The split of the Old Navy could release the value of both shares

The ramp-up offers investors an opportunity to withdraw money, especially as the stock could fall after the initial euphoria disappears. Nevertheless, a little patience could lead to a greater reward.

It's obvious why Gap separates. Old Navy accounts for nearly half of Gap's sales and is on track for three-quarters of its profits. It is one of the few affordable, family-oriented, fast fashion retailers with a large collection of plus-size clothing, allowing it to operate a $ 20 billion garment market that has been much ignored. The spin-offs will allow Old Navy shares to gain multiple indications of their strong growth, without being burdened by Gap's recovery efforts.

It's not uncommon for companies in all industries to explode with their growth components – look
HP Inc.

(HPQ) and
Hewlett Packard Enterprise

(HPE). Of course, the risk is that the remaining assets seem less attractive without their more powerful counterparts.

Nevertheless, the shareholders who will hang will get an equal proportion of shares in both companies when the spinoffs take place. It could be a good deal if Old Navy continues on its recent strong trajectory, and there are good reasons to believe it: Old Navy CEO Sonia Syngal, who has been running the company since 2016, will be his new manager, his Autonomous status could help recruit and retain talent, and assuming that an unusually weak holiday season is unique, it should be rewarded with a richer valuation than Gap.

The execution risk certainly exists, but Old Navy's winning formula has been an asset in the traditional retail business.

Of course, this raises the question of the prospect for the remaining society and its brands; there is no doubt that he has problems to solve.

However, things may not be as serious as they seemed in the past year. The Athleta brand has developed and, with several store closures on hold, the new company will benefit from cost savings. A new name could also draw attention to the Gap brand, which has fallen behind recently, and the comparisons seem pretty easy. So while society will have a lot to prove, it is too early to say that it is out of the way.

For now, Gap shares can not have any other step until more details about the split are published. But at the very least, the fallout shows that Gap is not as discreet as his recent image. Maybe the bold and unmistakable fashion of the 1990s can really reinvent itself once again.