Gap Inc To Split Into Two Separate Companies

Gap on Thursday announced plans to split into two publicly traded companies putting Old Navy on a stand-alone path

Gap on Thursday announced plans to split into two publicly traded companies putting Old Navy on a stand-alone path

Gap also announced plans to separate into two publicly traded companies: Old Navy, and a yet-to-be-named company ("NewCo"), which will consist of the Gap brand, Athleta, Banana Republic, Intermix and Hill City.

Looking forward. The spun-off Old Navy will have approximately $8 billion in annual revenue, and will continue to be led by Sonia Syngal, the president and CEO of Old Navy since 2016.

According to the CBC, Gap Inc's chairman, Robert Fisher believes Old Navy's customer base has diverged enough from the parent company to demand a separate business model.

Konik said separating Old Navy, which is the primary driver of profit for Gap, would also make the budget brand as attractive as off-price retailers such as TJX Co Inc and Ross Stores.

We announced yesterday that Victoria's Secret will be closing 53 stores in North America this year due to declining sales.

Gap plans to spend $750 million in 2019 on capital expeditures - including $100 million to build out its OH supply center and headquarters - and sell the main Old Navy office. In 2018, Old Navy's comparable sales were up three percent.

The moves, which followed a comprehensive board review, come as Old Navy has been thriving, while Gap and Banana Republic have struggled. "Recognizing that, we determined that pursuing a separation is the most compelling path forward for our brands - creating two separate companies with distinct financial profiles, tailored operating priorities and unique capital allocation strategies, both well positioned to achieve their strategic goals and create significant value for our customers, employees and shareholders".

Old Navy will have to go it alone from now on. The business battled traffic challenges at its stores, which Gap CEO Art Peck blamed on macroeconomic conditions and self-inflicted product miscues. NewCo will have about $9 billion in annual sales.

Gap says each company now requires a different strategy to thrive. Same-store sales decreased 1 percent, while overall sales fell 7 percent to $4.6 billion - slightly less than Wall Street predicted.

At Old Navy, the fashion is already more resonant with the latest styles, with blouses and dresses priced as cheap as $30. "We settled on this largely due to the business logic at the end of the day", Peck said referring to the split. That explains why shares of Gap spiked 24% in pre-market trading and is up 19% in early morning trading Friday.

Recommended News

We are pleased to provide this opportunity to share information, experiences and observations about what's in the news.
Some of the comments may be reprinted elsewhere in the site or in the newspaper.
Thank you for taking the time to offer your thoughts.