Gap splits into two societies; Old Navy will be a separate company: NPR



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Gap Inc. stated that Old Navy and the rest of the Gap brands attracted different customers and required different strategies.

Drew Angerer / Getty Images


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Drew Angerer / Getty Images

Gap Inc. stated that Old Navy and the rest of the Gap brands attracted different customers and required different strategies.

Drew Angerer / Getty Images

Updated at 18:02 ET

Gap Inc. plans to split into two publicly traded companies, turning Old Navy into a separate company at the closing of approximately 230 Gap stores over the next two years.

When Old Navy becomes its own company, the other company, which has not yet been named, will be Gap, Athleta, Banana Republic, Intermix and Hill City, announced Gap Inc.

The measures announced Thursday are the latest signs of turbulence in the retail sector, as Sears and other chains struggle to stay afloat.

Old Navy is the parent company's strongest brand, accounting for nearly half of annual revenues. According to Gap, Old Navy is the second largest clothing brand in the United States. Indeed, it has carved out a place of choice among buyers with discounted deals competing with off-price clothing stores like TJ Maxx.

In a statement, Gap Inc. stated that Old Navy and the rest of the Gap brands attracted different customers and required different strategies.

"It is clear that the business model and Old Navy customers have increasingly differentiated from our specialty brands.Every company now needs a different strategy to thrive," said Robert Fisher, Chairman of the Gap Board of Directors.

"Recognizing this, we determined that separation was the most compelling way for our brands – by creating two distinct companies with distinct financial profiles, tailored operational priorities and unique capital allocation strategies, both well positioned to achieve their strategic goals and create meaningful value for our customers, employees and shareholders. "

The company said closing 230 Gap stores over the next two years would reduce sales by about $ 625 million a year. Denim will remain the core and "essence" of the Gap brand, said Gap executives during a phone call with investors.

Gap shares rose about 25% Thursday afternoon.

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