Gap Inc. plans to split into two separate publicly traded companies — Old Navy and a new, yet-to-be-named company comprised of the Gap brand, Athleta, Banana Republic, Intermix, and Hill City, the company announced Thursday.
“Following a comprehensive review by the Gap Inc. 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, chair of Gap Inc., said in a statement. “Recognizing that, we determined that pursuing a separation is the most compelling path forward for our brands."
The new company will be led by Gap Inc.’s current president and CEO, Art Peck. Meanwhile, Sonia Syngal, the current president and CEO of Old Navy, will lead the brand as a stand-alone company.
Gap Inc. said the spinoff "will enable each company to maximize focus and flexibility, align investments and incentives to meet its unique business needs, and optimize its cost structure to deliver profitable growth."
The announcement comes the same day Gap Inc. announced it plans to shutter 230 of its namesake brand's stores over the next two years as it restructures its business. The brand has slowly lost relevance as consumers lean toward lower-priced apparel available at retail stores like Old Navy and TJ Maxx.
Old Navy has continued to be a bright spot on Gap Inc.'s financial reports. Gap's global sales fell 5% during fiscal year 2018 compared to a 1% decrease in 2017. However, Old Navy's sales increased 3% during the same time versus a 6% increase in 2017, the company reported on Thursday.
The official separation is expected to be completed in 2020.