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Gap Tackles Old Navy; Market Yawns

Gap (GPS - Get Report) is finally tackling its core problem at Old Navy: that hideous store design.

The apparel chain said it plans to remodel 50 Old Navy stores during the year. The chain has been operating on a 1990s store format -- aka a big box filled with merchandise. There is little store experience or customer service and, for the most part, stores are just too big.

If they're going to remodel, now is a good time, as consumers seek out value-oriented retailers amid the recession. Old Navy is poised to capture some of this share of the market.

In the first quarter, Old Navy same-store sales fell 3%, compared with an 18% decline a year ago.

While the chain is definitely performing better, Craig Johnson, president of Customer Growth Partners, says the momentum is only temporary. Old Navy is benefitting from a new ad campaign and additional marketing dollars, but once it returns to its normal marketing routine it could return to dismal days.

Gap also said it still plans to spend $350 million on capital expenditures during fiscal 2009, and will add 50 labels to its online shoe and handbag shop Piperlime.

Copyright 2009 Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. AP contributed to this report.

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