Gap Inc no longer intends to separate Old Navy into a stand-alone public company.
“The plan to separate was rooted in our commitment to value creation from our portfolio of iconic brands,” said Gap Inc interim President and CEO Robert Fisher.
“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.”
Moreover, Fisher said, the company and its brands are in a stronger place now. “The work we’ve done to prepare for the spin shone a bright light on operational inefficiencies and areas for improvement," he said. "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.”
The board plans to appoint a CEO to oversee the full portfolio of brands and corporate strategy. Neil Fiske, president and CEO of the Gap division, will be leaving the company. That follows the departure last November of Gap Inc CEO Art Peck.
“The significant dis-synergies related to the transaction, as well as most of its separation costs, will be avoided," said Christina Boni, a Moody’s vice president. "A larger diversified platform is instrumental to Gap Inc, not only in managing risk, but [also in] leveraging investments in technology and logistics.”
As a result of better than anticipated promotional levels over the holiday period, particularly at Old Navy, the company anticipates that its adjusted fiscal 2019 earnings per share will be moderately above its previous guidance of $1.70 to $1.75. “We are working aggressively to stabilise and improve business results,” said Gap CFO Teri 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.”
