Friday, August 11, 2000

Old Navy receipts sink

By Lisa Biank Fasig
The Cincinnati Enquirer

        Quirky Old Navy has sailed the seven seas of consumerism. With its campy commercials and everyday-low prices, the chain has set the trend for what teens wear and a year ago set the standard for what specialty retailers should achieve.

        But Thursday, executives of Old Navy's parent, the Gap Inc., acknowledged that the wind has slipped out of its sales. Receipts at stores open at least a year have sunk by double digits — albeit against a wildly strong 1999 — and foot traffic at Old Navy has declined.

        On the news, the Gap warned Wall Street that earnings in the third quarter will probably miss projections. Second-quarter earnings, announced Thursday, fell 6.1 percent to $184 million.

        “We know we have a number of challenges, and we're quite concerned about that,” Gap chief executive Millard “Mickey” Drexler told analysts in a conference call. “We're dealing with challenges in an uncertain retail environment.”

        The cause of setbacks at Old Navy is more complex than the Hawaiian-print dresses and draw-cord shorts on its shelves. All retailers are battling a general disinterest in apparel among shoppers, and this problem is exacerbated at Old Navy because its teen market is very trend-conscious and emotional about purchases.

        “I've never seen such little traffic in Old Navy,” said Denise Harpring, an Anderson Township native who took her 19-year-old daughter to the Sycamore Plaza store Thursday. “We just came out of Lazarus in the junior's department, and it was pretty crowded.”

        She said the new Old Navy at Rookwood Commons had more traffic.

        On top of market issues, Old Navy also has had some merchandising trip-ups. A glut of teen-oriented apparel in the past several months has left older shoppers uninspired, and, more recently, it has had problems moving back-to-school shipments to stores on time.

        “It's may be a little bit of sameness in the last year, maybe a lack of newness,” said Walter Loeb, of the New York-based retail consulting firm Loeb Associates. “(And) there's quite a few of these stores around now.”

        Receipts began to sink at Old Navy in March, when it said sales at stores open at least a year declined by 10 percent to 13 percent, compared with a 27 percent to 29 percent boost the year before. Same-store sales continued to decline in May, June and July, when they fell 17 percent to 19 percent against 11 percent to 13 percent gains a year ago.

        Mr. Drexler announced programs to revive interest in the Old Navy chain. The retailer last year began adjusting its merchan dising mix to appeal to a broader demographic group, a process still under way. And this weekend, Old Navy will launch a two-week denim promotion to stimulate interest among all age groups.

        The chain also will begin emphasizing its affordable prices, which are considered reasonable to most market groups.

        “We still want the teen customers,” Mr. Drexler said. “We love teen-agers. They shop a lot, they drive traffic. We are not moving away from them, we are looking for a balanced assortment.”

        Mr. Drexler said the sales declines are fairly recent, and surveys show Old Navy is still popular with its core market. He said the chain will stay on course with store expansions and remerchandising plans.

        Between 150 to 160 Old Navy stores are scheduled to open this year. Locally, Old Navy moved its store in Hyde Park Plaza to Rookwood Commons in Norwood — and in Kenwood, it expanded its Sycamore Plaza store into the former Loehmann's location. It also is building a store in Western Hills.

        “The business is 5 years old and has well over 90 percent customer awareness in America,” Mr. Drexler told analysts. “Of course, it hasn't run its course. We don't build anything for short-term in this business.”


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