Gap to separate into two independent companies

The spin-off will enable each company to maximize focus and flexibility, align investments and incentives to meet its unique business needs and optimize its cost structure to deliver profitable growth.

"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," said Robert Fisher, Gap board chairman. "Recognising 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."

NewCo, with approximately $9 billion in annual revenue and a strong balance sheet, will have a unique and differentiated portfolio, with significant opportunity to create value. The company will be well positioned to drive sustainable growth and improve profitability by leveraging its loyal and complementary customer base and an appropriately scaled operating platform with advantaged digital capabilities to deliver distinct products and experiences.

As one of the fastest growing apparel brands in the US with approximately $8 billion in annual revenue, Old Navy will be able to capitalise on its scale, broad customer awareness and unique positioning to extend its category leadership and deliver profitable growth as an independent company.

"We have made significant progress executing on our balanced growth strategy and investing in the capabilities to position our brands for growth: expanding the omni-channel customer experience, building our digital capabilities and improving operational efficiencies across the company. Today’s spin-off announcement enables us to embed those capabilities within two stand-alone companies, each with a sharpened strategic focus and tailored operating structure. As a result, both companies will be well positioned to capitalize on their respective opportunities and act decisively in an evolving retail environment," Art Peck, president and CEO of Gap Inc., said.

Both companies will have experienced leadership teams, well suited to lead these organizations on their separate, defined paths. Art Peck, will hold the same position with NewCo after the separation .Following the separation, Sonia Syngal, current president and chief executive officer of Old Navy, will continue to lead the brand as a standalone company.

Upon separation, Gap shareholders are expected to receive a pro-rata stock distribution and as a result own shares in both NewCo and Old Navy in equal proportion. The transaction is currently targeted to be completed in 2020, and is subject to certain conditions, including final approval by Gap Inc.’s Board of Directors, receipt of a tax opinion from counsel and the filing and effectiveness of a registration statement with the US Securities and Exchange Commission. There can be no assurances regarding the ultimate timing or terms of the separation or that the separation will be completed.

Fibre2Fashion News Desk – India