Old Navy plans to open 800 more Stores

Retailer looks toward expansion as it prepares to split from Gap Inc.

By guest author Patrick Thomas from Wall Street Journal

Gap Inc. GPS 0.31% ’s Old Navy brand plans to open hundreds of stores as it prepares to split from its parent company at a time when slower sales and online rivals are challenging many bricks-and-mortar chains.

Clothing retailer Gap said earlier this year that it would separate its fast-growing budget brand from the rest of the business, creating two publicly traded companies.

A store entrance to Old Navy (courtesy by WSJ)

For several years, Old Navy has outperformed its sister brands Gap and Banana Republic with its lower price points and catchy marketing. Old Navy now exceeds the original brand in sales, making up nearly half of Gap Inc.’s USD 16.6 billion of sales in 2018.

At its investor event on Thursday, Old Navy, which has about 1200 stores, said it wants to reach 2000 locations by opening stores, mostly in smaller, underserved markets. The company did not specify a timeline and said it aims to eventually hit $10 billion in annual sales. Old Navy opened 145 stores between 2016 and 2018, the company said.

The Gap brand, meanwhile, has been closing hundreds of stores in recent years after its expansion around the world left it with multiple stores in many markets. The company had about 3,800 total stores worldwide.

Gap Inc. CEO Art Peck will continue to run the parent company, which will include the Gap brand, Banana Republic, Athleta, Intermix and new athletic brand Hill City. It will retain its Gap name and have about $9 billion in annual revenue. Old Navy CEO Sonia Syngal will run the newly separated company, which generates about $8 billion in annual revenue.

Ms. Syngal said at the investor event that the new Old Navy stores will be slightly smaller than some current locations and that the retailer is also considering expanding its presence in Asia, where it had 17 stores as of Aug. 3, 2019.

Shares of Gap ticked down less than 1 % Thursday morning, September 12, 2019. The company’s stock is down more than 30 % over the past 12 months.

Gap said it is anticipating between USD 400 million to USD 450 million in separation expenses and between USD 300 million and USD 350 million in separation capital-related costs between 2019 and 2021.