Gap will not spin off its Old Navy brand

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The plan was presented last year to give Old Navy, Gap's fastest-growing budget brand, the freedom to do business. At the same time, the plan would have enabled Gap to consolidate its older brands like Gap and Banana Republic with newer ones like Athleta and Hill City.

Sales of Old Navy stores that were open for at least one year decreased 4% in the last quarter compared to the same period last year. Gap's former director general, Art Peck, the architect of the plan, also left the company in November. Analysts expressed concern about the spin-off after the poor results and Peck's abrupt exit.

So Gap pulled the plug.

"The cost and complexity of splitting into two companies combined with weaker business development has limited our ability to create reasonable separation values," said Robert Fisher, interim CEO of Gap, in a prepared statement.

Regardless, Gap announced that the outlook for the rest of the fiscal year would be at the upper end of its previous forecast. However, Gap still expects sales to decline in the year.

gap (Geographic positioning system) The stock rose up to 10% on Thursday after close of trading, a sign that investors approved of the decision to hold the brands together.

Old Navy, launched in 1994, was the top prize in Gap's often contradicting brand portfolio.

Old Navy generated $ 1 billion in annual sales in the first four years by selling trendy, inexpensive clothing. The brand has had success in recent years as more and more Americans are looking for bargains. Sales in stores that have been open for at least a year increased 3% in 2018 and the brand had sales of $ 8 billion. The goal is to reach $ 10 billion.

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Most of the budget brand's nearly 1,200 stores are not in the mall, and Sonia Syngal, CEO of the Old Navy, said the brand plans to open 800 new stores in "underserved small markets".

"We are a $ 8 billion start-up," Syngal said at an investor conference in September. "The sky is the limit."

"The ability to focus as an independent mono brand and mono company will give us the ability to move forward faster," she said at the time.

On Thursday, Gap interim CEO Fisher said the company would now act to "strengthen our growth brands Old Navy and Athleta and adequately focus on the profitability of the Banana Republic and Gap brands".