Gap said it had cancelled plans to spin off Old Navy into a separate standalone public company, citing its “commitment to value creation” from its portfolio of iconic brands.
“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,” Gap interim president and chief executive officer Robert Fisher said.
The retailer also announced that Neil Fiske, president and chief executive officer of Gap, will leave the company. The retailer said its board intends to appoint a new CEO to oversee all brands.
Gap announced plans last February to split into two independent, publicly traded companies, one comprising Old Navy and the other including Banana Republic and Athleta. That plan stemmed from a review by the board of directors that found Old Navy’s business model and customers had diverged from its specialty brands.
But in November the company abruptly announced the departure of chief executive officer Art Peck, causing doubt the split would go through. Fisher, the son of Gap’s founders Donald and Doris Fisher, was named interim CEO at that time.
“The work we’ve done to prepare for the spin shone a bright light on operational inefficiencies and areas for improvement,” Fisher said. “We have learned a lot and intend to operate Gap 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 brand.”
Gap said due to better than expected promotional levels during the holidays, it was calling for adjusted earnings per share in fiscal 2019 to be “moderately above” the previously issued range of $1.70 to $1.75.
Gap shares jumped more than 9% in after-hours trading Thursday on the news.
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