History of Old Navy Retail

Panya_/iStock/GettyImages

There are few people in the United States today who wouldn't instantly recognize the blue-and-white Old Navy logo. After all, this successful retail chain has a presence in just about every city in the country and has been a cornerstone of retail clothing since it seemed to pop out of thin air back in the 1990s.

Incorporated in 1994, Old Navy is a wholly owned subsidiary of The Gap, Inc. The chain has about 820 clothing stores throughout the United States and 30 more located in Canada. Today, Old Navy accounts for about 40% of The Gap's $15.8 billion in annual sales. The chain markets itself as a low-cost apparel store for men, women and children.

Old Navy History Begins With The Gap

Old Navy's story begins in San Francisco back in 1969. Frustrated at being unable to find a decent pair of jeans, Donald G. Fisher, 40 years old at the time, decided to start his first store: The Gap. At its first location, The Gap was a place to buy low-priced jeans and music records. It was such a success that Fisher was able to expand his idea at a lightning pace. By the mid 1970s, The Gap had 200 stores spread across 20 states.

By 1980, The Gap Inc. was a publicly traded company, bringing in over $300 million in sales and opening up to 80 new stores each year. Fisher was succeeded by Millard Drexler, who continued to expand the chain throughout the 1980s. The Gap expanded with a second chain, buying out Banana Republic, which thrived as an upscale version of The Gap.

While The Gap's success was phenomenal, the 1980s didn't pass without any hiccups. Two company failures, mostly forgotten by now, included a sportswear chain called Hemisphere, which it later sold. The company's foray into the furniture business was also short-lived with its brief ownership of the Pottery Barn retail chain.

First Incarnation: Gap Warehouse

Twenty years of successful sales did not go unnoticed. In the early 1990s, rumors began to circulate that rival company Dayton Hudson Corp., the owner of Target and Mervyn's, was planning on making a move on The Gap's market share by opening a rival clothing-store chain with lower prices. Upon hearing this, Drexler saw the threat — and the opportunity. He decided that he had to act first.

Drexler had his staff go on a discount shopping spree. They went to local retailers including Walmart, Target and J.C. Penney to purchase all the clothes and accessories they could find in the $10 price range. When they returned with their bags, Drexler arranged all of their purchases on the boardroom table and then had his advisers take a look. This was, they decided, the perfect opportunity for a new type of store.

The Gap contacted its network of overseas garment factories to ask about producing new lines of clothing with inexpensive fabrics. In August 1993, The Gap converted some of its stores into its new discount-clothing chain, originally named Gap Warehouse.

The Arrival of Old Navy

The new Gap Warehouse stores were a hit. After a few weeks, executives at The Gap decided that the new chain needed its own identity. After some consideration, Drexler decided on "Old Navy", which was the name of a bar he had seen while walking through the streets of Paris.

The first Old Navy store opened in Colma, California in 1994. Highly promoted as a media event with free giveaways, the company got Cindy Crawford to appear and to sign autographs. After just one year in business, Old Navy had opened 59 stores with $120 million in sales. In 1995, it opened its flagship store in Manhattan and expanded to 131 stores with $420 million in sales.

Old Navy stores were about double the size of The Gap stores, selling jeans for $22 and T-shirts for just $7 in industrial-styled stores with cement floors, chrome fixtures and exposed pipes. Commercials featured retro celebrities like Morgan Fairchild and the Smothers Brothers. In 1997, Old Navy became the first retail chain to reach $1 billion in sales in under four years.

Old Navy at the Turn of the Century

In 1999, Old Navy changed its course but not its speed. That was the year Jenny Ming became president of the company. Under her leadership, Old Navy would continue to expand and to dominate the retail clothing market. By the beginning of the new century, Old Navy boasted 513 stores.

A large part of the retailer's success was due to the fact that it had reached beyond its target market, bringing in a higher-spending customer base than the company targeted. In fact, an NDP Group survey revealed that over 70% of Old Navy revenue came from households earning $50,000 or more.

Its success stuttered in 2000, however, because its plans to expand internationally took a setback when distribution problems flooded the chain with excess inventory. In 2001, however, Old Navy launched 12 stores in Ontario, Canada on the same day. After 10 years of constant growth, Old Navy slowed the number of stores it opened. In 2004, there were 844 stores in its chain, bringing in $16 billion in sales annually and representing 40% of The Gap Inc.'s revenue.

Learning From the Competition

By 2012, Old Navy's growth had begun to stagnate, so executives at The Gap Inc. decided that a change was in order if Old Navy was to continue its success. After assessing the market, they decided that H&M was their main competitor and recruited Stephen Larsson to run Old Navy.

Larsson hired new designers recruited from Reebok, Nike, The North Face and Coach to come to Old Navy and work on new clothing lines. By 2015, Old Navy revenue reached $6 billion in the U.S. alone. Having achieved the success for which he was hired, Larsson left to work for Ralph Lauren, and Sonia Syngal became the next president and CEO of Old Navy.

The Spin-Off That Didn't Happen

Old Navy continued to have phenomenal growth for the next two years; however, sales began to plateau in 2018. Sales in 2017 were 6% higher than the previous year, but sales slipped to 3% growth in 2018, with no growth at all in the final quarter compared to 2017's final quarter. Sales then slipped 1% in the first quarter of 2019 compared to the same period in 2018 and then a further 5% in the second quarter.

In early 2019, The Gap Inc. announced its plans to spin Old Navy into its own company; however, this decision was reversed in January 2020. At the same time, The Gap Inc. stated that it would be appointing a new CEO. Old Navy's current president and CEO, Sonia Syngal, is expected to retain her position for some time to come.