Gap is turning to an experienced retail executive to address a problem that has become increasingly difficult to overlook: its largest brand is no longer contributing to the broader turnaround at the same pace as the rest of the company. The appointment of Michael Francis as president and chief executive of Old Navy follows a quarter in which the brand’s comparable sales fell 4 percent, even as the Gap brand itself delivered double-digit growth.

The leadership change comes at a particularly important point in Gap’s recovery. Since Richard Dickson became chief executive in 2023, the company has reorganized leadership, sharpened its brand strategies and improved the performance of several businesses. Gap and Banana Republic have shown stronger momentum, while Old Navy has remained more uneven. The decision to elevate Francis therefore suggests that management now sees the weakness at Old Navy as requiring a more direct customer and commercial reset rather than simply another adjustment to its existing strategy.

Francis brings decades of experience in retail, marketing and business transformation, including senior positions at Target and JCPenney and advisory work with Walmart. He joined Gap earlier in 2026 as Old Navy’s chief customer officer and head of marketing shared services. His move into the top operating role gives him responsibility for translating that customer-focused mandate into broader changes across the brand.

Old Navy has become the weak link in Gap’s recovery

The significance of the appointment becomes clearer when Old Navy’s results are compared with the rest of Gap’s portfolio. In the second quarter of fiscal 2026, Old Navy generated about $2.1 billion in sales, making it by far the company’s largest brand. Yet its comparable sales declined 4 percent, while the Gap brand’s comparable sales increased 10 percent and Banana Republic’s rose 3 percent.

That divergence is important because Gap’s overall recovery depends heavily on Old Navy. A smaller brand can outperform expectations without materially changing the group’s financial trajectory. Old Navy’s scale means that even a modest deterioration can offset gains elsewhere. The second-quarter figures demonstrated precisely that problem: Gap Inc.’s total comparable sales declined 1 percent despite strong performances from the Gap brand and Banana Republic.

The weakness also followed a more mixed first quarter. Old Navy’s comparable sales had risen 1 percent during that period, supported by categories such as denim, activewear, and children’s clothing, but the women’s dress business underperformed. Management subsequently identified broader weakness in seasonal women’s merchandise, suggesting that the problem was not limited to one isolated product category.

The company has acknowledged that some of the weakness was related to its seasonal assortment, while also pointing to an unexpected slowdown in customer traffic during the second quarter. That combination makes the problem more complicated than simply correcting a few poorly performing products.

Women’s apparel has exposed a broader customer problem

The most immediate challenge for Francis will be determining why Old Navy’s merchandise is not consistently giving customers enough reason to purchase. Women’s apparel is especially important because it represents a large part of the brand’s relationship with its core family-oriented customer base.

The company’s own comments indicate that the summer seasonal assortment did not perform as expected. Management has already responded by sharpening price points, changing customer messaging and making adjustments to the assortment. Those measures produced some improvement during the quarter, but not enough to prevent the overall comparable sales decline.

This creates a difficult distinction for the new chief executive. If the problem is primarily product selection, Old Navy needs better merchandising and faster responses to changing consumer preferences. If the problem extends to brand relevance, simply changing individual products will not be sufficient. The company would need to reconsider how Old Navy communicates value, fashion and identity to its customers.

The challenge is particularly significant because the brand competes in an intensely crowded segment. Consumers can choose from discount retailers, department stores, specialty apparel chains, online marketplaces and rapidly expanding digital fashion companies. Old Navy has historically relied on a combination of affordability, family appeal and accessible fashion. Maintaining that proposition becomes harder when competitors can offer similar prices while responding rapidly to changing trends.

Francis brings a customer strategy rather than a simple cost focus

The choice of Francis indicates that Gap is emphasizing customer strategy and brand relevance alongside operational execution. Before becoming Old Navy’s chief executive, Francis was brought into the company specifically to strengthen customer strategy and marketing. His career includes senior roles at major retailers and extensive experience in brand building and business transformation.

