Feb. 28 (Reuters) – Gap Inc. announced on Thursday that it would separate its Old Navy brand into a publicly traded company, in order to focus on its fashionable ready-to-wear business, bringing its shares to 18% .
Old Navy has been more successful than the Gap brand in recent years because a wide range of discounted clothing has made it more appealing to a wider consumer base.
"It is clear that the business model and Old Navy customers have become increasingly differentiated from our specialty brands," said Robert Fisher, chairman of Gap 's board of directors.
The company also announced plans to close 230 Gap specialty stores over the next two years.
Overall Gap same-store sales decreased 1% in the fourth quarter ended February 2, compared with the average analyst estimate of a 0.3% increase, according to Refinitiv's IBES data.
Gap, Athleta, Banana Republic and the remaining brands will be part of a company that has not yet been named. The separation should be completed by 2020, said Gap.
The company's shares rose 17.7% to $ 29.89 in prolonged trading. (Report by Uday Sampath in Bengaluru, edited by Sriraj Kalluvila)