Gap Inc said on Thursday it would separate its Old Navy brand into a publicly traded company, to focus on its struggling namesake apparel business, sending its shares up 18 percent.
Old Navy has had a better success than the Gap brand in recent years as a wide range of budget apparel has made it more appealing to a broader base of consumers.
"It`s clear that Old Navy`s business model and customers have increasingly diverged from our speciality brands over time," Gap`s Chairman Robert Fisher said.
The company also said it plans to close 230 Gap speciality stores over the next two years.
Gap`s overall same-store sales fell 1 percent in the fourth quarter ended Feb. 2, compared to analysts` average estimate of 0.3 percent rise, according to IBES data from Refinitiv.
Gap, Athleta, Banana Republic and the remaining brands will be part of a yet-to-be-named company. The separation is expected to be completed by 2020, Gap said.
The company`s shares were up 17.7 percent at $29.89 in extended trading.
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03:44 AM IST