Gap Inc. Cancels Plan to Spin Off Old Navy

Gap Inc. announced yesterday that it has ended plans to spin off its Old Navy brand, reversing a strategy announced less than a year ago. The plan was unveiled last year as a way to give Old Navy, Gap's faster-growing budget brand, space to maneuver as its own company. At the same time, the plan would have allowed Gap Inc. to consolidate its older brands like Gap and Banana Republic with newer ones like Athleta and Hill City. But Old Navy has struggled in recent months, making separating the brands less attractive to investors. Sales at Old Navy stores open for at least a year declined 4 percent year-over-year during its most recent quarter. Former Gap Inc. CEO Art Peck, the architect of the plan, also left the company in November. Analysts raised concerns about the spinoff after the weak results and Peck's departure.

Total Retail's Take: The recent struggles of Old Navy have cooled investors’ interest in the brand, leading to the decision by Gap Inc. to keep it in the fold. And according to analysts, that's the proper move. The challenges of parent company Gap Inc. and the early successes seen by its Old Navy brand made it a natural target for spin off, allowing Gap Inc. to generate some much-needed capital. But it appears that opportunity has been missed — at least for now. The focus now, which it is for a lot of specialty apparel retailers, is turning around the performance of its existing brands, most notably Gap and Banana Republic.