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Old Navy splits off from Gap

Mary Hanbury, Business Insider

Old Navy is going out on its own.

Gap Inc. on Thursday announced that it would be splitting into two publicly traded companies: Old Navy and a yet-to-be-named company that will consist of the Gap brand, Athleta, Banana Republic, Intermix, and Hill City.

"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," Robert Fisher, Gap Inc.'s board chairman said in a statement to the press.

He continued: "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."

Old Navy is one of Gap Inc.'s strongest businesses and accounted for 47% of its sales in 2018. On Thursday, Gap Inc. reported its fourth-quarter earnings. Same-store sales at Old Navy were up 9% during the quarter and 3% for the year overall.

Gap Inc.'s namesake brand saw sales drop by 5%, for both the quarter and 2018 overall.

Gap Inc. also announced that it would be closing 230 Gap specialty stores over the next two years.

The company said in a statement that this new separation would give Old Navy "the flexibility, focus, and control needed to increase customer access by further applying its strategic real estate strategy, evolving its omnichannel model and expanding its product categories to continue to successfully resonate with value-focused customers."

Gap Inc. CEO Art Peck will stay on as CEO of the new, soon-to-be-named company. Sonia Syngal, the CEO of Old Navy, will lead this separate company.

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