NEW YORK — Old Navy Clothing Co. — touted by Gap executives as its biggest future growth vehicle — may be docking in Manhattan.

The lower-priced sportswear division of The Gap Inc. will reportedly open its first Manhattan store, possibly in time for Christmas selling, on the southeast corner of Sixth Avenue and 18th Street, sources said Tuesday.

The three-level, 30,000-square-foot unit will open on the site of a former Honda dealership in the heart of an area burgeoning with new stores.

Millard Drexler, Gap president, said in an interview in WWD this year that Old Navy was the final step in the company’s three-tiered retailing strategy. At the high end is its Banana Republic division, in the mid-range are The Gap stores, and in the lower range is Old Navy, poised to go after the lower-priced sportswear market, the fastest-growing segment of the industry.

Old Navy already has about 30 units in operation, including sites on Long Island and in Connecticut. It plans to have 45 stores operating by the end of 1994. Sources estimate that sales of the division could reach $240 million based on a potential core of about 80 stores. It sells casual apparel at prices about 30 percent lower than Gap.

Retail sources expect Old Navy on 18th Street to rake in $12 million to $15 million in sales, or $400 to $500 a square foot.

Old Navy made its debut in California in March as a refined version of the company’s Gap Warehouse division, which is being converted to Old Navy.

The area on and around lower Sixth Avenue is becoming a mecca for mass merchants and off-price retailers.

As reported, Loehmann’s will move into a part of the original Barneys New York flagship at Seventh Avenue between 16th and 17th Streets. Loehmann’s, which sells better and designer labels at discount, will occupy 60,000 square feet in a separate adjacent building on the 16th Street side, in space which had been leased to Barneys.

Other big-box retailers soon to be in the area are Burlington Coat Factory, T.J. Maxx and Filene’s Basement. Additionally, a Bed, Bath & Beyond and Barnes & Noble superstores and Today’s Man, a men’s wear superstore, are on the strip on lower Sixth Avenue.

The area is known as “Ladies Mile,” defined as the 28-block area from 15th Street to 24th Street between Sixth and Park Avenues. It was home to many of the city’s most famous retailers from the Civil War to World War I. Stores that attracted the carriage trade in the area included Macy’s, Stern Bros., Siegel-Cooper Arnold, Bergdorf Goodman, Lord & Taylor and B. Altman.