Costs cited as Gap Inc cancels Old Navy spinoff plans
Gap has nixed plans to spin off its Old Navy subsidiary, saying that after further investigation the costs involved outweighed the benefits.
“The plan to separate was rooted in our commitment to value creation from our portfolio of iconic brands,” said Robert Fisher, Gap Inc’s interim president and CEO. “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.
“The work we’ve done to prepare for the spin shone a bright light on operational inefficiencies and areas for improvement,” he said.
Meanwhile, the company is now searching for a new CEO to oversee the full portfolio of brands.
Neil Fiske, president and CEO of Gap brand who previously led Billabong before moving to Gap in 2018 has left without explanation. Last November, former long-term CEO Art Peck left Gap on the eve of the announcement of the Old Navy spinoff.
Meanwhile, four of the company’s senior leaders have taken on additional responsibilities reporting to Fisher. Mark Breitbard, president and CEO at Banana Republic, will now lead Gap Inc’s specialty brands, including Gap, Banana Republic, Athleta, Janie and Jack, Intermix and Hill City; Sonia Syngal, president and CEO at Old Navy, will continue to lead that business; Teri List-Stoll, executive VP and CFO, will lead corporate operations related to finance, supply chain, technology and real estate; and Julie Gruber, executive VP, global general counsel, corporate secretary and chief compliance officer, will lead corporate administrative functions including legal, corporate facilities and services, human resources and communications, loss prevention, sustainability, government affairs and foundation.
Fisher said the company had “learned a lot” from the preparations to spin off Old Navy and intends to operate Gap Inc in “a more rigorous and transformational manner” in future in a way that empowers its growth brands, Old Navy and Athleta, and appropriately focuses on profitability for Banana Republic and Gap brand.
“Our board is focused on supporting this work and appointing new leadership with the appropriate experience necessary to lead a portfolio of retail brands and to support our transformation efforts.”
Meanwhile, as a result of better-than-anticipated promotional levels during the holiday period, particularly at Old Navy, the company now expects its adjusted fiscal year 2019 earnings per share to be moderately above its previous guidance of $1.70 – $1.75.
“We are working aggressively to stabilise and improve business results,” said 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.”