Lingering inflation has been wreaking havoc on consumers these past few years. And many are being forced to cut corners to stay afloat.
A recent Bank of America survey found that 64% of Americans are stressed about their financial situation. And 67% say the cost of living in their area is outpacing growth in their income.
Even consumers who aren’t struggling financially are feeling skittish about the economy.
Related: Kohl’s drops key partnership in some locations
Consumer sentiment reached a two-year low in March, according to the University of Michigan’s latest Consumer Sentiment Index.
Not only has inflation remained stuck in an elevated state, but until it wiggles downward, the Federal Reserve can’t offer much relief to consumers from an interest rate perspective. The central bank just paused interest rate cuts at its mid-March meeting, citing inflationary concerns.
Consumers are also worried about the impact of tariffs. A poll conducted by The Guardian published in March found that 72% of Americans fear the economic impact of tariffs, up from 61% in January.
Current economic conditions could be brutal for retailers, many of which were already struggling before the start of 2025. As it is, Coresight Research anticipates 15,000 store closures in the course of the year, more than doubling the roughly 7,300 closures that occurred in 2024.
Retailers need to think strategically to draw in customers at a time when consumers are being more choosy with their limited funds.
Fomral clothes are generally expensive.
Image source: Princess Cruises
Old Navy is a haven for budget-conscious shoppers
There’s a reason shoppers have long remained loyal to Old Navy. As the most economical brand within the Gap lineup, the store is known for its fun, casual lineup and competitive price points.
In an age when workers are increasingly doing their jobs from home, consumers are moving away from business casual attire and higher-end apparel in favor of low-key dresswear. There’s no need to splurge on a $60 pair of slacks when a $30 pair of Old Navy cargo pants gets the job done.
Related: Costco CFO sounds the alarm on cost increase
Plus, Old Navy’s frequent sales make it possible for fans of the store to snag already reasonably priced inventory for less. And the strategy of giving out store cash, dubbed Super Cash, also works to drive repeat sales.
During Gap’s last fiscal quarter, Old Navy saw sales of $2.2 billion, with comparable sales up 3% that blew past analysts’ expectations. The brand did particularly well in the denim and activewear categories.
In the coming year, Gap plans to shutter 35 net stores. But most of them will be Banana Republic stores, not Old Navy, which isn’t surprising given the waning need for higher-end attire.
Old Navy’s newest product line gives it an edge
Old Navy isn’t exactly known for fancy dresswear. But the store is trying something new with its line of special occasionwear for women.
Dubbed “The Occasion,” Old Navy’s latest collection includes dresses for weddings, parties, and proms. The line was introduced quietly, and prices range from about $25 to $65.
Related: Another struggling mall retail chain closing more stores
Although consumers are generally moving away from dressier clothing, there will always be occasions that require nicer attire. At a time when Americans need to be price-conscious, Old Navy has a prime opportunity to take business away from competing retailers, including higher-end department stores.
It will also be interesting to see if Old Navy becomes more of a destination for bridesmaid dresses given a broad push toward more casual affairs.
More Retail:
Walmart CEO sounds alarm on a big problem for customersTarget makes a change that might scare Walmart, CostcoTop investor takes firm stance on troubled retail brandWalmart and Costco making major change affecting all customers
The Knot puts the average cost of a bridesmaid dress at $128. Old Navy’s newest lineup maxes out at roughly half that price point.
All told, special occasionwear could be a huge win for Old Navy, especially if the company is able to keep its prices to $65 or less.
A recent Harris Poll survey found that 44% of Gen Z and 33% of millennial women feel that wedding season has become more stressful than the holidays, and that inflation is impacting their ability to attend weddings as a guest. Old Navy’s newest offerings tap into a real need, and they could take the brand to new heights.
Related: Veteran fund manager unveils eye-popping S&P 500 forecast
