Old Navy set out to make clothes shopping more inclusive for women of all body types. It ended up with too many extra-small and extra-large items and too few of the rest, a mismatch that frustrated customers and contributed to falling sales and a management shake-up.
The stumbles at Old Navy are a problem for its parent, Gap Inc.
The chain accounts for the majority of the company's sales and profits and helps prop up the weaker Gap and Banana Republic brands. It also shows the challenges of producing a wide range of sizes that have led some brands to stop carrying plus-sizes.
A Gap Inc. spokeswoman declined to comment.
The company will report its latest quarterly results on May 26. Analysts expect the company to report net sales of $3.44 billion, down from the $3.99 billion it reported in the same period last year.
Billed as one of the biggest launches in the brand's history, Old Navy in August began offering all women's clothing styles in size 0 to 30 and XS to 4X, making it one of the first retailers to place such a big bet on inclusive sizing.
It did away with separate petite and plus-size departments and grouped all sizes of each style together. Mannequins in varying body shapes displayed the new wares. All sizes of a style were priced the same, a break with an industry practice in which retailers charge more for larger sizes.
"This is the largest integrated launch in the brand's history and an important growth driver for the business for years to come," Gap chief executive Sonia Syngal told analysts in August.
Soon after, however, Old Navy's sales started to nosedive. Last month, Nancy Green, the chain's president and chief executive, stepped down after less than two years running the brand.
Gap warned that sales for the spring quarter would fall short of expectations in part due to troubles at Old Navy.
The extended sizes were the culprit, according to current and former employees.
Stores were selling out of the middle sizes and were stuck with piles of very small and very large sizes, the employees said.
To clear out the excess goods, Old Navy put a large quantity of women's clothes on sale this spring. The move contrasts with other retailers that have held the line on discounting because of strong demand and supply-chain challenges that have kept some items in short supply.
At an Old Navy store in Queens, N.Y., racks of women's clothes were recently selling for 50% off. Some women's dresses were available in only XS and XXL. High-waisted canvas pants were sold out in sizes 4 through 10, but available in size 2 and in 12 to 28.
Shoppers said Old Navy's message of inclusivity resonates with them. But it is sometimes outweighed by the frustration of not being able to find their size.
"I'm not necessarily the slimmest," said Sydney Bassard, of Charlotte, N.C. "Sometimes it's hard to find clothes that aren't tight."
Nonetheless, the 26-year-old speech pathologist said that since Old Navy introduced the wider range of products, she has had a hard time finding her size, which is among those that have been in short supply since the expansion.
"I have to look through a lot of sizes and then my size isn't available," she said.
Retailers from Victoria's Secret & Co. to Target Corp. have embraced size inclusivity by adding more styles in small and large sizes to win over new customers and promote more positive body imagery.
Few chains have gone as far as Old Navy.
"It was a big step for the industry," said Liza Amlani, the founder of consulting firm Retail Strategy Group. "Old Navy really invested in equality around sizing, not just in the product but from the way the stores were laid out."
Most retailers sell clothes in sizes that range from 0 to 14. Adding additional sizes comes with extra costs from developing new patterns to buying extra material, Ms. Amlani said.
Retailers tend to buy more of a given item in midrange sizes and fewer in very small or very large sizes. But they are often still short of the most popular sizes, while ending up with too many of the sizes that are less in demand. Offering a wider range of sizes can magnify that problem, she said.
The average American woman is a size 18 today, up from a size 14 five years ago, according to Don Howard, executive director of Alvanon, which works with brands and retailers on sizing and fit.
The mean weight for women aged 20 and over was 170.8 pounds as of 2016, according to the most recent data from the National Center for Health Statistics. That is up from 163.6 pounds in 2000.
Old Navy relied on the NCHS data when it developed its new sizing and conducted its own research. It interviewed hundreds of women about their body image, scanned the bodies of 389 women to create digital avatars and built new fit blocks for sizes 20 through 28.
Because the proportions change as sizes get larger, it had to review the pocket placements, waistband pitches and dress lengths to ensure the clothes fit across all sizes.
The launch was complicated by the Covid-19 pandemic, which forced some factories to close and created shipping delays that made it harder to get products to stores in a timely manner, some of the former employees said.
Old Navy's same-store sales fell 9% in the third quarter of last year and 6% in the fourth quarter, compared with the same periods in 2020.
The declines followed big gains in early 2021 and most of 2020. Compared with 2019, Old Navy's sales were unchanged in the fourth quarter of 2021. The figures exclude newly opened or closed stores.
Paul Lejuez, a Citi analyst, said the expanded sizes aren't bringing in enough new customers or getting existing customers to buy more.
"If some of those sizes don't sell, it doesn't make sense to use up the floor space," he said.
Fashion designer Diane von Furstenberg said this past Wednesday that her namesake company wants to cater to as many people as possible but that producing a wide range of sizes is expensive.
"If you are a size 2 and if you are a size 16, you do not use the same amount of fabric," she said at The Wall Street Journal's Future of Everything Festival. "You also don't want to penalize the small people [who would be] paying more because the price has to be the same. It may be very controversial to bring that up. But I think it's important."
Nicole Cueto said she has been shopping elsewhere for activewear and jeans, because it has been hard to find her size at Old Navy in the past few months.
"They mostly just have larger sizes and sell out of the small sizes," said the 39-year-old publicist, who lives in Manhattan. "It is super-frustrating."
Ms. Syngal told analysts in November that Old Navy more than doubled the number of extended-size customers in its database since the launch and that 15% of customers who shopped for extended sizes are new to the brand.
She said Old Navy, which makes many of its products in Vietnam, where factories were shut for an extended period due to the pandemic, had been hurt by inventory shortages that persisted into the fourth quarter.
In March, Ms. Syngal said the brand suffered from not having enough fashionable dresses and tops, as consumers shifted to buying more of those items.
Old Navy's stumbles don't bode well for Gap Inc. In 2021, Old Navy accounted for 54% of the company's sales and roughly 80% of profits, according to Mr. Lejuez.
In 2019, Gap announced plans to separate Old Navy from the rest of the company. It scrapped the idea a year later, saying it would have been too costly and complicated.
Ms. Syngal, the former leader of Old Navy, took over as Gap Inc.'s CEO in early 2020.
Gap spent about $300 million on separation costs before deciding a split wouldn't be feasible, according to company filings.
The company's systems are too interwoven, according to a person familiar with the situation. For instance, all the brands use the same mainframe-computer inventory system, rather than a more modern modular system that would allow for changes more easily.
Separating Old Navy would have been like cutting a bicycle in half, this person said.
"Because of the time spent analyzing the split, Gap fell behind on other initiatives that have become crucial to retailing, such as product recommendations and personalization. Then, the focus shifted to inclusivity, further distracting the company from implementing new technologies.''
