With over 1,000 Gap and Old Navy stores in North America, GPS is finding itself running out of real estate to expand. This means that further expansion in North America may come at the price of cannibalization of existing store sales. GPS must look to overseas markets more if they wish to continue their growth.
Gap's key revenue driver, Old Navy, has produced the worst same store sales growth of the three brands. Old Navy's sales decreased 17% during the 2008 holiday season, a sharper decline than the company's other brands. In addition, The Gap has been trying to market Old Navy more effectively in order to take advantage of more frugal consumers. However, given Old Navy's track record, investors are concerned as to whether or not focusing so much on marketing Old Navy and not its core brand (The Gap) is an effective use of time and money, especially during a recession.