everyone complains about because it is easy to discuss. Put the exact revenue, growth rate, margin and traffic or retention number on one page.
2. Name one accountable operator. Not a committee. Not a “working group.” One person who owns the customer outcome and the financial outcome together.
3. Separate attention from demand. Measure whether campaigns create profitable repeat behaviour, not merely clicks, reach or applause. A celebrity partnership is not a strategy if it ends with clearance stock.
4. Promote from insight when the clock matters. The best turnaround CEO is not automatically the most famous external hire. Sometimes it is the executive who has already found the leak, earned trust and can fix it without spending a year learning where the taps are.
5. Do not confuse a good quarter with a solved business. Gap beat profit expectations and raised its earnings outlook. Old Navy still fell 4%. Both facts can be true. The operators who build serious companies can hold two truths at once—and act on the uncomfortable one.
That is the real lesson from Gap’s reshuffle. A CEO change is not leadership theatre when it puts customer truth closer to commercial power. Now Francis has to turn that truth into product customers actually want to buy. No amount of upbeat language will do that for him.