June 10, 2003, 12:00 AM

Old Navy increases average retail prices with optimization system

Old Navy has increased its average retail prices and improved gross margins through a web-based, price optimization system from ProfitLogic, the company said at the Retail Systems conference this week.

Old Navy, the largest division of apparel retailer Gap Inc., has increased its average retail prices and improved gross margins while reducing inventory levels through a web-based, price optimization software system, Jeannie Barsam, senior director of merchandise planning, said at the opening breakfast meeting of the Retail Systems 2003 Conference and Exposition in Chicago today.

Old Navy, with more than 840 stores and 2002 sales of $5.8 billion, implemented the Retail Merchandise Optimization system from ProfitLogic in time for fourth quarter sales last year. Throughout Q4 and the first quarter of this year, Old Navy increased the average retail selling price of products over their lifespan more than it expected, Barsam said. “We beat our plan, even though we planned to do better because of this optimization system,” Barsam said.

In an interview following her presentation, Barsam said the optimization system has enabled Old Navy to be far less rigid in its policy of marking down prices to meet planned unit sales. “We’ve broken our old rules,” she said. “We used to cut 25-30% on our first markdown, now we start out at 15%.”

Barsam said during her presentation that Old Navy’s improved sales performance in Q4 alone more than paid for the ProfitLogic system. “This was the quickest way for us to increase gross margins,” she said.

With the ProfitLogic system, Old Navy now moves products more often into promotions before going straight into markdown, Barsam said. Barsam urged retailers to test the recommendations before they begin implementing the markdowns.

The software resides on a ProfitLogic server and retail managers access the recommendations via a browser.

ProfitLogic also announced today the launch of ProfitLogic 2003, an expansion of its suite of product offerings. It includes upgrades to assortment, allocation and markdown optimization systems.


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