Gap Tackles Old Navy; Market Yawns

Gap (GPS) 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.

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