Old Navy and changing consumer preferences
Gap's (NYSE:GPS) fast fashion brand Old Navy opened its first store in 1994. Within four years, Old Navy had reached $1 billion in annual sales. Revenue then surpassed $6 billion in fiscal year 2012 and $7 billion five years after that. The brand was the clear star in Gap's portfolio.
In 2019, Gap announced it would spin off Old Navy into a separate publicly traded company. The goal was to let Old Navy keep growing, without the burden of Gap's other, weaker brands. However, that spin-off never happened. Old Navy's sales growth suddenly reversed, and Gap scrapped the plan less than a year later.
For Old Navy, the timing was all wrong. It was a tough year for fast fashion. The environmental effects of throwaway clothes were becoming more widely publicized, and shoppers began turning away from the cheap, trendy styles. Fast retailers Forever 21, Charlotte Russe, and Payless Shoesource filed for bankruptcy. That's also the year Zara went on the defensive by announcing major sustainability initiatives.
The tough times continued in 2020, as the pandemic temporarily shuttered stores around the world.
Still, Old Navy -- and the entire fast fashion industry -- aren't down and out. Old Navy's global sales have since returned, reaching more than $9 billion in fiscal year 2021. And a report by Verified Market Research predicts global sales in fast fashion will increase at a compound annual growth rate (CAGR) of 10.13% from 2023 to 2030 .
So, shoppers will still buy cheap clothes. And brands will still produce them, possibly with an eye on adopting more sustainable business practices going forward.
