Old Navy is poised for an unlikely comeback thanks to millennials and moms
Old Navy could be headed for a comeback, thanks to millennials and moms.
In its most recent quarter, sales were flat, but according to RBC Capital Markets, the brand is primed to rule the back to school market.
RBC surveyed 540 women, with 57% of the group consisting of millennials and 43% of the group consisting of mothers. The research noted that Old Navy was the "mindshare winner," with 45% of the participants saying they intended to shop at Old Navy. 41% of millennials planned on shopping at Old Navy, and 51% of moms said they planned to shop there.
Could this mean that Old Navy is positioned for success?
"In our view, with [approximately $6 billion] in domestic revenues, we expect that Old Navy’s strong response rate is indicative of its market share in the US apparel market," the analysts write.
However, just because consumers want to shop there or plan on shopping there doesn't necessarily mean they will — or that it will translate into a successful, positive quarter. As RBC concedes, the brand was a "mindshare" leader in its holiday 2015 survey, but still saw comparable sales plummet 8% in the fourth quarter of fiscal 2015.
In the spring, the brand struggled from a subpar assortment of merchandise and too many discounts. Discounting is a rampant problem in the retail industry, and when consumers areconditioned to shop on sale, it's hard to convince them to pay a premium.
It does, however, appear that young people like the styles that Old Navy is selling now.
Low prices are certainly important to millennials who typically prefer to spend on experiences. RBC notes that following Old Navy, millennials intended on shopping at TJ Maxx, a retailer that should terrify Macy's with its off-price designer goods.
Even if Old Navy returns to dominance, Gap Inc. has other problems on its hand: namely,Banana Republic, which saw sales dip 9% in its most recent quarter.