Gap will no longer spin-off Old Navy— a move that calls into question the future of both brands and their ability to stand out in today’s competitive landscape.

WHAT HAPPENED: The moves comes after three-quarters of slowing sales—ranging from one to five percent year-over-year. Old Navy attributes its sales decline to a lack of investment in high-performing product categories like denim.

WHY IT MATTERS

  • While investing in an on-trend product assortment is important, training shoppers to expect promotions is more damaging. Up until this point, Old Navy’s low-priced, trendy clothing has enabled the brand to avoid heavy promotions. But the company’s decision to grow its store count (It opened 75 stores in 2019) means it has to produce more products, which means more room for inventory mistakes. While the brand turned to sales to move unwanted inventory, once Old Navy became reliant on promotions it was too late to convince customers to go back to buying full-price.
  • Gap Inc.’s move to apply its formula to Old Navy led the latter brand astray, leading to the same problems that sunk Gap. Old Navy always had a distinct identity—Gap’s fun and progressive younger sister, with trendy products and celebrity brand ambassadors like Amy Poehler and Neil Patrick Harris. Ensuring Old Navy was entirely independent of Gap was a good idea, which gave the brand room to grow. But in a turbulent retail environment, applying Gap’s formula—doubling its store count, being too conservative with product design and being too aggressive with sales—washed Old Navy’s “secret sauce” down the drain. To get back to its roots, Old Navy needs to regain the independence that made it great in the first place.