Gap inc. gave a news on Thursday which helped it surged shares to more than 20 percent that it is going to split into two independent publicly traded companies. One of them comprised of its Old Navy brand and the second company includes its other brands like Banana Republic and Athleta.Gap said that its new company, NewCo will roughly have $9 billion in annual sales. It will include Banana Republic, Intermix and Hill City.
Old Navy roughly bring about $8 billion in annual sales by itself. This brand is among the strongest. Old Navy has been successful in targeting shoppers, like their off-price channels T.J. Maxx and Ross Stores. According to the company the current CEO of Gap, Art Peck will remain in the company as chief executive of NewCo. Old Navy recur 47 percent of the total sales last year with high margins leads to profitability. It is their fastest growing brand with comparable stores of 3 percent last year.
According to Gap’s board of directors, this split help the company to sharpen their strategic focus in their current structure. However, it can also reduce the business diversification.