Gap Inc. is making good on its plan, announced last year, to elevate Old Navy’s role in its portfolio, adding 60 more stores in North America this year, CNBC reports. That’s double the more than 30 new Old Navy stores the company opened last year.
At the same time, another 150 or so Old Navy stores will be remodelled to update fitting rooms, bathrooms and checkout, with 15 or so of those undergoing major overhauls, according to the report. Three stores need to be rebuilt after being destroyed by hurricanes, CNBC said.
It’s the start of the plan unveiled last September, when the company said it expects, over the next three years, to add about 70 net new stores, with the addition of about 270 Old Navy, Athleta and outlet stores, and the closure of about 200 under-performing Gap and Banana Republic stores.
Old Navy, along with the company’s much smaller but rapidly growing Athleta activewear brand, is “Gap Inc.’s best horse in the retail race,” says Ray Hartjen, director of marketing at RetailNext. For years now, the lower-priced brand has mostly been the sales powerhouse of the lot. The company in last year’s document said it expects Old Navy to exceed $10 billion and Athleta to exceed $1 billion in net sales in the next few years, driven by growth in online and mobile channels, U.S. store expansion and “continued market share leadership in loyalty categories.”
In March the company reported fourth quarter Old Navy global same-store sales rose 9% after a 5% rise last year; Gap global same-store sales were flat in the quarter, as they were in the same period last year; and Banana Republic global same-store sales rose 1% after falling 3% last year. Athleta, meanwhile, is giving Lululemon a run for its money in the activewear category, moving from mid-teens sales growth in the first half of 2017 to mid-20s in the back half of the year, Peck told analysts last month.
Indeed, although Gap seems to be stabilizing, lower-priced Old Navy has been hitting a stride that the flagship banner has failed to do for years now.
“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,” Hartjen noted. “Moreover, Old Navy repeatedly resonates with its loyal core shopper, season after season, with its merchandise assortment. For long-term, sustainable growth, Old Navy is the jewel in the portfolio.”
It’s not just what but where the company is opening and closing doors, however. For the most part, Gap Inc. has exited “older malls that the customer isn’t as excited about anymore … and moved to where the customer is,” Gap CEO Art Peck told CNBC, meaning urban, main street stores and better malls like open-air centers.
Gap remains a massive brick-and-mortar apparel retailer—the company ended the year with 3,165 stores, and Peck last month emphasized that. “Stores remain a highly relevant component of our business,” he said, according to a transcript from Seeking Alpha. “Over 80% of apparel purchases are current stores and an even higher number of purchases are influenced by physical stores. Stores matter,” but also said, “[T]here are problems with stores in the wrong location, not priced to market or oversized for current customer demand.”