Will Old Navy Collapse the Way Gap Did?

By Douglas A. McIntyre Updated Jan 30, 1:23PM EST · Published Nov 10, 9:32AM EST

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Will Old Navy Collapse the Way Gap Did? — © Justin Sullivan / Getty Images

Gap Inc. (NYSE: GPS | GPS Price Prediction) has dumped CEO Art Peck, presumably because the retailer he presided over continued to fall apart. Its primary brands (Gap, Old Navy, and Banana Republic) have had different fates. Sales results for Gap and Banana Republic have cratered. Sales of Old Navy have been good enough so that it is expected to be spun off into its own public company. Now, its sales have been dented badly as well, which begs the question of whether it will be a good investment.

As Peck was pushed out, Gap’s board announced results for the three brands. Gap same-store sale fell 7% in the quarter that ended November 2. Its sales fell 7% in the same quarter last year. Banana Republic’s same-store sales fell 3%, compared to growth of 2% last year. Old Navy same-store sales fell 4%, after a rise of 4% in the same period last year.

It is hard to turn around poorly performing retail brands, particularly in light of the move of consumers to e-commerce. Old Navy’s same-store sales drop is a big enough slide so that its fortunes have turned quickly in a poor direction. Now, investors need to worry whether the drop will continue through the critical holiday season. If so, Old Navy has proved that it is in a tailspin of its own. It has too much retail competition to argue that there is an easy way to attack the competition again successfully. And it is hard to find a retailer that has gone from suffering a sharp drop in same-store sales to figures that are positive.

The Gap board must have believed that Old Navy would have good same-store sales ahead of the spin-off. Now, it is starting to look like J.C. Penney, which had a same-store sales dip of 6% in its last reported quarter. If the trend continues, it will threaten Old Navy’s ability to keep its current store footprint.

Old Navy was supposed to be Gap’s bright light. Instead, it has started to look like the rest of the company.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.