Gap cancels plan to spin off Old Navy, citing 'cost and complexity'
- Gap Inc. is halting plans to spin off its Old Navy brand into a standalone company, citing "cost and complexity" as a reason for the reversal.
- In a statement, interim president and CEO Robert Fisher said the process of spinning off Old Navy shone a "bright light on operational inefficiencies and areas for improvement," ultimately contributing to the reversal.
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Nearly a year after Gap debuted its plan to spin off Old Navy, the company is calling it quits.
On Thursday, Gap Inc. announced it no longer planned to pursue spinning off Old Navy into a standalone company, citing the "cost and complexity" of splitting the brand from its parent company.
"The plan to separate was rooted in our commitment to value creation from our portfolio of iconic brands," Robert Fisher, Gap Inc. interim president and CEO, said in a statement. "While the objectives of the separation remain relevant, our board of directors has concluded that the cost and complexity of splitting into two companies, combined with softer business performance, limited our ability to create appropriate value from separation."
The company also shared that Neil Fiske, president and CEO of the Gap brand, will leave the company. Fiske's departure is just the latest in an ongoing executive shakeup at Gap Inc., which included the resignation of CEO Art Peck in November, who stepped down after 15 years with the company.
Gap first shared its plan to separate Old Navy, the company's top performing brand, in February 2019. However, Old Navy had joined its sister brands in showing signs of struggle in recent quarters - in the third quarter of 2019, Gap reported a 4% year-over-year drop in comparable sales at Old Navy, as well as a 4% decline across the entire portfolio.
In the statement, Fisher said the process of splitting the companies shone a "bright light on operational inefficiencies and areas for improvement" for the Old Navy brand, ultimately contributing to the decision reversal.
"We have learned a lot and intend to operate Gap Inc. in a more rigorous and transformational manner that empowers our growth brands, Old Navy and Athleta, and appropriately focuses on profitability for Banana Republic and Gap brand," Fisher said in a statement.