Old Navy overhauls leadership after 4% Q2 sales decline

By Daniel Okafor

Old Navy sales and comparable sales each fell 4% in Gap Inc.’s second quarter as the retailer added a merchandising leader and prepared to change its CEO.

Gap Inc. has tapped Nicole Colombo to lead women’s merchandising at Old Navy, according to Colombo’s LinkedIn page. Neither Gap Inc. nor Old Navy immediately responded to requests for more information. Colombo has served as general manager of fashion for Walmart’s marketplace for the past three years. Her experience also includes nearly six years at eBay.

The appointment brings Colombo back to Gap Inc., where she worked early in her career. She served as lead merchant for women’s and petites at Banana Republic factory stores, according to Dive.

A deeper merchandising problem

Dive described the turnover as evidence that Old Navy’s merchandising troubles run deeper than Gap Inc. executives first understood. After tepid growth in Q1, executives identified fashion and pricing misses. They said those problems were being rectified quickly. By Q2, both sales and comparable sales had fallen 4%.

Gap Inc. is installing a new team. On Monday, Michael Francis takes over from Haio Barbeito as Old Navy CEO. Barbeito, a former CEO of Walmart Canada, took the Old Navy reins four years ago. Francis previously advised Walmart. He arrived at Gap Inc. in May with dual roles, including chief customer officer at Old Navy.

Needham analysts, led by Tom Nikic, said last week that Gap Inc. might not be adequately addressing “the recent slowdown at Old Navy, which could be more persistent than management expects.” The warning matters because the new leadership team inherits a Q2 decline after executives said earlier problems were already being fixed.

The marketing test

Old Navy introduced an activewear subbrand in September and is moving into accessories and beauty. Gap Inc. CEO Richard Dickson earlier this year called those higher-margin areas “sleeper categories.”

Dive said the culture-oriented marketing that has appealed to Gap brand customers may not work as well at Old Navy. Evercore ISI analysts led by Michael Binetti tied a surprise traffic dip in June to that approach. Binetti said: “Traffic dropped off as marketing pivoted away from product focus to more of a brand campaign, and per GAP, once it switched back to product marketing traffic trends stabilized.”

What does this change for Old Navy?

It changes who will set the merchandising direction and lead the brand. Colombo brings three years managing fashion for Walmart’s marketplace, nearly six years at eBay and earlier merchant experience within Gap Inc. Francis brings advisory experience at Walmart and prior roles at Gap Inc., where he arrived in May.

The moves do not erase the operating problem. Gap Inc. and Old Navy have not provided additional information about the appointments or recovery plans. The next results will show whether a return to product-focused marketing stabilizes traffic, whether the new team fixes the fashion and pricing misses identified in Q1, and whether accessories and beauty can deliver sales from the higher-margin “sleeper categories.”