Gap not spinning off Old Navy; exec departs
Gap Inc. will remain whole.
The apparel retailer is scrapping plans to spin off Old Navy into a separate public company, citing the cost and complexity involved in the split. In other news, Gap announced that Neil Fiske, president and CEO of its namesake brand, will leave the company.
“The plan to separate was rooted in our commitment to value creation from our portfolio of iconic brands,” stated Robert Fisher, who was named interim president and CEO of Gap Inc. following the abrupt departure of Art Peck in November. “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.”
Gap announced its plan to spin off its fast-growing value brand Old Navy and split into two public companies last February. But the brand’s sales have slumped in recent months, making it less attractive to investors. Comparable sales fell 4% at Old Navy Global in the third quarter, and were down 7% at Gap Global. Banana Republic Global’s same-store sales fell 3%.
In his statement, Fisher said the company learned a lot from its plan to split into two companies and that it will operate “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.”
Gap said it intends to appoint a new CEO to oversee the full portfolio of brands and corporate strategy. In the meantime, four of the company’s senior leaders have been elevated and have taken on additional responsibilities reporting to Fisher. Mark Breitbard, president and CEO, Banana Republic, will now lead Gap Inc.’s collection of specialty brands, including Gap, Banana Republic, Athleta, Janie and Jack, Intermix and Hill City; Sonia Syngal, president and CEO, Old Navy, will continue to lead the Old Navy business; Teri List-Stoll, executive VP and CFO, will lead corporate operations related to finance, supply chain, technology and real estate; and Julie Gruber, executive VP, global general counsel, corporate secretary and chief compliance officer, will lead corporate administrative functions including legal, corporate facilities and services, human resources and communications, loss prevention, sustainability, government affairs and foundation.
The company said it now expects total company fiscal 2019 comparable sales and net sales to both be at the higher end of its previous guidance range of down mid-single digits and down low-single digits, respectively. As a result of better than anticipated promotional levels over the holiday period, particularly at Old Navy, the company now expects its adjusted fiscal year 2019 earnings per share to be moderately above its previous guidance of $1.70 - $1.75.
“We are working aggressively to stabilize and improve business results,” said List-Stoll. “We are committed to sharpened strategic focus, tailored operating strategies and operational discipline and accountability that can strengthen the health and profitability of our brands.”