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The gap and the old Navy are separated



Gap said on Thursday that it would break into two companies. One of the companies will contain an old navy, while the other, which will still be named, is currently called the NewCo, will include Gap, Banana Republic and other brands, including Athleta and Hill City.

The move was designed to allow the Old Navy – which increased to $ 8 billion in annual sales, after opening its first store in 1994 – to expand independently. Meanwhile, the company can consolidate its older brands such as Gap and Banana with its newer ones like Athleta and Hill City. NewCo will have about $ 9 billion in annual sales.

"We think that the best way for every company to grow and meet the needs of our customers is to enable them to follow tailored strategies in particular," Gap executive director, Art Peck, said on Thursday. Peck will lead the New Cor. Sonya Singhgall, the executive director of the Old Navy, will continue to run that company.

Wall Street welcomed the decision: Gap (GPS) shares increased by 25% in after-hours trading.

Separation is a story of two very different businesses: The Old Navy is progressing in recent years, and sales in stores open at least a year have grown by 3% in 2018.

In the meantime, the gap struggled – sales last year fell by 5 percent. Banana Republic is closing down stores, which helped the company improve sales.

"The Old Navy continues to outstrip the Gap and Banana Republic brand, and is one of the fastest growing clothing brands," said Christina Bonnie, an analyst at Moody's.

Gap, founded in 1969, was the coolest brand in retail: it drove the mall in the back of the 20th century, and its signed mats and bunnies captured all of the teenagers to mothers and celebrities like Sharon Stone.

But the brand fell from touch with Baby Boomers who grew up on the brand, and failed to attract Millennials who drive fashion trends today. Traders like Levi, Goal (TGT) and fast fashion vendors H & M and Zara have been cheating shoppers of Gap Texas with cheaper prices and cutting edge styles.

For a while, the company has been talking about how to make a healthy part of the business again. In November, Peck described Gap magazine as unprofitable. Starting from the end of the last quarter, there were 1,242 shops in the world "Gap". 758 of them were in North America.

On Thursday, the company said it would close 230 Gap stores over the next two years as part of its Gap's revitalization plan. The conclusions will affect the "specialty" Gap stores, which includes shops based on a shopping center.

Most of these stores will be in North America, Peck told analysts Thursday. Chief Financial Officer Terry Stall said the company focused on stores that did not deliver, were in "wrong locations" or were not "strategically fit".

About 130 of these closures will occur this year, according to Gap. The company also plans to open locations the Old Navy and Atleta. Atletta, which will be part of the new company "Gap", is a female chain of allergies that was successful. Hill City started last year as a male brand of Gap.

Gap believes it will save 250 to 300 million dollars before tax over the next two years due to closing plans, according to the filing of securities. Expected to end the division of companies in 2020.

But some analysts doubt why promising brands such as Athleta and Hill City were included in the NewCo with the Gap Gap brand.

"This could have been an opportunity for a new beginning for" Gap, "said Bob Fibbs, executive director of the Retail Retailer's consulting firm." It's simply putting the NewCo brands through a ring for another rinse cycle and repetition. "


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