In a statement on Thursday, the San Francisco-based firm said that its board of directors concluded that the “cost and complexity” of splitting into two companies, coupled with softness in its overall performance, would not benefit its bottom line as it had originally hoped.
“The work we’ve done to prepare for the spin shone a bright light on operational inefficiencies and areas for improvement,” said interim president and CEO Robert Fisher. “We have learned a lot and intend to operate Gap Inc. in a more rigorous and transformational manner that empowers our growth brands, Old Navy and Athleta, and appropriately focuses on profitability for Banana Republic and Gap brand.”
Gap Inc. first revealed in February the separation into two publicly traded companies: one being Old Navy, and the other retaining the flagship Gap brand as well as Banana Republic, Athleta, Intermix and Hill City. Although Old Navy had been the crown jewel in its financial portfolio for some time, the apparel and accessories retailer has struggled in recent months, reporting a 4% drop in comparable sales in the third quarter.
Along with yesterday’s announcement, Gap Inc. revealed the appointment of Mark Breitbard, president and CEO of Banana Republic, as executive chief of the firm’s portfolio of brands. Sonia Syngal will continue to lead as president and CEO of the Old Navy business.
Further, it named Teri List-Stoll EVP and CFO as well as tapped Julie Gruber as EVP and global general counsel, corporate secretary and chief compliance officer. The company also announced the departure of Neil Fiske, president and CEO of the Gap brand.
For the full year, Gap Inc. now expects revenues to be at the higher end of its previous guidance range for a decline in the low-single digits rather than the mid-single digits. Plus, following a better-than-expected performance during the critical holiday season, it predicts adjusted fiscal year earnings per share to be “moderately above” its previous guidance of $1.70 to $1.75.
“We are working aggressively to stabilize 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.”
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