Recession helps Old Navy stage a comeback

Old Navy was the toast of the retail community after its parent company, Gap Inc., reported first-quarter earnings Thursday.

Did the cheap-basics chain post a surge in net sales? No. But in this economy, single-digit drops are the new black. And while its more expensive and buttoned-up sisters, Gap and Banana Republic, reported 12% and 13% same-store sales declines respectively, Old Navy reported it was down just 3% -- and helped mitigate the parent company's overall losses.

It was a good day for Gap Inc., but a real victory for Old Navy, which has long been the company's money-bleeder. Now the store is being hailed as Gap Inc.'s savior from the recession, but it's actually just the opposite -- the recession has saved Old Navy from extinction.

The warehouse-style peddler of $20 jeans has undergone an arduous makeover in the past two years. First, tailored tops and trendy accessories started showing up among the offerings, which have long been staunchly tonedeaf to fashion (Old Navy traditionally relied on customers who wear simple, monochromatic polos in the summer and simple, striped sweaters in the winter).


Then they brought on a legitimate fashion designer -- Todd Oldham -- to take things to the next level. Oldham's collections were solid, but sales didn't reflect that, and he was forced out after 17 months. In his absence, Old Navy's attention to fashion has more or less continued, albeit with a bit less imagination.