In an effort to keep up with modern day business and trends, Gap Inc. has made a major announcement.
A Feb. 28 press release by San Francisco-based Gap Inc. has said that as a result of fourth quarter results and fleet restructuring, 230 Gap specialty stores will be closed over the next two years.
“Following a comprehensive review by the Gap Inc. Board of Directors, it’s clear that Old Navy’s business model and customers have increasingly diverged from our specialty brands over time, and each company now requires a different strategy to thrive moving forward,” Gap Inc.’s Board Chairman Robert Fisher said.
“Recognizing that, we determined that pursuing a separation is the most compelling path forward for our brands – creating two separate companies with distinct financial profiles, tailored operating priorities and unique capital allocation strategies, both well positioned to achieve their strategic goals and create significant value for our customers, employees and shareholders.”
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The separation Fisher speaks of is in relation to the other announcement the parent company made, in which, due to its overwhelming financial success, clothing subsidiary Old Navy will be separated from Gap Inc. to become its own publicly-traded entity,
Meanwhile, the Gap brand, Athleta, Banana Republic, Intermix and Hill City will continue to be restructured accordingly under a new publicly-traded company yet to be named.
“The company estimates an annualized sales loss of approximately $625 million as a result of these store closures,” said the press release.
There has been no word yet on whether Canadian stores will be a part of these closings.
“While stores are an important part of the customer journey, the Company is actively working on multiple initiatives to revitalize the Gap brand by re-engaging with customers and expanding its loyal customer base, leveraging the multigenerational, democratic appeal of the brand,” the press release said.
“Improving the product by recapturing the traditional Gap attributes of style, quality, fit and value is a top priority. The company intends to modernize its marketing model to efficiently build engagement and loyalty.”
After the restructuring, with nearly 40% of sales coming from their website, the company anticipates split fairly evenly between the specialty and value channels, the press release said.
Fourth quarter and 2018 fiscal results can be viewed here.
Shareholders need not worry, however. Upon separation, Gap Inc. shareholders are expected to receive a pro-rata stock distribution and, as a result, own shares in both NewCo and Old Navy equally, which will be completed in 2020.
“As a result, both companies will be well positioned to capitalize on their respective opportunities and act decisively in an evolving retail environment,” President and CEO of Gap Inc. Art Peck said.