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Gap to split into two public companies, with Old Navy as a standalone

Old Navy, meanwhile, brings in about $ 8 billion in annual sales by itself. This brand has been a 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. Maxx and Ross Stores.

Gap's current CEO, Art Peck, will remain at the chief executive of "NewCo," Gap said. Sonia Syngal, currently president and CEO of Old Navy, will lead the new public, stand-alone Old Navy company.

The spinoff should help both companies operate with a sharpened strategic focus, "Peck said in a statement. The transaction is expected to be completed in 2020.

Christina Boni, Analyst at Moody's, agreed the split-up will help enable a sharpened focus on its business priorities. However, she warned it will also reduce the business' diversification.

"Old Navy is a Gap Inc.'s leading brand," Boni said. "Old Navy continues to outpace Gap Brand and Banana Republic and one of the fastest growing apparel brands with a 3 percent in 2018 growing to $ 7.8 billion in 2018."

Gap also on Thursday announced it plans to shut down 230 of the namesake of the next two years, as it works to restructure its business. The retailer posted mixed results for the holiday quarter. To revive the Gap brand, it has been working on multiple products and "modernize its marketing."

Gap shares have fallen roughly 20 percent over the past 12 months, bringing its market cap to about $ 9.7 billion.

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