Old Navy Is the Anchor Gap Badly Needs

(MoneyWatch)  Discount apparel obviously makes sense in this economic environment. Abercrombie & Fitch, which never marked down its clothing because of a perceived disrespect to its brand, now offers deals.

Apparel giant Gap Inc. is taking notice. It's biggest line of stores, Old Navy, boasts best sales gains for locations open at least a year. That pummels its namesake chain, and beats the more upscale Banana Republic brand. Old Navy stores open at least a year posted a 10 percent sales gain in the third quarter, while Gap stores fell seven percent and Banana's dropped six percent.

Executives at the San Francisco company are taking notice. They said during the third quarter they will increase the marketing dollars spent promoting Old Navy, and specifically pointed to the success of the SuperModelquins campaign launched earlier this year.

"We're quite pleased with the return we've gotten on a marketing investment," said Sabrina Simmons, executive vice president and chief financial officer. "So that causes us to want to continue investing to feed that momentum."

Part of that investment so far makes Old Navy a go-to place for women and kids clothing, executives said. Plans to refocus on those areas of merchandise paid off, as they were the leading all items in third-quarter sales.

And since Black Friday is somewhat overhyped because other selling days during the holiday are increasing in importance, Gap's move to open Old Navy and its other chains on Thanksgiving was likely a good gamble. We'll see when those financial numbers come out soon.

Of course, as one blogger points out, Old Navy faces a lot of low-price competition out there, from discount chains to specialty apparel companies, like Aeropostale, H&M and Forever 21. But in an economy with little good news, it's nice to notice a struggling giant retailer make sucessful efforts to turn itself around.