That background matters because Old Navy’s current problem is not primarily a balance-sheet crisis. The company remains a large and established retailer with substantial sales, a broad store network and significant digital operations. The immediate challenge is converting that scale into more consistent customer demand.

Francis is expected to focus on brand storytelling, the customer experience across physical and digital channels and Old Navy’s connection with families. Those priorities suggest an attempt to address the demand side of the problem rather than relying principally on discounts or cost reductions.

That distinction could be important. Excessive discounting can temporarily stimulate sales but can also weaken margins and train customers to wait for promotions. Gap has emphasized reduced discounting as part of its broader turnaround, meaning Old Navy will need to improve customer demand without simply purchasing sales through increasingly aggressive promotions.

The brand has also been expanding into areas such as beauty and accessories while developing new marketing initiatives. Those moves could broaden customer engagement, but they also increase the number of categories competing for management attention. The central challenge remains making the core apparel business compelling enough to support sustainable traffic and sales.

Gap’s broader recovery raises the pressure on Old Navy

The contrast between Old Navy and the Gap brand is particularly revealing because it suggests that Gap’s broader transformation is not failing uniformly. The namesake Gap brand has posted repeated quarters of comparable sales growth, supported by stronger performance in categories including denim, fleece and children’s clothing.

That improvement provides management with evidence that its strategy can work under certain conditions. It has also raised expectations for Old Navy. If one part of the portfolio can regain cultural relevance and attract customers through stronger product and marketing execution, investors may reasonably expect the company’s largest division to make similar progress.

At the same time, Old Navy faces a different commercial challenge. Its customer base is broader and more value-conscious, and the brand operates at a much larger scale. Changes that work for the Gap brand cannot simply be copied. Old Navy has to remain affordable while maintaining sufficient fashion relevance to avoid becoming overly dependent on basic merchandise and promotional pricing.

That makes Francis’s appointment a test of whether Gap can adapt its turnaround model to the particular economics and customer expectations of Old Navy.

Investors are rewarding the appointment, but the numbers remain mixed

Gap’s shares rose sharply after the leadership announcement, reflecting investor confidence in both the quarterly earnings report and the possibility that a stronger Old Navy strategy could improve the company’s overall trajectory. The company exceeded profit expectations and raised its full-year earnings outlook, even while narrowing its sales-growth expectations because of economic uncertainty.

The reaction suggests that investors are distinguishing between Gap’s current profitability and its longer-term growth challenge. Stronger margins and disciplined cost management can support earnings even when sales growth is uneven. But Old Navy’s scale means that sustained weakness in the brand would eventually become harder to offset through efficiency improvements elsewhere.

The company’s second-quarter figures reinforce that tension. Total net sales declined 2 percent to about $3.7 billion, while comparable sales fell 1 percent. At the same time, gross margin improved substantially, helped partly by a recovery of certain tariff-related costs, and the company raised its earnings outlook.

Those results give Gap some financial room to continue investing in the turnaround. They do not, however, resolve the underlying question of whether Old Navy can return to sustained comparable sales growth.

Francis will therefore inherit a brand with considerable advantages: scale, recognition, a large customer base and substantial physical and digital distribution. The problem is that those advantages have not prevented recent weakness. His challenge will be to translate them into stronger reasons for customers to return, particularly in women’s apparel and seasonal categories.

The leadership change should consequently be viewed as an attempt to accelerate a correction rather than evidence that the correction has already succeeded. Old Navy remains central to Gap’s financial performance, and the appointment gives the company an experienced retail executive to address the brand’s customer and merchandising challenges. The more meaningful measure will come from whether traffic, product performance and comparable sales improve over the next several quarters without relying excessively on discounts.

For Gap, restoring Old Navy is not simply about reviving one brand. It is about making the company’s largest source of sales contribute more consistently to a turnaround that has so far produced stronger results in other parts of the portfolio.

(Adapted from MarketScreener.com)