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Sep 12, 2019

Gap seeks aggressive Old Navy expansion as part of spinoff plan

Gap's Old Navy Spinoff Good But Not an Answer, Analyst Redding Says


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Old Navy plans to almost double its store count in North America as Gap Inc.’s soon-to-be-spun-off discount chain seeks to reach US$10 billion a year in sales.

The division, which now operates about 1,140 stores across the U.S., Mexico and Canada, sees the potential to expand to about 2,000 locations in the long term, it said without specifying a timeline. It will primarily focus on smaller markets, including about 75 off-mall sites a year.

It’s also considering growth in China, where the business is “nascent,” Sonia Syngal, Old Navy’s Chief Executive Officer, said at an investor event Thursday.

The goals, laid out in a presentation, are part of the parent’s plan to split Old Navy from the rest of its businesses to unlock the faster-growing franchise’s value for shareholders.

Old Navy, which has outperformed Gap’s other brands but also saw its own growth fade in its latest quarter, sees an opportunity by expanding its selection of products to include plus sizes, lingerie and beauty products, the slides show. It also plans to expand store pick-up service for online orders, make it easier to return items and remodel locations.

The spinoff plan, announced earlier this year, initially caused Gap’s shares to jump — shares surged 16 per cent the next day — but some of the luster has worn off since. Gap shares have lost about a quarter of their value this year as investors have broadly sold off apparel stocks.