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The year 2019 has been so far brutal for US retailers. BDO, a tax and financial advisory firm, has recorded more than 7,200 store closures (pdf) announced in the first half, a pace never seen before. The majority of closures involve clothing and footwear, mainly due to bankruptcies and the reduction in the size of businesses in stores.
But if the brick and mortar retail business collapses in North America, no one has told Old Navy.
The San Francisco-based clothing chain announced yesterday its intention to almost double its store base from 1,100 to 2,000 (most of which is in the United States). The goal is to open them at a rate of about 75 new stores a year.
This would make Old Navy one of the most ubiquitous clothing stores in America. In a research note addressed to its clients, investment firm Morgan Stanley said it could not identify any clothing retailer that operates as many stores in the country.
While Old Navy – the star of Gap Inc.'s brand portfolio – planned to split into a separate company, Old Navy CEO Sonia Syngal presented the company's development strategy. She added that openings would occur mainly in "underserved small markets". In recent years, Old Navy has opened about 35 stores in these small markets, which typically have fewer than 200,000 people, and have learned a lot, said Syngal.
While a number of other clothing retailers appear ready to go and die, Old Navy has flourished (despite some recent mistakes) by serving a target audience of families in search of value. Children's clothing is often a point of entry for the brand, said Syngal. This leads moms to shop over and over again as their kids get older. These moms can also shop for themselves and everyone else in their family during their stay.
In its note, Morgan Stanley said the brand offered "exorbitant prices in terms of fit, style and quality, as evidenced by products like $ 25 rockstar jeans". The brand is also focused on expanding its lineup of many US women who are underserved by the narrow ranges of other brands. (Most of Old Navy's large large size businesses remain online, but the number of trials it does in its stores has been larger.)
Although its low prices may seem to place it in the same category as distressed ready-to-wear brands such as Forever 21, which is supposed to prepare a bankruptcy filing, Old Navy operates a fundamentally different company. Unlike Forever 21, about three-quarters of Old Navy stores are not in shopping centers.
Its success has prompted retailers to continue to accelerate their store openings as other retailers close their stores. And he set up an infrastructure that quickly feeds these stores with the items desired by local customers, rather than serving the same assortment to everyone.
Everyone can not accept the project to open more than 800 new stores in the coming years. Morgan Stanley, for his part, explained that the reason was unclear and worried about the many risks involved in the execution.
But Syngal, at least, is optimistic. She believes that her "very profitable" stores and booming online business will enable her to reach her ambitious goal of $ 10 billion and more sales.
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