Gap Inc. will expand its presence in the Southland’s fiercely competitive discount clothing market today by opening two outlets of its new apparel chain, Old Navy Clothing Co.
The stores--one in Fontana’s Empire Center and the other at the Citadel in City of Commerce--will offer casual clothing for men, women and children at prices averaging about 30% lower than apparel sold at the Gap locations. Men’s jeans carrying the Old Navy label sell for about $22, a woman’s linen blouse costs about $10 and a boy’s T-shirt is priced at about $5.
Gap Inc., which opened its first three Old Navy stores in the San Francisco area in March, plans to open eight Old Navy stores in Southern California within the next 12 months--part of a plan to create a 50-store chain nationwide over the same period.
To succeed, Old Navy will have to draw customers away from major chains such as Mervyn’s, T.J. Maxx, J.C. Penney, Wal-Mart and Kmart--and that will be difficult, New York-based apparel analyst Alan Millstein said.
“Old Navy has a 50-50 shot at success,” Millstein said. “They will have to slug it out with retail giants who have an established customer base. In California and other areas with a soft economy, Old Navy may take some customers away from the Gap because consumers in tough economies are more bargain-oriented.”
San Francisco-based Gap says it does not expect that to happen because Old Navy will cater to a different customer base. Old Navy is part of a three-tiered strategy--with the company’s more upscale Banana Republic chain at the upper end, the Gap stores in the middle and the value-oriented Old Navy at the low end.
Kmart, Wal-Mart and Target are also expanding rapidly in Southern California and in other regions of the country this year.
“Some estimate that the value-priced market is a $150-billion industry,” Gap President Mickey Drexler said. “Old Navy gives us a chance to grow and allows us to be a player in a broad market.”
Overall, Gap had a profit of $258 million for the 12 months ended Jan. 31, compared to earnings of $211 million in the previous year.