Gap shares jumped 14% on Friday premarket after Michael Francis, an industry veteran, was named CEO of Old Navy. The move is intended to reinvigorate the brand amid a 'challenging spending environment.

Gap's largest?brand?, Old Navy, has struggled to gain traction with select women's clothing categories in recent years, which is a major obstacle in the turnaround of the company.

Gap's leadership and marketing have been revamped since CEO Richard Dickson assumed charge in 2023. This has boosted Gap and Banana Republic while Old Navy continues to lag.

The Gap cannot ignore the fact that this is not a minor mistake.

Some retailers bring in new leaders to revive their struggling brands. Kate Spade, Tapestry's Kate Spade, appointed Jonathan Saunders last month as its executive creative director.

Jefferies analysts wrote in a report that the appointment of a New Old Navy leader demonstrates management's commitment to stabilizing performance for its largest banner.

Gap's annual profit forecast was raised after exceeding quarterly expectations, thanks to stronger pricing and Gap Brand sales.

The company cited economic uncertainty as the reason for reducing its forecast of fiscal 2026 growth to?1%-1.5%, from 1%-2.5%.

Gap exceeded second-quarter sales estimates by?10%, while Old Navy reported its first drop in sales for 12 quarters. It was down 4% after several quarters with sluggish sales.

The forward 12-month ratio of the company's price to earnings was 8.33, as opposed to American Eagle Outfitters at 8.94 and Urban Outfitters at 11.93.

Saunders stated that "Gap will be able to finish the full fiscal year with a strong sales performance, but they need to get Old Navy's big engine whirring once again in order to continue to advance at a convincing rate."

(source: Reuters)