Dive Brief:
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Following a series of quarterly sales misses, Old Navy is getting a new CEO. On Nov. 2 Haio Barbeito will move into an advisory role after four years at the helm.
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Replacing him is Michael Francis, who took dual roles at Gap Inc. when he arrived in March, including chief customer officer at Old Navy. He’s had an advisory role at Walmart, as well as leadership positions at DreamWorks Animation, J.C. Penney and Target.
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Gap Inc. announced the transition Thursday, when it also reported another disappointing performance at its value brand. Old Navy Q2 net sales fell 4% year on year to $2.1 billion, with comps down 4%, along with “an unanticipated slowdown in traffic” in the period.
Dive Insight:
The namesake Gap brand and even Banana Republic in Q2 overshadowed Old Navy, the conglomerate’s biggest brand and usually a dependable sales juggernaut.
Gap brand Q2 net sales rose 9% to $844 million and comps surged 10%, while Banana Republic net sales rose 1% to $478 million, with comps up 3%. Overall Gap Inc. net sales fell 2% to $3.7 billion and comps dropped 1%, dragged down not just by Old Navy but also Athleta’s 12% declines in net sales and comps.
Gap Inc. CEO Richard Dickson said the Q2 result at Old Navy was only a “modest miss,” given the known merchandising issues that already led to sales weakness in Q1. Fall styles and marketing have led to improved traffic and more strength in women’s denim, he said.
The departure of Barbeito was planned, he also said. But some analysts view it as at least in part a response to Old Navy’s troubles.
“It is true that the family demographic that Old Navy serves is under pressure, but Old Navy did not give them enough reasons to buy,” GlobalData Managing Director Neil Saunders said in emailed comments. “In our view, this is now quite a serious challenge that the group needs to correct and cannot simply dismiss as a modest range misstep. Fortunately, Gap seems to understand this, which is why it has made the decision to install a new CEO to refresh the brand and its approach.”
The quarter was a continuation of the success story at Gap, which was in the doldrums for years. Under Dickson the brand has labored to regain cultural relevance, but the sales gains are not just about marketing, according to Saunders, who said Gap is now the “star of the show” at the apparel retailer.
“The various collaborations and cultural activations are certainly helping to keep the brand in the spotlight and are driving sales,” Saunders said. “But growth has also moved beyond this as healthy uplifts are being produced across the core assortment in categories like fleece and denim. Here, improved products and more relevant styling are creating interest.”
Clarification: This story has been updated to better reflect Old Navy's quarterly performance.
