# Gap group lost its right arm By [Alexis](https://paragraph.com/@alexis-11) · 2022-04-29 --- Source: gap On April 21, the parent company of gap, an American fast fashion brand with the same name, announced that Nancy green, CEO of another major Old Navy brand, would leave this week. While looking for a successor externally, Sonia syngal, CEO of gap group, will temporarily lead the Old Navy team to continue operation. It is worth mentioning that, when COVID-19 broke out in 2020, it was promoted to Sonia Syngal of group CEO, which had served as CEO of Old Navy for a long time. The announcement also said that due to the macroeconomic dynamics and the challenges brought by the management and executive facing the Old Navy brand, gap group expects the sales decline in the first quarter to exceed expectations, expanding from the middle and high single digits to the percentage of the middle and low double digits. The group also plans to use more radical means to balance brand differences and will increase the promotion of Old Navy. The defeat of old navy may cause greater turbulence to gap group. It is worth noting that since 2014, the performance of Old Navy began to surpass the main brand gap and become the performance pillar of the company. According to the annual report of fiscal year 2021, Old Navy recorded revenue of US $9.08 billion (about 58.8 billion yuan), accounting for 54.5% of the group’s total revenue, while gap accounted for only 24.4%. Gap group once introduced Old Navy into the Chinese market, but withdrew it in early 2020. In less than six years in China, Old Navy only opened more than 10 stores, and did not follow the strategy of major brand gap and similar fast fashion brands H & M and Zara to expand in China, losing the market opportunity. At the same time, gap brand’s sense of presence in the Chinese market has become increasingly thin, and there was once news that it was considering selling its business in China. The distinctive American style makes it difficult for gap group to meet the diversified needs of the regional market. After a series of setbacks, gap group accelerated its contraction in Asian and European markets and tried to concentrate more resources on the US domestic market. In fact, since the outbreak of the epidemic, gap group has always been limited to it and can not boost its performance. Sonia syngal once said that fiscal year 2020 was the “most difficult year in history” and expected to recover in 2021. However, judging from the performance data of fiscal year 2021, this goal has not been achieved. In fiscal year 2021, gap group’s revenue increased by 21% year-on-year to US $16.7 billion (about 108.1 billion yuan), still up 1.8% year-on-year compared with 2019 before the epidemic; The net profit reached US $260million (about RMB 1.7 billion), turning losses into profits, but there is still a considerable gap compared with us $350million (about RMB 2.3 billion) in 2019. Source: gap In order to recover from the epidemic, gap group proposed a three-year reform plan called “power plan” in October 2020. In the plan, gap said that it would focus on the development of sports brand ATHLETA and fast fashion brand old navy, and planned to reduce a total of 30% of its North American stores of gap and Banana Republic, with about 350 stores affected. At the same time, gap will also reassess its European businesses including France, the UK, Italy and Ireland, and consider transforming gap brand stores in Europe into cooperation and franchise models by the second quarter of fiscal 2021. According to the financial report information of 2021, during the period, the company has expanded 32 Old Navy stores and 28 ATHLETA stores, and continued to close the stores of gap and Banana Republic brands with poor performance in North America. It can be seen that although gap group puts more hopes and resources on the development of Old Navy and ATHLETA, there are hidden worries about the performance of Old Navy in fiscal year 2021. According to the comparable sales data released by the group, the performance of the Old Navy brand has plummeted since the strong growth of 35% in the first quarter of fiscal 2021. The comparable sales of the brand in the second, third and fourth quarters changed by 0%, 9% and 6% respectively compared with the same period of the previous year. Gap group once mentioned in the third quarter financial report that the supply chain delay has affected the sales of Old Navy brand, especially women’s clothing, and the supply is in short supply. However, according to the latest personnel announcement, the Old Navy brand seems to be facing greater internal adjustment problems. It is worth mentioning that in 2019, gap group announced that it would separate Old Navy, which has good sales performance, but it has not been realized so far. According to the women’s daily, a recent report released by Wells Fargo Bank said that the reason why old navy was not split was due to the negative growth of its comparable sales, which would cost the group hundreds of millions of dollars and complex processes. But at the same time, the potential value of ATHLETA brand and the possibility of being stripped have become a hot topic among many analysts. Wells Fargo said in the aforementioned report: “in our view, stripping the ATHLETA brand will be easier to achieve, because the brand is very healthy, is an acquired asset, and there is less overlap between its supply chain and gap brand, which has a large proportion of knitted products.” In recent years, the comparable sales of anleta brand have basically maintained double-digit growth, but from the current performance volume, anleta is far from being comparable with Old Navy and gap. --- *Originally published on [Alexis](https://paragraph.com/@alexis-11/gap-group-lost-its-right-arm)*