Gap Inc. and Old Navy Will Split into Two Commercial Companies

Gap Inc. will separate its famous Old Navy brand and close 230 stores of its struggling namesake clothing business. Both companies have been trending in opposite directions from any years. Now finally they are separating. On Thursday Gap announced that it would split into two companies. Although, one of the companies will include Old Navy. While the other unnamed business is temporarily called New Co. It will host Gap, Banana Republic, Athleta, and Hill City under the umbrella. After the arrival of the news, Gap’s shares soared more than 20% in after-hours trading on Thursday.

Robert Fisher, Gap Chairman, said Old Navy’s business pattern and customers have increasingly varied from its exclusive brands over time. He added that nowadays every company requires a different strategy to rise in the future. The move is to allow Old Navy to develop on its own. While the company reported annual growth worth $ 8 billion since its establishment in 1994. Old Navy will be able to combine its old brands with the new ones. Besides, the new company will have an annual sale worth $9 billion. Gap said that its current CEO, Art Peck will remain at the company and be the chief executive of the new company. On the other hand, Sonia Syngal, present CEO and president of Old Navy, will lead the newly separated Old Navy company.

Unfortunately, Old Navy’s success provides a stark contrast to the remainder of Gap Inc., which has struggled for the past ten years. Old Navy has thrived recently, and its sales increased by 3% in 2018. Whereas, the Gap has battled for years, and its sales cut down 5% last year. Gap founded in 1969 was one of the coolest brands in the retail market. Its most popular products include logoed sweatshirts and turtlenecks. But the brand failed to emerge in other categories like baby boomers. The company eventually decide to shut 230 Gap stores over the upcoming two years. The move is to renew the Gap brand. As per securities filing, Gap supposes it will save $250-$300 million before taxes in the upcoming two years.

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