Gap Inc has announced a new CEO for its Old Navy label, the same day the company’s financial results showed that the brand’s underperformance was weighing down results.
Michael Francis will become president and CEO of Old Navy, effective November 2, according to the statement. He will succeed Haio Barbeito, who will transition from his operating role into an advisory capacity.
Francis has been Old Navy’s chief customer officer and head of marketing shared services since March. His leadership experience spans over 40 years of commercial, marketing and business transformation, including being a strategic advisor to Walmart’s c-suite and board for a decade.
In his new role, Francis and the Old Navy team will continue to build upon the transformation already underway.
Growth streak ends
Results for the second quarter ended August 1 saw a 2 per cent decline in net sales and a 1 per cent decrease in comparable sales. This ended a long sales growth streak that the company had delivered.
According to GlobaData MD Neil Saunders, the sales declines are not disastrous, but nor are they good in a market where apparel performed well and inflation is still prevalent. It also represents a modest loss of apparel market share.
Old Navy, the biggest part of Gap Inc’s portfolio, is the anchor that is weighing down the group, the analyst said. Sales at the label slid 4 per cent on both a reported and comparable basis during the quarter.
“This is an extremely weak performance that, in our view, is the consequence of an assortment that remained lackluster across most of the trading period – with far too much bloat and not nearly enough must-have style.
“Because this problem has been embedded in the business for a while, we think it is reducing visit frequency – which may now make it challenging for the brand to rebuild quickly,” Saunders said.
Meanwhile, the Gap brand was once again the star of the show, with net sales up 9 per cent and comparable sales soaring 10 per cent.
“From our data, Gap is also now becoming a regular store for younger consumers as opposed to somewhere they visit occasionally for the odd on-trend item. This is pleasing as it suggests that Gap’s revival has put down some deep roots that will sustain growth in the quarters and years ahead,” Saunders said.
Banana Republic is also performing well, with sales up 1 per cent on a reported basis and 3 per cent on a comparable basis. Athleta remains in the doldrums with a 12 per cent drop, but the business is too small to pose a serious threat to the group, according to the analyst.
The company has lowered its outlook slightly to reflect Old Navy’s second-quarter performance. Net sales are now expected to increase 1-1.5 per cent, compared to the prior range of 1-2 per cent.
