Gap Stock Surges on Q2 Profit Beat, Raised Guidance, and Old Navy CEO Change

Gap Inc. (NYSE: GPS) shares surged more than 14% in pre-market trading after the apparel retailer posted second-quarter profits that topped analyst estimates, raised its full-year earnings outlook, and announced a key leadership change at its Old Navy brand.

Earnings Beat and Raised Outlook

Gap reported stronger-than-expected profitability for its second fiscal quarter of 2026. The company's gross margin expanded by 20 basis points to 41.4%, contributing to a solid earnings beat and an improved forecast.

Key figures from the report include:

• Adjusted EPS: $0.52, exceeding the Wall Street consensus of approximately $0.49.
• Total Revenue: $3.7 billion, roughly in line with expectations but representing a 2% decline year-over-year.
• Full-Year Guidance: The company raised its full-year adjusted EPS guidance to a new range of $2.35–$2.45, with the midpoint now above prior analyst forecasts.

Old Navy Leadership Shake-Up

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A significant catalyst for the stock's move was the announcement that Michael Francis will become the new President and CEO of Old Navy, effective November 2, 2026. He succeeds Haio Barbeito, who is transitioning into an advisory role.

Investors appeared to welcome the decisive action, as Old Navy is Gap's largest brand, contributing nearly 60% of total revenue. The change follows a challenging quarter for the division, which posted a 4% decline in comparable sales, its first negative result in several periods.

Market Reaction and Brand Performance

The positive investor reaction was driven entirely by company-specific news, as the broader S&P 500 was trading flat. The rally pushed Gap's stock price toward the upper end of its 52-week range.

While Old Navy showed weakness, the company's namesake Gap brand delivered a strong performance, with comparable sales growing 10% for its eleventh consecutive quarter of positive growth. According to CEO Richard Dickson, the company is already seeing improved traffic driven by new fall styles and marketing initiatives.