Will Old Navy chart a course for profitable growth?
Haio Barbeito, Old Navy CEO, on Gap Inc.’s fourth-quarter analyst call, said the apparel chain has “spent considerable time focusing on stabilizing the core and elevating execution” as it rebuilds from a down year marked by merchandise miscues.
Old Navy’s same-store sales fell 12 percent in 2022. The decline was attributed to an overemphasis on active and casual assortments that worked early in the pandemic before fashion-forward and occasion dressing revived as people headed back to offices and resumed socializing.
A Wall Street Journal article also noted that Old Navy had “too many extra-small and extra-large items and too few of the rest” in a push toward inclusive offerings. Gap has indicated that pressure on lower-income households has particularly impacted Old Navy.
Mr. Barbeito, who led Walmart’s Canadian operation before taking over at Old Navy last July, said the chain rebalanced inventory in the second half of 2022 to make “room for newness and seasonally the right assortment.”
Assortments are now more balanced and relevant after “pivoting from narrow-end use over dialed a little bit on comfort to a more versatile occasion-based assortment in response to our customers’ need for return to routine,” he said.
The leaner inventory position and balanced assortment have refocused Old Navy on “getting our responsive capabilities back in order to buy more efficiently and remain dynamic and flexible to chase into demand or pivot, if the consumer needs shift.”
Old Navy’s focus on “execution discipline” has helped it in “identifying areas of opportunities for organizational efficiency.”
Signs of progress included “positive momentum” in women’s in the fourth quarter that helped Old Navy maintain market share in the second half after losing share in the first half. Updated assortments in kids and babies are “seeing early improvement” and “consistent improvement” is being seen in overall net promoter scores.
“With a more solid foundation from which to build, I can focus my attention toward the long term and defining the future of Old Navy,” said Mr. Barbeito.
“I am confident that our unique customer value proposition is well suited for an environment where consumers are increasingly seeking value,” he added.