Gap watching Old Navy for growth

Gap is ramping up its roll-out of Old Navy stores as the budget brand drives growth for the embattled US apparel giant.

Gap Inc says it will open 60 new stores this year in the US, Canada and Mexico – twice the number of new stores it opened last year. It will refurbish a further 150 stores, upgrading fitting rooms, bathrooms and checkout facilities.

The new focus on Old Navy, revealed last September, comes at the same time about 200 underperforming Banana Republic and Gap-bannered shops will be closed. Over a three-year timeframe, Gap Inc plans to open about 270 new Old Navy and Athleta stores, leaving a net network growth of 70 shops.

Old Navy sales rose 9 per cent in the last quarter, on top of a 5 per cent rise a year earlier. Gap expects Old navy to reach US$10 billion in annual sales within the next few years, and its athleisure brand Athleta, to reach the $1 billion threshold.

Analyst Retail Dive observes that while Gap store sales are showing signs of stabilising, lower-priced Old Navy has been hitting a stride that the flagship banner has failed to do for years now”.

“Old Navy is the jewel in the portfolio,” added Ray Hartjen, director of marketing at RetailNext.

“Shoppers have shown their preference for value across the board, and off-price retail has been one of the few consistent bright spots for the industry the last several years,” he said. “Moreover, Old Navy repeatedly resonates with its loyal core shopper, season after season, with its merchandise assortment.”