While Gap is continuing to shrink its physical footprint as it seeks to reinvent itself, Old Navy is doing the exact opposite.
Setting out her intentions for the 25-year-old Old Navy after Gap Inc. spins it off next year as a separate entity, president and chief executive officer Sonia Syngal told analysts at an investor conference in New York that Old Navy will open more than 800 stores, pushing the total fleet up to around 2,000.
These stores will predominantly be located in smaller towns and off-mall locations and are part of Syngal’s plan to transform Old Navy, which clocked $8 billion in sales in 2018, into a $10 billion revenue company.
“As we lean into the focus that standing alone will allow us, I’m confident that this will give us that path to $10 billion and beyond,” she said.
In contrast, Art Peck, the president and ceo of Gap Inc. who will oversee a company made up of the Gap, Athleta, Banana Republic, Intermix and Hill City brands post-split, has previously laid out plans to shutter 230 Gap stores, mainly in North America, and an unspecified number of Banana Republic stores.
He indicated that this number may end up not being quite as high as originally thought.
“One surprise I would say is the degree of the intensity that landlords have with wanting to keep a Gap store in their centers,” said Peck, also speaking at the Wall Street event. “Now there are some centers, we’re leaving. There are some centers we want to be in, but the economics don’t make sense. That can lead us to a conversation about how do we change the terms.”
The investor day gave executives the opportunity to update investors on the split, which was first announced in February with the idea being that spinning off a stronger Old Navy will give them a better chance to revive struggling brands like Gap and Banana Republic.
Other developments outlined Thursday included Peck shrinking the amount of people involved in key decision-making.
“We’ve been too consensus based as an organization and we’re going to move away from that, and we’re designing a management structure and an organization structure that reflects far fewer people participating in decisions so that we can move faster and farther and generate enduring change,” he said.
At the same time, Peck, whose pay package totaled almost $21 million last year (a large chunk of that was stock whose full value may never be realized due to market fluctuations), is also changing the company’s compensation structure, which “has been more safe than at risk,” to reflect performance and accountability among his senior team.
On a brand level, in the case of the Gap, he detailed that the focus will be on growing its denim offering. “We are going to gain share in denim, plain and simple. It is how we have gotten the flywheel turning before in our other brands. It is what I did when I was running the brand in 2012. We said we’re going to gain share in denim and that is going to be the fuel that powers the turnaround.”
He also has a lot of hope for sport and active apparel company Athleta, which Gap Inc. bought for $150 million more than a decade ago. Peck called Athleta a “rocket” and told the audience that it is targeting $2 billion in sales for the activewear retailer. “We have very significant upside here,” he said. “I don’t know what the limitation is.”
As for children’s wear business Janie and Jack, which Gap acquired earlier this year for $35 million, Peck wants to grow it internationally through franchise partnerships.
Regarding Old Navy, which Syngal admitted had a difficult first half on the back of weakness in the women’s assortment, the retailer is hoping to turn that around in the second part of the year with its denim, fleece and outerwear offerings.
Long-term goals include intimates, beauty and the plus size market. The latter is also an area that Peck wants to grow among all the brands he will hold onto.
“I’d like to think about us as an $8 billion company with the framework or the culture of a start-up, we’re an $8 billion start-up. We have the scale associated with what that $8 billion gives us and maybe added to the energy and the excitement of the full potential of a start-up attitude,” concluded Syngal.
Gap’s stock closed down 0.4 percent on Thursday at $19.18.
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