Is Old Navy in Trouble as Gap Shares Fall ~17%, or Is This a Hiccup?

Old Navy has a longstanding reputation as a fashionable and affordable apparel line under Gap, but the most recent report may have scared investors — shares were down a significant 17% as of 11:30 a.m. on May 29. And while the actual quarterly results were mixed, per CNBC’s Gabrielle Fonrouge — with Gap delivering EPS of 38 cents adjusted versus 37 cents expected, and $3.5 billion in revenue against $3.52 billion anticipated — the company did pare down its sales growth outlook to a range of 1%-2% rather than the 2%-3% established prior.

In remarks shared with CNBC, CEO Richard Dickson actually drew attention to Old Navy’s own spring and summer assortment failing to resonate with consumers, shouldering some blame at the company level rather than blaming the economy.

“It’s not a consumer issue. We’re winning with all income cohorts across low, middle, and high. When you have the right product at the right price value equation, customers are there, and our seasonal categories just got off to a weaker start,” Dickson said, with dresses and swim shorts being the weakest links.

As sales look a bit iffy in the near future, profitability appears relatively healthy: On this front, Gap raised its overall guidance to between $2.30-$2.40, an improvement over the previous range of $2.20-$2.35. An expected $80 million windfall from reduced tariff rates was not factored into any company guidance.

With Old Navy’s recent performance being sluggish — and the slow movement pressing on into the current quarter — Dickson noted that Gap was taking a “moderated view” of the year. Fonrouge noted that Old Navy accounts for more than half of Gap’s total revenue (60%, in fact), and that “any pressure on Old Navy impacts the entire company.”

Other banner results were outlined by Quartz’s Colleen Cabili: “Gap’s four brands had mixed results. The Gap brand had its best comparable sales in over 20 years, rising 10% and beating analyst expectations. Banana Republic saw positive comparable sales for the fourth quarter in a row, but its 2% gain was below the 4% analysts expected. Athleta’s turnaround has not yet worked, with overall sales down 12% and comparable sales falling 11%.”

Reddit Opinion on Old Navy Shows Mixed Results, With Many Nostalgically Pining for the Brand of Yesteryear (or Recommending Competitors)

A consultation of recent and popular Reddit threads on the subject of Old Navy’s assortment and brand rep draws mixed results.

The most recent discussion on r/frugal — titled “OId Navy quality gone downhill or [is it] just me?” — saw several users lament a perceived drop in quality across Old Navy’s inventory, with many users chiming in to give props to the brand for its 1990s and 2000s products (still going strong). Conversely, some Redditors stayed firmly loyal to today’s Old Navy stores, and still others advocated for shoppers to switch to competitors like H&M and Uniqlo.

“I have definitely noticed a decline. I have some sweaters and some jeans that I bought years ago that are holding up well. And then stuff I’ve bought within the past year or two that is already worn out and borderline unwearable,” one top-rated comment read.

On the flip side of the coin, r/unpopularopinion (note the subreddit name) featured a thread titled “Old Navy is hands down the best clothing store.” There, most users tended to agree with the original poster, who wrote:

“They’re cheap, reliable, and they always have the basics. In fact, you could argue they excel at the basics, while still occasionally offering something flashy. The lighting there is perfectly inoffensive and shows the clothing perfectly, the quality is decent, and they frequently have sales on already cheaper than average prices.”

Some criticism was still present, however, as is common to any public forum. Showing signs of reddit’s persistent anxieties around bot or corporate-insert users, one critic wrote: “Is this some sort of marketing for Old Navy? Not as cheap as Walmart. The lighting is the same in all stores.”