The Gap Tries To Reignite Its Ailing Old Navy Brand

Apr. 14, 2016 9:49 AM ETThe Gap, Inc. (GPS)2 Comments

Summary

  • The company has finally found a replacement for Stefan Larsson who left to become the CEO of Ralph Lauren.
  • Sonia Syngal has just been appointed the global president of Old Navy.
  • Old Navy’s growth has been carrying the company. It has so far this year which is a big concern.
  • But we are confident Syngal has the pedigree to get the brand pumping again.

On September 30 2015 the share price of The Gap (NYSE:NYSE:GPS) took a dive following an announcement by the company. It wasn't anything to do with slowing sales, not this time, nor was it any changes to guidance. It was the announcement that its Old Navy brand had lost its global president Stefan Larsson to rival Ralph Lauren (NYSE:RL).

That sell-off will have come as little surprise to many shareholders who recognize Larsson as being the genius that helped the company get its act together. He turned Old Navy into a force to be reckoned with and made it the company's number one brand. Presently the Old Navy brand is contributing 42.2% of total revenue, compared to the Gap brand which is just 36.4% of total sales.

The chart above shows the market reaction to Mr Larsson's departure, or arrival depending on your view. Although neither company has performed to expectations since then, they are slowly navigating through the difficult retail environment they are faced with. We expect Ralph Lauren to produce the goods in the next few years with Larsson at the helm.

Until yesterday the company had been operating without a replacement for Stefan Larsson and it was clear to see. The brand appeared to lack direction and things were coming away at the seam. Although the Old Navy segment was the only segment to post an increase in sales in the last fiscal year, its momentum has slowed drastically. Old Navy's year over year sales grew by just 1%, compared to a 6% increase the previous year.

Yesterday the company announced a successor at long last in long-time executive Sonia Syngal. Most recently Syngal was in charge of Gap's global supply chain and product operations, but has been heavily involved with Old Navy in the past. She was senior vice

This article was written by

Collective Investment Co. is intent on finding investments based on value and growth. Inspired by Warren Buffett and Charlie Munger.

Disclosure: I am/we are long GPS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (2)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.