Gap stores to close in Canada

02 March, 2019, 00:41 | Author: Darnell Patrick
  • Gap on Thursday announced plans to split into two publicly traded companies putting Old Navy on a stand-alone path

Old Navy posted sales that were unchanged from a year ago.

Gap shares were up about 25 percent in after-hours trading Thursday.

"Following a comprehensive review by the Gap Inc".

"It's absolutely long overdue". Sonia Syngal, Old Navy's president and chief executive, will take over that franchise. "It's nearly as if they used Old Navy as a smokescreen to hide the absolute urgency to do some fundamental things with the other businesses". Once the go-to place for casual clothing, Gap has been mired in a sales funk for years, hurt by increasing competition from the likes of Target and Amazon.

Originally launched by Gap in 1994, Old Navy offers apparel that generally comes in at a lower price point than at Gap or Banana Republic.

Gap Inc. on Thursday announced plans to split into two companies and shutter 230 stores in a makeover that showcases its hot "Old Navy" chain and deemphasizes its slumping namesake brand.

The company is expecting the closures to deliver an annualized sales loss of about US$635 million, but says the move should bring about $90 million in annual pre-tax savings.

Gap refusing to tell The Canadian Press exactly how numerous 230 stores it is closing will be in Canada, but says the majority of global network closures will be in North America.

The retailer said the separation will be done through a spin-off that is meant to generally be tax-free to company shareholders for USA federal income tax purposes. The companies belonging to the new company reel in $9 billion in annual revenue. Meanwhile, the company can consolidate its older brands like Gap and Banana with its newer ones like Athleta and Hill City.

There's also been a sense that the Gap brand lost its fashion sense, falling out touch with its core customers. Old Navy is the No. 2 clothing brand in the US, according to Gap, as it has carved out a niche targeting shoppers with discount deals that compete against off-price clothing stores like T.J.Maxx.

That leaves 742 Gap stores globally. "I'm not so sure on NewCo; that's still going to take some time", said Jennifer Redding, Wedbush Securities analyst. "There's still work to do". 758 of them were in North America. "Gap is not Gap, the brand is not relevant anymore".

In explaining their reasoning behind the split, company leaders cited a growing divergence between the customer bases, operating strategies and value-creation mechanisms of Gap and Old Navy, with the latter outperforming the former. The transaction is expected to be completed in 2020, if it gets approval.



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