Photo: Getty Images/carterdayne
Old Navy is ready to set sail on its own
Old Navy is coming off a tough second quarter during which its same-store sales fell more than five percent — its worst showing in three years — but that doesn’t mean the value-priced clothing chain is losing confidence after its official spinoff from Gap Inc. In fact, Old Navy has big plans to expand from its current count of 1,140 stores to 2,000 after it becomes a standalone company.
The chain announced its growth plans, which did not include a timeline for the new store openings, at an investor conference, presumably with the goal of attracting interest in Old Navy’s stock following its split from Gap.
The decision to separate Old Navy from its parent company was announced earlier this year. The chain has been a bright spot for Gap in recent years with sales growing to 47 percent of the specialty clothing retail store operator’s total by the end of 2018.
Old Navy’s expansion plans are impressive, even given its history of success. The chain, which averaged a little more than 70 new store openings a year since 2016, is looking to ramp up its physical locations by moving into smaller markets where it does currently have a significant presence. In the process, Old Navy expects to grow its annual revenues from its current level of around $7.8 billion to about $10 billion a year.
Sonia Syngal, president and CEO of Old Navy, will continue to lead the retailer following the spinoff.
- Old Navy plans to open 800 new stores – CNN
- Old Navy plans to expand to about 2,000 stores — nearly doubling its existing total — as it spins off from Gap – Business Insider
- Old Navy plans to open 800 new stores – The Wall Street Journal
- Gap same-store sales disappoint as Old Navy struggles – Reuters/Yahoo Finance
- What will going separate ways mean for Gap and Old Navy? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Do you find Old Navy’s aggressive growth plans following its spinoff from Gap more encouraging or worrying? What will decide whether Old Navy succeeds or fails as a standalone company?
Poll
BrainTrust
It appears as though management is not tuned in to the fact that the country has been overstored. Are we overstored in every type of store but Old Navy? Doubtful. Eight hundred is not a trivial number of new stores.
When I first heard this news, I was worried for the chain. The retail industry is volatile right now, and Old Navy is not immune to this volatility.
Now that I’ve had time to learn more about the expansion and how it is primarily international-focused, I’m worried for different reasons. One of the countries where Old Navy is considering rapid expansion is China. US brands resonate in China, but there is so much uncertainty — this is not the time for massive expansion in China.
800 new stores with competitor Forever 21 rumored to be going bankrupt in the next week? Something tells me this is not based on reality as much as hype.
It’s madness. Utter madness!
I think Old Navy needs to be cautious about its growth plan. Companies love getting their stockholders excited with strategies for increasing sales whether it be by opening more stores or other programs, but today with the brick & mortar world a bit unstable, I’d be careful about how many stores they open, how quickly and most importantly where.
Fashion changes rapidly, and usually, the apparel chain that is hot today will be a memory in a few years. It’s hard to stay on top of the next trend and to know what fashion style and look will be the next big thing and what will not. Breaking away from the Gap was wise because Old Navy was carrying all the other divisions. I predict within a few years, The Gap and its other brands will consolidate to one brand, and if unsuccessful, go out of business.
There is too much choice, and too much sameness amongst many apparel chains today. The consumer is only loyal to a few if any at all. Once we perfect the technology to offer custom made clothing with speed, so many of the off the rack clothing chains will have no choice but to modify their business or close their doors.
Old Navy is a fairly solid concept, but I am not sure the U.S. needs so many more Old Navy shops. This suggests the complete absence of any real underlying strategy; it’s just a case of “add more capacity and more people will come.” It really doesn’t work like that! I suspect these overly ambitious numbers will be pared back over time.
It’s worrying. I mean, good God, did they not learn the lesson of over-expansion from their former daddy/mommy?
I don’t think all the speeches about the future of Old Navy and the Gap survive a real world reality check. One of the big lessons of the past couple years is that the USA is over mall’d and over store’d. And here is an already big business talking about doubling. And doubling against competition like TJMaxx, Ross, Burlington — and — the emergence of Primark. It doesn’t sound plausible. I was in a mall yesterday (Danbury, CT) where Primark and Old Navy are literally next door neighbors. Both stores looked good, but Old Navy had crickets chirping. Primark was genuinely busy. Wish I could attach pictures. I should have counted heads or people lined up at registers. And what if JCP gets their act together? And what about Macy’s and Backstage? And what about the emergence of rental and recycle businesses? It’s not like the opening price point segment of the market is hurting for options and the door for growth is wide open. None of this makes any sense to me. Let’s hear from a financial guy that says this financial engineering actually makes sense — if you believe the speeches. But I don’t believe the speeches about the available upside.
Really? Oh no!
It certainly is worrisome that despite reality, a sense of confidence prevails. That would apply to anyone, let alone a business in a category that’s suffering from disinterest and declining footfalls on a consistent basis. Another burning question about this split is; what happens to Gap? Feels like the rats are jumping off the ship a little bit, doesn’t it?
Old Navy. Basics 50 percent off. Clunky execution of vast racks of key basics. Meet the Old Navy customer. Get the popcorn, 800 new stores will be an interesting show to watch.
“…did not include a timeline for the new store openings” So, in short, they didn’t really say anything.
No, I’m not worried — nor am I impressed — by the specifics of Old Navy’s plans. If I were a shareholder, I’d be worried about: tariffs, the growing dissonance between consumers’ talk (sustainability) and their actual actions (fast-fashion), and the fact that a half dozen other companies are trying to do the same things we are — and probably only a few can succeed at it.