Gap Inc. said on Thursday that one of the companies will include Old Navy. The other unnamed business includes Gap, Banana Republic and other brands, including Athleta.
"It's clear that Old Navy's business model and customers have become increasingly differentiated from our specialty brands over time," said Gap chief executive Robert Fisher in a statement. He said that every company needs "a different strategy now to move forward."
Gap said Thursday Sonia Syngal, CEO of Old Navy, will continue this brand. Art Peck, CEO of Gap, will lead the other company.
The separation is a story of two very different companies: Old Navy is in the last Years of successful growth, and sales in stores that were open at least a year, rose by 3% in 2018. A Jeffries analyst described the retailer as a "machine" last fall.
In the meantime, the gap has been difficult – sales dropped by 5% last year.
Formerly The Gap was the coolest retail brand: it was a mega-boom in the last half of the 20th century, and the logo-printed sweatshirts and turtlenecks convinced everyone from teenagers to moms to celebrities like Sharon Stone.
But the brand got out of hand with the baby boomers who grew up with the brand, and they failed to attract the millennials who dominate fashion trends today.
The company has been talking for some time about how Gap can become a healthy part of the business again. In November, Peck described the number of Gap businesses as unprofitable. At the end of last quarter, there were 1,242 gap businesses worldwide. 758 of them were in North America.
On Thursday, the company announced that it will close 230 gap stores over the next two years to "revitalize" the Gap brand. The closures will impact on the "specialty" gap businesses, which include shopping center stores.
Most of these businesses will be in North America, Peck told the analysts on Thursday. CFO Teri Stoll added that the company has focused on outlets that are not delivering, "wrong locations" or "strategically appropriate".
According to Gap, about 130 of these closures will take place this year. The company also plans to open the Old Navy and Athleta sites. Athleta, which will be part of the new Gap company, is a successful women's athleisure chain.
Gap expects to save between $ 250 and $ 300 million before tax over the next two years due to closure plans. It is expected that the companies will be split in 2020.