Gap, Inc. has given an update on the upcoming split of its businesses into two separate companies, revealing plans to almost double Old Navy’s brick-and-mortar store count, while the Gap brand will refocus around denim.
The separation will see the Old Navy brand spin off as a standalone company. Gap, Inc.’s remaining banners, including Gap, Athleta, Banana Republic, Intermix and Hill City, will continue to be operated together as part of one company, which, as reported last month, will retain the Gap, Inc.
name. It is hoped that the split will allow Old Navy, a consistent bright spot at Gap, Inc., to focus on executing its growth-oriented strategic initiatives, while the other company resulting from the separation will be able to channel its resources into revitalizing struggling brands, such as its flagship Gap label and Banana Republic.
Following its split from its parent company, Old Navy intends to open 860 new locations in North America. The brand, which proposes a more affordable offering than the namesake Gap label and finished fiscal 2018 with a network of 1,140 stores, further clarified that it will focus its expansion efforts on outlet stores in smaller markets and off-mall locations.
Old Navy, which reported net sales of around $8 billion in 2018 expects to achieve annual sales of more than $10 billion in the long term. As for the Gap brand, it was revealed that store closures at the banner may ultimately be fewer than the 230 previously announced, as a number of landlords have since proved eager to keep the stores in their centers.
Gap also told investors that the revitalization of its flagship brand will be based around a renewed focus on jeanswear. Gap intends to complete the spin-off process in 2020. As a result of the separation, between 2019 and 2021 the company expects to incur between $400 million and $450 million in one-time separation expenses, as well as capital-related costs in the range of $300 million to $350 million.
