Gap to spin off Old Navy into its own company

Anna Jefferson
March 4, 2019

The yet-to-be-named company, now dubbed "NewCo", will encompass Gap, Banana Republic, Intermix, Hill City and the thriving Athleta brand while the other eponymously named one will be dedicated exclusively to Old Navy, which had a 3 percent increase in sales previous year and about $8 billion in revenues.

In addition, the company plans to close 230 Gap-brand stores over the next two years, but it's now unknown how many closures will impact Canada.

"It's clear that Old Navy's business model and customers have increasingly diverged from our specialty brands over time, and each company now requires a different strategy to thrive moving forward", Robert Fisher, the board chairman of Gap Inc., said in a statement.

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Gap Inc.is refusing to tell The Canadian Press exactly how numerous 230 stores it is closing will be in Canada, but says the majority of global network closures will be in North America.

Banana Republic, which closed the year with 601 locations, has performed better with positive comps achieved in 2018 but will also see some closings in 2019. "Now is the right time for us to take the next step on our journey to both ensure the competitiveness of our brands and to deliver shareholder value". But that was on top of a 9 per cent gain in the year-ago period. Athleta, though still a small brand, is growing quickly.

Peck said Athleta was able to grow its active customer by 20 percent, exceeding goals.

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"We're confident these closures will play an important role in revitalizing the brand", the Gap Inc. The results were mixed, but the market didn't care because that wasn't Gap's main announcement of the evening.

About 130 of those closures will happen this year, according to Gap. To revive the Gap brand, it said it's working on multiple initiatives to fix the fit of its products and "modernize its marketing". Peck will lead NewCo. Gap Inc.'s current President and Chief Executive Officer, Art Peck, will hold the same position with NewCo after the separation.

As one of the fastest growing apparel brands in the U.S. with approximately $8 billion in annual revenue, Old Navy will be able to capitalise on its scale, broad customer awareness and unique positioning to extend its category leadership and deliver profitable growth as an independent company. The split will help it focus on capitalizing on its scale, broad consumer awareness and unique value positioning to drive growth. CEO said during a call with investors, USA Today reports.

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