Old Navy will have to go it alone from now on. Owners Gap Inc are closing 230 of their branded stores, roughly half of all their locations, and splitting Old Navy into a separate publicly traded company. Most of the closures will be in the U.S. “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,” Gap’s board chairman Robert Fisher said in a statement. “Recognizing that, we determined that pursuing a separation is the most compelling path forward for our brands.” Among the Gap locations already slated for closure in Manhattan are the stores at 680 Fifth Avenue and 60 West 34th Street. Old Navy has consistently outperformed sister companies Gap and Banana Republic, according to reporting from USA Today. Gap will continue as its own business, under the name New Co. Neither Gap nor Old Navy performed well in the fourth quarter of 2018. Old Navy opened the year flat, while Gap saw a five percent drop during the end-of-year holiday season, according to USA Today. [USA Today] – Decca Muldowney<doc-sep>All retail bankruptcies are not the same. Here's what you need to know Dollar General's business is booming. It's also vulnerable to crime, police say NEW YORK, UNITED STATES - 2020/07/08: People wearing face masks shopping inside a retail store in Manhattan as the city enters phase 3 of reopening amid the coronavirus pandemic As New York City enters phase 3 of reopening retail stores for indoor shopping, restaurants have been postponed for indoor dinning. The U.S. Department of Health recorded a total of 3,219,999 infections, 135,822 death and 1,426,428 recovered since the beginning of the outbreak. (Photo by Braulio Jatar/SOPA Images/LightRocket via Getty Images) NEW YORK, NEW YORK - NOVEMBER 19: A view of the window display as Macy's Herald Square unveils Give, Love, Believe 2020 Holiday Windows on November 19, 2020 in New York City. (Photo by Eugene Gologursky/Getty Images for Macy's) This gym is actually opening studios during the pandemic Ever receive a package you didn't order? It could be a scam One of many large boxes of returned products that fill the warehouse. The returned products in this box will eventually be sorted and categorized. This airplane-shaped bag is selling for more than some actual planes Old Navy is doing so well it's splitting up with Gap Pedestrians pass in front of Gap Inc. and Old Navy Inc. stores in the Times Square area of New York, U.S., on Wednesday, Dec. 13, 2017. Bloomberg is scheduled to release consumer comfort figures on December 21. Photographer: Mark Kauzlarich/ Bloomberg Correction: An earlier version of this article misstated how much Gap, Inc. will save by closing stores this year and next. (CNN Business) — Gap and Old Navy have been trending in opposite directions for years. So they’re finally splitting up. Gap said Thursday that it would break into two companies. One of the companies will contain Old Navy, while the other yet-to-be-named business, currently called NewCo, will comprise Gap, Banana Republic and other brands, including Athleta and Hill City. The move is designed to allow Old Navy — which has grown to $8 billion in annual sales since it opened its first store in 1994 — to expand on its own. Meanwhile, the company can consolidate its older brands like Gap and Banana with its newer ones like Athleta and Hill City. NewCo will have about $9 billion in annual sales. “We think the best way for each company to grow and meet the evolving needs of our customers is to allow them to pursue tailored strategies separately,” Gap CEO Art Peck told analysts Thursday. Peck will lead NewCo. Sonia Syngal, CEO of Old Navy, will keep running that company. Wall Street cheered the decision: Gap (GPS) stock was up 25% in after-hours trading. The separation is a tale of two vastly different businesses: Old Navy has thrived in recent years, and sales at stores open at least a year grew 3% in 2018. Meanwhile, the Gap has struggled — its sales fell 5% last year. Banana Republic has been closing stores, which has helped the company improve sales. “Old Navy continues to outpace Gap brand and Banana Republic, and is one the fastest-growing major apparel brands,” said Christina Boni, analyst at Moody’s. The Gap, which was founded in 1969, used to be the coolest brand in retail: It rode the mall boom in the back half of the 20th century, and its logoed sweatshirts and turtlenecks won over everyone from teens to moms and celebrities like Sharon Stone. But the brand fell out of touch with the Baby Boomers who grew up on the brand, and it failed to attract the Millennials who drive fashion trends today. Retailers such as Levi’s, Target (TGT) and fast-fashion sellers H&M and Zara lured away Gap’s denim shoppers with cheaper prices and trendier styles. The company has been talking for a while about how to make the Gap a healthy part of the business again. In November, Peck described Gap’s store count as unprofitable. As of the end of last quarter, there were 1,242 Gap stores worldwide. 758 of them were in North America. 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. The closures will affect “specialty” Gap stores, which includes mall-based stores. Most of those stores will be in North America, Peck told analysts Thursday. Chief financial officer Teri Stoll added that the company focused on stores that were not delivering, were in the “wrong locations” or were not a “strategic fit.” About 130 of those closures will happen this year, according to Gap. The company also plans to open Old Navy and Athleta locations. Athleta, which will be part of the new Gap company, is a women’s athleisure chain that has been a success. Hill City launched last year as Gap’s men’s athleisure brand. Gap thinks it will save $90 million before taxes starting in 2021 because of its closure plans, according to a securities filing. It expects to finish splitting the companies in 2020. But some analysts questioned why promising brands such as Athleta and Hill City were included in NewCo with the struggling Gap brand. “This could have been an opportunity for a fresh start for Gap,” said Bob Phibbs, CEO of consultancy Retail Doctor. “It’s simply putting the NewCo brands though the ringer for another cycle of rinse and repeat.”<doc-sep>NEW A vastly improved search engine helps you find the latest on companies, business leaders, and news more easily.<doc-sep>
Gap Inc. will spin Old Navy off into its own company, as it also prepares to close roughly 230 of its namesake stores. The retailer said Thursday that Old Navy, which has consistently bested its sister companies Gap and Banana Republic when it comes to sales, will stand on its own as a publicly traded company. Gap meanwhile will continue as a separate business, dubbed NewCo, along with Banana Republic, Athleta, 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. “Recognizing that, we determined that pursuing a separation is the most compelling path forward for our brands.'' The move comes as the company also said that it would be shuttering roughly 230 Gap stores worldwide over the next two years – about 50 percent of locations. J.C. Penney closing stores:J.C. Penney to close 24 more stores: Sales fall as department stores struggle Economy grows:Economy grew 2.6% in Q4 and 2.9% in 2018, matching strongest yearly showing since recession Most of those closures will be in the U.S. And while the stores that are left will need work, including being reduced in size, "we’re confident these closures will play an important role in revitalizing the brand,’’ Gap Inc. CEO Art Peck said in an earnings call with investors. Gap stores that are struggling the most are expected to be closed by the end of 2019, said Gap Inc.'s executive vice president and chief financial officer Teri List-Stoll. But roughly 150 locations will be shuttered as their leases expire. The closing of underperforming stores should lead to almost 40 percent of purchases being made through the website, with remaining sales coming from mainline stores and off-price locations, Gap Inc. said. Like many retailers, Old Navy had a less than stellar fourth quarter, with worldwide sales at stores open at least a year flat as compared to a 9 percent uptick during that period the year before. But it still outperformed Gap, which reported a 5 percent drop in sales during the three-month period that includes the all-important holiday season, and Banana Republic, which experienced a 1 percent sales decline. “Overall, the quarter did not live up to what I know our brands can deliver,’’ Peck said. Peck will continue as CEO of NewCo, while Old Navy's current CEO, Sonia Syngal, will retain that title with the company as it spins off. Victoria's Secret closings:53 more stores will be shuttered Walmart in midst of controversy:Disabled Walmart greeters are being replaced by 'customer hosts,' causing backlash Follow USA Today reporter Charisse Jones on Twitter @charissejones