Gap will split into two publicly traded companies; stock surges

Gap Inc. said Thursday that it will split into two independent publicly traded companies — one comprised of its Old Navy brand, and the second a yet-to-be-named company that includes its other brands like Banana Republic and Athleta.

Following a review by Gap's board of directors,"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, Gap's board chairman, said. Old Navy, meanwhile, brings in about $8 billion in annual sales by itself. This brand has notably been the strongest within the company as Gap's namesake label has struggled to grow sales of late. Old Navy has been successful in targeting shoppers on a budget, rivaling off-price channels like T.J. Maxx and Ross Stores.

The spinoff should help both companies operate with"a sharpened strategic focus and tailored operating structure," Peck said in a statement. The transaction is expected to be completed in 2020, subject to final approval by Gap's board of directors."Separating Old Navy to a standalone company is what we have argued for over the past few years," Jefferies' Randal Konik said in a research note.

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Both out of business in 2 years

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Gap to spin off Old Navy as stand-alone company, stock skyrockets more than 25%Gap Inc. stock surges in the extended session Thursday after the retailer says it will split itself into two publicly traded companies, one consisting of its Old Navy brand and a yet-to-be-named company with its Gap, Athleta, Banana Republic, Intermix, and Hill City brands, as sales at the flagship Gap brand fell 5% globally in the fourth quarter.
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