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Gap bets the spin off of star performer Old Navy will sharpen focus

Category: Finance,Retail

In late February 2019, Gap Inc. announced plans to split into two separate publicly traded companies, sending its stock soaring on the hopes the new structure will help sharpen its focus and boost sales.

The retailer said it would spin off its most successful brand, Old Navy, into a separate, publicly-traded company. With its inexpensive basics, Old Navy has consistently accounted for more than 40 percent of the company's total annual sales. Its other brands, Gap and Banana Republic, will join much its smaller brands, Intermix, Athleta, and Hill City, to form an as-yet unnamed company. Gap also plans to buy high-end children's clothing line Janie and Jack and fold that into the new company.

Despite the sharp spike on the announcement, Gap shares, which have a market value of just under $10 billion, are up less than 1 percent since the start of the year, and have fallen 20 percent over the past year.

Gap CEO Art Peck, who will remain with the executive of "NewCo," said both companies should benefit from "a sharpened strategic focus and tailored operating structure."

A Gap spokesperson wasn't immediately available for comment.


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