Old Navy Sailing Along

Feb 26, 2010

George Anderson

Gap Inc.’s fourth quarter numbers look pretty
good and that, in large part, is due to the increased contribution the
company is getting from its Old Navy apparel chain. The low price apparel
division, which grew same-store sales three percent in the fourth quarter,
has been reenergized in the past year, according to a Wall
Street Journal
report, after making the decision
to focus its marketing on young moms rather than teenagers.

Old Navy was among
those companies receiving high marks in a Retail Advertising and Marketing
Association (RAMA) survey conducted by BIGresearch that polled consumers
on their favorite commercials for the holiday season. The chain, which ranked
sixth among retailers for television spots, was also among the favorites
for best online promotions.

The chain, which represents 37 percent of
Gap Inc.’s sales, has also benefited from the rollout of a new format.
The company announced yesterday that it would remodel 200 stores this year
on top of 52 units already operating with the concept.

Last June, according
to Visual
Merchandising and Store Design
, Gap Inc. CEO
Glenn Murphy, said, “The new layouts create a better experience for our
customers that better captures the unique energy that’s central to Old
Navy’s fun personality."

Chief Financial Officer Sabrina Simmons told the Journal that
expanding the concept to more stores will “be a big win for us.”

Discussion Questions: What do you think are the keys to
Old Navy’s recent success? Are the changes implemented by the chain enough to
keep it growing for the long term?

Please practice The RetailWire Golden Rule when submitting your comments.

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9 Comments on "Old Navy Sailing Along"

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Dick Seesel
12 years 2 months ago

I can think of a few factors that have led to Old Navy’s revival in the past year, and many of them represent the chain returning to its roots:

1. A focus on value-priced apparel…never more important than in the current economic downturn.
2. A bigger emphasis on key-item merchandising…compelling sale prices on new items, not just staples like denim, have been a big factor.
3. Clever marketing…the “mannequin” campaign is attention-getting, just slightly edgy, fun and product-focused.

There seems to be a crisper, more focused assortment in the stores as well…all of these factors sound like “Retail 101” but good, basic execution can’t be taken for granted.

Michael Tesler
Michael Tesler
12 years 2 months ago

To quote Bill Parcells: “Lets not put this guy in Canton (the Pro Football Hall of Fame) based on one decent game.” Three percent same store increases on the huge decreases experienced in the past few years still has them far short of what they once were and where they need to be. They stopped the bleeding maybe but they are by no means healed yet. Advertising awards are not given by customers and have nothing to do with the in store experience. Renovations and new formats generally bring a short term kick in business but do not guarantee permanent gains. Call me a skeptic….or as Bill would say “they won one game but you need more than one win to have a winning season.”

Carol Spieckerman
Carol Spieckerman
12 years 2 months ago
The keys to Old Navy’s success are just as much about differentiating Gap’s other two brands as they are about improving Old Navy’s proposition. Lack of differentiation between Gap and Old Navy in particular has caused cannibalization between the two brands in the past (and, as Banana Republic moved into more affordable price points, the blur continued); however, Gap’s revisioning of each brands’ in-store environments and value propositions is beginning to set them apart. Gap’s decision to stop being everything to everyone under one roof (fashion, basics, innerwear, outwear, hair, fragrance, pets, kids…) and to instead narrow its focus down to denim, a category that has always been a critical brand bellwether, was a stroke of genius. Gap has always sold lots of denim; however, the baggy fits were more suited to yard work than a night on the town. Gap’s 1969 premium denim hits the sweet spot as a great-fitting, on-trend range priced well below Seven For All Mankind ($200) and not-so-hot mom jean fits from Lands’ End and fall-apart versions from mass retailers.… Read more »
Cathy Hotka
12 years 2 months ago

It’s the merchandise. Customers who sweep through the store just to see what’s there have discovered white coats with black buttons, colorful jackets, and sweaters that demand to be taken home. Service is good, too. Now, if they can just get some of the clothes off the floor…

Paula Rosenblum
12 years 2 months ago

It’s the merchandise/price point combination. Gap probably has too many stores to support its price point and has a hard time differentiating from less expensive brands. Old Navy, on the other hand, has a distinctive look at a price point suitable for the masses. I expect the chain to continue to do well.

John Boccuzzi, Jr.
John Boccuzzi, Jr.
12 years 2 months ago

Gap’s Old Navy chain is benefiting from the same thing Food/Drug and Mass Retailers Private Brands have been benefiting from over the last 18 months. A slow economy drives consumers to change shopping behaviors. Old Navy is what I would consider Gap’s private label under its own banner.

As Richard mentioned in his comments, they have gotten back to what they do best. Focus on value price, strong promotions, and unique advertising.

Consumers will keep some of the habits they picked up over the last 18 months and Old Navy will benefit for the next several years.

Roger Saunders
12 years 2 months ago
Retailing is a tough business–have to take care of store ops, get the right merchandise, have the right price points, and so much more. A promising future aspect for Old Navy continues to be the demographics. The teens are fans, and their parents are supporters. Based on the February, 2010 BIGresearch “Consumer Intentions & Actions” (CIA) Survey, the Adult Consumers 18+ who shop Old Navy “Most Often” for Women’s or Men’s clothing have average household incomes of nearly $60,000 per year. That indexes at 107 vs. the general population. They are better educated than the general population–14.8 years vs. 14.5. Their levels of confidence (Very Confident/Confident) about the economy in the next 6 months is more optimistic than the general population, with 40% saying the are Very Confident/Confident, vs. just 27% responding in that manner overall. As pointed out, the merchandising and operations teams have to continue to do their parts. To chime in with the sports analogies, and quote Vince Lombardi, “You never know when you’re going to score, but you have to be… Read more »
Craig Sundstrom
12 years 2 months ago

My initial response to George’s story was “pretty good…as in not horrible like they have been since…practically forever?” and then I found myself repeating Mike’s comments word for word. I think the long-term problem for this particular ship in the GAP’s leaky fleet will be a continued expansion of Wal-Mart–remember them?–into clothing and other soft goods lines; and we all know the usual result when that happens (the recent video experience notwithstanding).

Mark Johnson
Mark Johnson
12 years 2 months ago

I think you are going to see a trend towards value and customer centricity.


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