Old Navy Sailing Along

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.

Richard Seesel, Principal, Retailing In Focus LLC

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."

Michael Tesler, Founding Partner, Retail Concepts

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.

Gap reminds me of Burberry in the way that they have revisioned core elements of the brand without abandoning them altogether or repeating old mistakes.

To me, the next step will be to further bolster the Gap brand by keeping the denim momentum going and moving on to complementary categories. After all, Gap is the flagship, "emotional brand" for the company. As CEO Glen Murphy stated, "As it goes, so goes the company."

Carol Spieckerman, President, newmarketbuilders

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...

Cathy Hotka, Principal, Cathy Hotka & Associates

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.

Paula Rosenblum, Managing Partner, RSR Research

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.

John Boccuzzi, Jr., SVP National Retail Sales, Affinion Group

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 ready every play.

Old Navy has the right people on the field in order to score. It's the consumer.

Roger Saunders, Managing Director, PROSPER BUSINESS DEVELOPMENT / BIGinsight

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).

'notcom'

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

Mark Johnson, President and CEO, Loyalty 360