(Bloomberg) -- Gap Inc. plummeted after announcing trouble at Old Navy -- the brand that generates half of its sales and is seen as the apparel giant's growth generator going forward.
Nancy Green, who joined Old Navy in 2019 after having run Athleta, is leaving this week, Gap said. An external search is under way for her replacement. The retailer also trimmed its sales projection for the first quarter of its current fiscal year.
“We believe now is the right time to bring in a new leader with the operational rigor and creative vision to execute on the brand's unique value proposition,” Gap CEO Sonia Syngal said in the statement. Gap said it has also “taken a more aggressive approach” to balancing its inventory assortment, which has caused “increased promotional levels primarily at Old Navy.”
Gap has established a goal of Old Navy reaching $10 billion in sales by 2023 and has sought to expand its appeal by offering larger sizes. Executives have said they're boosting Old Navy's e-commerce capabilities and are looking to add flexibility to its apparel production. In March, Gap said Old Navy's sales in 2021 surpassed $9 billion.
The change signals that Gap is concerned about the business, however. The company cited “macroeconomic dynamics as well as execution challenges at the Old Navy brand” and said it would lower its quarterly forecast as a result. Net sales for the quarter ending in late April fell by a low- to mid-teen percentage, a steeper drop than the previous estimate of a decline in the mid- to high-single digits, the company said in a statement Thursday.
Gap shares fell 11% at 5:23 p.m. after the close of regular trading in New York. The stock has declined 19% this year through Thursday's close.
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