Gap to spin off Old Navy business

Gap plans to spin off and float its Old Navy business, creating two independent publicly traded companies.

Old Navy will operate only its own brand, while the as yet unnamed company – dubbed NewCo for now – will own the Gap brand, Athleta, Banana Republic, Intermix and Hill City.

“It is 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,” said Gap’s chairman Robert Fisher in a statement.

“Recognising that, we determined that pursuing a separation is the most compelling path forward for our brands – creating two separate companies with distinct financial profiles, tailored operating priorities and unique capital allocation strategies, both well positioned to achieve their strategic goals and create significant value for our customers, employees and shareholders.”

NewCo will launch with about $9 billion in annual revenue and a strong balance sheet.

Old Navy, a value-focused brand which is currently one of the fastest-growing apparel labels in the US, will have annual revenue of about $8 billion.

In a statement, Gap said separating Old Navy would allow it to capitalise on its scale, broad customer awareness and unique positioning to extend its category leadership and deliver profitable growth as an independent company.

“Through this separation, Old Navy will have the flexibility, focus and control needed to increase customer access by further applying its strategic real estate strategy, evolving its omni-channel model and expanding its product categories to continue to successfully resonate with value-focused customers. Old Navy will be well positioned to invest in capabilities and initiatives that will continue to grow its market share.”

After the split, Gap Inc’s current president and CEO Art Peck will hold the same position with NewCo.

Sonia Syngal, current president and CEO of Old Navy, will continue to lead the brand as a standalone company.

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