Gap Inc. has downgraded its sales outlook for the first quarter of fiscal 2022 and announced the departure of Old Navy President and CEO Nancy Green, causing shares of the retail group to plummet 18% the day after the announcements.
Citing challenging macro-economic dynamics and “execution challenges” at the Old Navy brand, Gap Inc. is now predicting low- to mid-teens declines YoY in the first quarter, compared to an earlier forecast that foresaw mid- to high-single-digit declines. The company will update its full fiscal 2022 guidance when it reports first quarter results on May 26.
Once a bright spot in Gap’s balance sheet, Old Navy has faced headwinds in recent months with inventory delays and inflation hitting the lower-priced brand particularly hard. Same-store sales at Old Navy were flat compared to 2019 in the fiscal fourth quarter, reported in March.
In another sign of trouble for the parent company, Banana Republic will shut down its ecommerce operations in the UK on May 31, 2022. Gap closed its eight remaining Banana Republic stores in the UK in 2016, but had maintained ecommerce operations in the region until now. Gap has not yet made a formal statement about the closure of Banana Republic’s UK ecommerce business.
As Gap looks to course correct its larger business, the company said it is taking a “more aggressive approach” to assortment balancing, which will lead to increased promotional levels primarily at Old Navy. The company is clearly also hoping a leadership change will help to right the Old Navy ship. “As we look to seize Old Navy’s potential, particularly amidst the macro-economic dynamics facing our industry, we believe now is the right time to bring in a new leader with the operational rigor and creative vision to execute on the brand’s unique value proposition,” said Gap Inc. CEO Sonia Syngal in a statement.
Green took the helm at Old Navy in October 2020, following a stint as President and CEO at sister brand Athleta. Earlier that same year the company dropped its plans to spin off Old Navy into its own public company, citing the high execution costs of a separation at a time when sales numbers had already begun to slide.
As the hunt for Green’s replacement begins, Gap Inc. CEO Syngal will oversee the Old Navy business, a position that will feel familiar given that she served as Old Navy CEO for four years prior to taking over the larger Gap Inc. business.