Aug 28 (Reuters) - Gap's shares jumped as much as 24.1% to a four-month high, after the apparel retailer named industry veteran Michael Francis as CEO of Old Navy, a move aimed at reinvigorating the brand in a challenging spending environment.
Old Navy, Gap's biggest brand, has struggled to gain traction in select women's apparel categories in recent quarters, a key hurdle in the company's turnaround.
Since CEO Richard Dickson took charge in 2023, Gap has revamped its leadership and marketing, boosting Gap and Banana Republic, but Old Navy continues to lag.
"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," said Neil Saunders, managing director of GlobalData, adding that the weakness points to a broader problem that Gap can no longer pass off as a "modest range misstep".
Gap shares were trading 15% higher at $23.95, and could add about $1.14 billion to the company's market value if gains hold.
Some retailers are bringing new leaders on board to revive their struggling brands. Tapestry's Kate Spade last month appointed renowned designer Jonathan Saunders as executive creative director.
"The appointment of a new Old Navy leader underscores management's focus on stabilizing performance at the company's largest banner," Jefferies analysts said in a note.
Francis joined Gap in March as Old Navy's chief customer officer. He brings over four decades of marketing, commercial and business transformation experience, including roles at Target and Walmart.
Gap lifted its annual profit forecast after topping quarterly estimates. However, it narrowed its fiscal 2026 sales growth target, citing economic uncertainty.
Its quarterly comparable sales grew about 10%, while at Old Navy they were down 4%, the first decline in 12 quarters.
The company's forward 12-month price-to-earnings ratio stood at 8.33, compared with American Eagle Outfitters' 8.94 and Urban Outfitters' 11.93.
"Gap should be able to end the full fiscal year on a positive sales note, but it needs to get the big engine of Old Navy whirring again to keep advancing at a convincing pace," Saunders said.
Reporting by Anuja Bharat Mistry and Angela Christy M in Bengaluru; Editing by Shinjini Ganguli
Source: Reuters