Author:Dhani MauUpdated:Jan 16, 2020Original:Feb 28, 2019Gap, Inc. made a big announcement alongside its Q4 earnings report on Thursday afternoon: It's going to split up into two separate publicly-traded companies. Old Navy is being spun off into its own company, while Gap brand, Athleta, Banana Republic, Intermix and Hill City will comprise the other company, which has yet to be named.
Gap, the brand, has been experiencing declining sales fairly consistently for years now. And throughout that time, lower-priced chain Old Navy has been picking up its slack. Or, perhaps more importantly, Gap was dragging down Old Navy's sales. Old Navy was making up nearly half of Gap, Inc.'s sales and was its second fastest-growing brand as of last quarter.
This news coincides, probably not coincidentally, with some Gap brand news that's equally major: It will be closing 230 of its stores, which is estimated to result in a $625 million loss in annual sales. The move is part of an overall revamp of Gap's retail strategy, with 40 percent of sales expected to come from e-commerce post-restructuring.
"The plan to separate was rooted in our commitment to value creation from our portfolio of iconic brands," said Robert Fisher, interim president and chief executive officer, in a statement. "While the objectives of the separation remain relevant, our board of directors has concluded that the cost and complexity of splitting into two companies, combined with softer business performance, limited our ability to create appropriate value from separation.
So bottom line....still together? Both are favorites.
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