Gap to spin off Old Navy as stand-alone company, stock skyrockets more than 25%

The Gap Inc. shares skyrocketed more than 20% in after-hours trading Thursday after the retailer said it would split into two publicly traded companies, turning Old Navy into an independent entity.

Gap GPS, +0.16% said the Gap, Athleta, Banana Republic, Intermix and Hill City brands will remain grouped together in a yet-to-be-named company. Sales at the flagship Gap brand fell 5% globally in the fourth quarter, and Gap plans to close about 230 Gap stores in the next two years as part of an effort to “revitalize” the brand, which has sagged for years.

Gap’s stock finished the extended session up 25.6%, after ending the regular session up 0.2% at $25.40. Gap shares have lost 20% in the past 12 months, contrasting with gains of around 2.6% for the S&P 500 index. SPX, -0.28% In addition, Gap said Thursday it earned $276 million, or 72 cents a share, in the fourth quarter, compared with $205 million, or 52 cents as share, in the year-ago period. Sales fell to $4.6 billion, from $4.8 billion a year ago.

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