Gap plans to separate from the old navy after a catastrophic year

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Gap, one of the largest shopping center operators in the United States, announced on Thursday its intention to turn Old Navy into a separate public company, establishing a dividing line between the family clothing chain and its classic brands. , more expensive.

The distinct company would contain the namesake label of Gap, Banana Republic, Athleta, Intermix and its new brand Hill City. Gap aims to finalize the transaction in 2020 and the two companies will have a similar size. Old Navy generated approximately $ 8 billion in revenue in the last fiscal year, while the brands that make up the new entity total approximately $ 9 billion.

Art Peck, chief executive of Gap, said at a call for results that the proposed split was an opportunity "to write the next chapter for the specialized retail business". He added that over time, Old Navy's needs have differed from those of the rest of the brands. . It shares fewer customers with other labels, has a smaller global footprint, and uses different in-store technologies.

"Old Navy is a little faster, its price is lower," said Greg Portell, senior partner of the consulting firm A. T. Kearney in the consumer and retail sector globally. "If you think of shopping mall brands, they are fundamental, they are classic, they are not so promising. Athleta is a bit different, but it still targets the consumer who is looking for a different experience than the old navy, a price-based go-now buyer. "

He added, "Many people will have different opinions about the meaning that this has. In a sense, by separating the two, they allow investors to put their money behind the company they feel has the best strategy to apply. "

Gap shares jumped more than 20% in the aftermarket segment trading.

Gap, based in San Francisco, created Old Navy in the early 1990s as a cheaper version of itself. He has since become the largest revenue generator of the company. But the company said that with the development of Old Navy, its business had become significantly different from that of other Gap labels.

"The value drivers, business model and customers of Old Navy are moving further and further away from our specialty brands," said Peck. "This divergence for me is now clear and we believe that the best way for each business to grow and meet the ever-changing needs of its customers is to allow them to pursue individualized strategies separately."

According to Gap's plan, Mr. Peck would be the CEO of the new company, while Sonia Syngal, the president of Old Navy, would be the CEO of the company. It is unclear what role the Fisher family, which founded Gap Inc. and still holds several seats on the board, including the president, would play in the new entities.

Peck also said the new company could become the largest publicly traded Group B, a status certified by a non-profit organization called B Lab for companies that commit to meet social and environmental standards high.

Gap made the announcement it has published dismal financial results, especially for its eponymous brand. Gap's comparable sales have decreased by 5% over the past year compared with the increases of Old Navy and Banana Republic, the company said. It also announced plans to close approximately 230 Gap stores over the next two years, to find the right balance between online sales, in its usual stores and from outlets.

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