Lou & Grey’s newly opened store on Fifth Avenue, the brand’s first in Manhattan, wants to feel like a boutique. It features designs by Brooklyn artists painted directly on the walls. CAP Beauty, a West Village-based organic cosmetics brand, occupies a section of real estate in the back of the store. The fitting rooms are decorated with oversized curtains and lounge chairs in the most on-trend shade of dusty pink. Overlooking the space is a “design loft,” an area where Lou & Grey’s 11-person design team plans to work a few days a week in order to get closer to their customers and the store’s salespeople.

Underneath its bespoke charm, Lou & Grey has a little secret, one it’s hiding from the chic Manhattanites who wander in to browse the store’s selection of soft knits, leggings, dresses, locally made accessories and beauty products: It’s an Ann Taylor brand.

“Ann Taylor birthed Loft, Loft birthed Lou & Grey,” said Michelle Horowitz, svp of marketing for Lou & Grey and Loft. “It came out of the loungewear. It’s a true evolution from the Loft stores to the brand.”

Lou & Grey was established as its own brand in January 2014, expanded out of a collection of loungewear that Loft had been selling in its stores since 2009. In two years, the company has opened 12 standalone retail stores as well as an online store. The brand is a younger, more nimble counterpart to its sister stores: established retailers Ann Taylor and Loft have been hurt by dwindling mall traffic and sucked into the promotional cycle that’s also plaguing competitors like Banana Republic, J.Crew and Gap.

Lou & Grey is, for now, a blank slate with a modern outlook on retail and a more distinguished flair. For younger shoppers, it’s not the brand that their moms, or even older siblings, bought.

“Lou & Grey is Ann Taylor’s discovery brand,” said Neil Kraft, founder of fashion and lifestyle agency KraftWorks. “It’s not heavily marketed. It’s spread by word of mouth, people stumble upon it, and it’s a millennial fit. When you go inside or to the website, it’s not at all obvious that it’s attached to Loft. That’s on purpose.”

The “discovery brand,” according to Kraft, is a fresh brand meant to boost the image of a retail company that’s been long associated with a certain clientele. J.Crew has a younger, cooler indie counterpart in Madewell. The discovery brand isn’t just a brand for younger shoppers, either: H&M’s sister brand & Other Stories is made for the shopper who has phased out of H&M’s fast-fashion ubiquity.

As part of the overall business, these spin-off brands make up a very small portion. Lou & Grey, for example, has 12 stores compared to Loft’s 680. Lou & Grey’s parent company, Ascena, doesn’t break out individual revenue for Ann, Inc. retailers. But what Lou & Grey lacks in size, it makes up for in novelty. Plus, having the reach and resources of the Ann brands behind it helps.

“Traditionally, what these brands would do to boost sales is get into the emotional cycle of endless promotions, which has fundamentally killed retail,” said Kraft. “You can’t get out of that. So the retailers say, if we have a new store, where we don’t fall into this trap, we have a way out.”

Instead, the store draws in customers by offering community classes in its locations, supporting local artisans and hosting Instagrammable activations. For the opening of the Lou & Grey on 5th Avenue, the store pulled a branded soft serve ice cream truck up outside for free cones. That week, the brand’s Instagram follower count grew eight times the average rate to 71,300, and #louandgrey received 1.9 million impressions, according to the brand.

Horowitz said that Lou & Grey operates within the Ann company like a startup. Although growth has been fast-paced, the brand has taken a “read and react” approach to expansion.

“It’s not the traditional retail perspective of ‘let’s hit this number of stores at the end of the year,’ and, from the get go, Lou & Grey has also been protected from the promotional cycle. It needs the space to grow separately from that,” she said. “From an internal organization standpoint, we’ve had the freedom to experiment and try something new.”

That startup-within-a-corporation mentality helps drive the discovery and experience elements of new brands inside traditional retailers. Lou & Grey has the budget to pull off a branded ice cream truck, but it’s free from the associations of the older brands.

“The ‘younger sister’ brands feel like discoveries, they’re more personal,” said Jessica Navas, evp at Erwin Penland. “All stores want to have experiences, but Lou & Grey doesn’t come off as a corporate template. From a financial standpoint, Ann Taylor and Loft have the reach and backbone to pull it off, but Lou & Grey doesn’t have any of their baggage.”