Gap to shed namesake brand to fuel growth

Old Navy, founded in 1994, has outpaced the company's flagship chain and become its biggest source of revenue. That division focuses on lower-cost clothing and blends sportswear with casual apparel.
Old Navy, founded in 1994, has outpaced the company's flagship chain and become its biggest source of revenue. That division focuses on lower-cost clothing and blends sportswear with casual apparel. PHOTO: BLOOMBERG

It will also drop Banana Republic label and shift focus to Old Navy and Athleta

NEW YORK • Gap's latest strategy shift involves moving away from the Gap chain. The apparel seller plans to refocus its efforts on the Old Navy and Athleta brands, a shake-up that will involve closing hundreds of stores that carry its namesake and Banana Republic names.

Investors applauded the move, sending the shares on their biggest rally since October. The idea is to concentrate on the most promising growth drivers for the company: e-commerce, value-priced products and activewear.

Those are all areas where the Gap and Banana Republic brands have struggled. So the firm plans to shut 200 poor-performing locations of those two chains, while opening 270 new Old Navy and Athleta stores.

As part of the push, Gap expects Old Navy's sales to top US$10 billion (S$13.4 billion) in coming years, with Athleta exceeding US$1 billion.

The announcement sent shares up 7.4 per cent to US$25.82 on Wednesday. That brought the stock's year-to-date gain to 15 per cent.

Old Navy, founded in 1994, has outpaced the company's flagship chain and become its biggest source of revenue. That division focuses on lower-cost clothing and rode the wave of so-called athleisure - the blending of sportswear with casual apparel.

Athleta, meanwhile, concentrates on yogawear, a growing category where it competes with Lululemon Athletica. "We're now shifting our focus to growth," chief executive officer Art Peck said in a statement on Wednesday.

The store closures extend an effort to winnow Gap's fleet in recent years, part of a turnaround bid that has been long and frustrating for investors. The company signalled last month that Old Navy was its best hope for fuelling sales growth.

The chain's performance helped earnings top analysts' estimates in the second quarter. "We are seeing our investments in product, customer experience and brand equity begin to pay off," Mr Peck said at the time.

BLOOMBERG



PHOTO: REUTERS

Gap shuts 200 stores, plans 270 new ones

American apparel giant Gap plans to shutter 200 stores that carry its namesake and those of the Banana Republic brand as part of efforts to focus on other growth drivers. The company intends to concentrate on e-commerce, value-priced products and active wear. Its Old Navy brand, founded in 1994, has outpaced the company's flagship chain and become its biggest source of revenue. It intends to open 270 new stores under Old Navy and Athleta - its athletic clothing brand. Gap declined to specify how many of each brand's stores will close or where the soon-to-be-shuttered stores are located.

A version of this article appeared in the print edition of The Straits Times on September 08, 2017, with the headline 'Gap to shed namesake brand to fuel growth'. Print Edition | Subscribe