It's the end of an era for a major mall retailer. On Thursday, Gap announced it is splitting from Old Navy, in what appears to be a way make a distinction from the affordable, family-friendly label and its more expensive brands. Old Navy will be its own separate company while Gap, Banana Republic, Athleta and Hill City will be their own entity. (That company is currently known as NewCo, with a new name to be determined at a later date.)
According to CNN Business, the amicable split will allow both brands an opportunity for expansion tailored to its customers. "The move is designed to allow Old Navy — which has grown to $8 billion in annual sales since it opened its first store in 1994 — to expand on its own," the website reported. "Meanwhile, the company can consolidate its older brands like Gap and Banana with its newer ones like Athleta and Hill City. NewCo will have about $9 billion in annual sales."
“Old Navy is a little bit more fast-fashion, move quick, lower price point,” Greg Portell, lead partner in the global consumer and retail practice of A. T. Kearney, a consulting firm, tells The New York Times. “If you think about the more mall-based brands, they are foundational, they’re classic, they’re not as quick to turn. Athleta’s a little bit different, but it still targets that consumer that is looking for a different experience than the Old Navy, price-based, go-now shopper.”
“Old Navy’s value-creation levers, business model and customers have increasingly diverged from our specialty brands,” Peck continued. “That divergence to me is now clear, and we think the best way for each company to grow and meet the evolving needs of our customers is to allow them to pursue tailored strategies separately.”
As expected, the new hit Twitter pretty hard. "No!!! I can shop at Gap and Old Navy with one card! One card!!!!!!!!," user @Jdubgirl78 wrote, emphasizing her point with six crying face emojis. "Someone tell Baby Gap it's not their fault," @allisona15 wrote.
The separation is expected to be completed in 2020.