SAN FRANCISCO — Gap Inc. shares jumped roughly 12% to 14% Friday after the retailer posted stronger-than-expected second-quarter earnings and announced a leadership shake-up at its largest and most troubled brand, Old Navy.

The company named Michael Francis, a 26-year veteran of Target credited with helping build the "cheap chic" strategy that reshaped the discount retailer's image, as Old Navy's new chief executive, effective November 2. Francis had already been serving as Old Navy's chief customer officer since May, and his promotion comes as the brand just posted its first sales decline in 12 quarters, down 4%, according to CNBC's coverage of the earnings call.

A Turnaround Bet Under Pressure

Gap raised its full-year adjusted earnings-per-share outlook alongside the announcement, even as it trimmed its fiscal 2026 sales-growth forecast to a range of 1% to 1.5%, down from 1% to 2%, citing broader economic uncertainty, per Reuters. Investors appeared to read the Old Navy move as the more consequential signal, given the brand accounts for the largest share of Gap Inc.'s overall revenue.

Gap Inc. President and CEO Richard Dickson framed the hire as a targeted fix rather than a sign of deeper trouble. "Michael is one of the most respected commercial, brand and customer leaders in retail," Dickson said, according to WWD. "We have work to do at Old Navy, but we are taking targeted actions that are already driving improved results."

"WE WILL CONTINUE TO SHARPEN OUR CUSTOMER FOCUS, STRENGTHEN THE BRAND'S CULTURAL RELEVANCE ... AND BUILD ON THE MOMENTUM ALREADY UNDERWAY." — MICHAEL FRANCIS, INCOMING OLD NAVY CEO

Francis's résumé is built around exactly the kind of value-positioning turnaround Old Navy needs. At Target, he was part of the team credited with popularizing the idea that discount retail could still feel stylish — a formula Gap Inc. is hoping he can translate into fresh momentum for a brand that has struggled to differentiate itself from fast-fashion competitors and warehouse-club apparel sections in recent years.

Old Navy's slump had been weighing on Gap Inc.'s overall results for several quarters, making Friday's stock pop as much a reaction to relief that leadership is finally being held accountable as to the headline earnings beat itself. Whether the market's enthusiasm holds will depend on Francis's first moves once he formally takes over in November — and on whether Old Navy's core customers respond to whatever "cultural relevance" push he has planned.

What's next: Francis begins the role November 2, giving him a matter of weeks to prepare a strategy heading into the critical holiday shopping season that will serve as his first major test.