Home Brand Talk Gap Inc to split into two companies
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Gap Inc to split into two companies

Gap Inc to split into two companies
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Gap Inc announced its plans to create two independent publicly traded companies – Old Navy, a family apparel brand, and a yet-to-be-named company (NewCo), which will consist of the iconic Gap brand, Athleta, Banana Republic, Intermix and Hill City. The spin-off 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.

“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,” said Robert Fisher, Gap Inc.’s Board Chairman. “Recognizing that, we determined that pursuing a separation is the most compelling path forward for our brands – creating two separate companies with distinct financial profiles, tailored operating priorities and unique capital allocation strategies, both well positioned to achieve their strategic goals and create significant value for our customers, employees and shareholders.”

Art Peck, President and CEO of Gap Inc., added, “We have made significant progress executing on our balanced growth strategy and investing in the capabilities to position our brands for growth: expanding the omni-channel customer experience, building our digital capabilities and improving operational efficiencies across the company. This spin-off announcement enables us to embed those capabilities within two stand-alone companies, each with a sharpened strategic focus and tailored operating structure. As a result, both companies will be well positioned to capitalize on their respective opportunities and act decisively in an evolving retail environment.”

NewCo, with approximately $9 billion in annual revenue and a strong balance sheet, will have a unique and differentiated portfolio, with significant opportunity to create value. The company will be well positioned to drive sustainable growth and improve profitability by leveraging its loyal customer base and an appropriately scaled operating platform with advantaged digital capabilities to deliver distinct products and experiences. With enhanced strategic and operational focus, it can deliver improved results at Gap, Banana Republic and Intermix, while capitalizing on the momentum of B-Corp certified Athleta and newly-launched Hill City. The program to restructure the Gap brand specialty fleet is an important part of the plan to enhance the profitability of that channel. As a stand-alone company, NewCo also will be better positioned to continue to evolve its leadership role in sustainability and social responsibility.

As one of the fastest growing apparel brands in the U.S. with approximately $8 billion in annual revenue, Old Navy will be able to capitalize on its scale, broad customer awareness and unique positioning to extend its category leadership and deliver profitable growth as an independent company. Through this separation, Old Navy will have the flexibility, focus and control needed to increase customer access by further applying its strategic real estate strategy, evolving its omni-channel model and expanding its product categories to continue to successfully resonate with value-focused customers. Old Navy will be well positioned to invest in capabilities and initiatives that will continue to grow its market share.

Gap Inc.’s current President and Chief Executive Officer, Art Peck, will hold the same position with NewCo after the separation. Following the separation, Sonia Syngal, current President and CEO of Old Navy, will continue to lead the brand as a standalone company.

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