Gap to shut shops and hive off Old Navy

An Old Navy store in New York’s Herald Square district

An Old Navy store in New York’s Herald Square district

In its Wednesday announcement, Gap Inc. said that it will also group its other brands Gap, Athleta, Banana Republic, Intermix and Hill City into NewCo, the placeholder name for the other company.

On an earnings call Thursday evening, said Teri List-Stoll, Gap's chief financial officer, said the company had been grappling with "what's right for Old Navy versus what's right for the other brands", whether with online strategies or technology tools. "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", Gap Inc Board Chairman Robert Fisher said in a statement.

On Thursday, the company said it will close 230 Gap stores over the next two years as part of its plan to "revitalize" the Gap brand.

Additionally, the company announced a plan to restructure the specialty fleet, including the closure of about 230 Gap specialty stores over the next 2 years.

Just a day after Victoria's Secret announced it would be closing more than 50 stores across North America, Gap Inc announced its own major shutterings.

A good number of the closures are expected to happen throughout 2019, and the remaining closures will happen in 2020 as leases for the rental properties expire.

The iconic mall fixture Gap, which was a popular brand with baby boomers, has been losing market share over the past few years as younger generations have been attracted to the cheap costs and style of fast-fashion companies. In 2018, Old Navy's comparable sales were up three percent. Old Navy would have been too valuable for Gap to simply sell off.

Christina Boni, vice president at Moody's, the rating agency, said: "Old Navy is Gap Inc.'s leading brand comprising 47% of sales in 2018 with margins that lead its portfolio". The new company that Peck will run has about $9 billion in annual revenue.

Peck will serve as CEO of the new Gap entity, while current Old Navy CEO Sonia Syngal will lead the soon-to-be separate firm. "It's nearly as if they used Old Navy as a smokescreen to hide the absolute urgency to do some fundamental things with the other businesses". 'But for the Gap, this seems like potentially a last significant effort to help the brand find its place in a market where it has lost relevance'.

The question for Gap will be how it rebounds and reorganizes after the split, Cohen said.

Recommended News

We are pleased to provide this opportunity to share information, experiences and observations about what's in the news.
Some of the comments may be reprinted elsewhere in the site or in the newspaper.
Thank you for taking the time to offer your thoughts.