Gap CEO exit opens door for spin-off talks again

Gap CEO exit opens door for spin-off talks again



The abrupt exit of Gap


The company, which owns brands such as Old NavyBanana RepublicSonia Syngal

Gap Inc’s shares were down about 6% at $8.20 in premarket trading on Tuesday with at least six brokerages cutting their price targets.

“The potential for Gap to announce that it is either exploring strategic alternatives (potentially including an Athleta

The company previously shelved plans to spin off Old Navy in 2020 citing increased cost and complexity in splitting the brands.

Syngal was tasked with guiding Gap Inc to safety during peak pandemic and was initially lauded by investors for doubling down on inclusivity, launching the YeezyKanye West

However, fashion missteps at its Old Navy brand that accounts for more than half of the company’s sales, supply chain snarls and decades-high inflation derailed any recovery in sales after the pandemic.

Several analysts said issues at Old Navy would likely bleed into next year, with the company’s margins suffering due to missing out on stocking key styles, while having more seasonal or less-popular styles and plus-sized clothing on the shelves.

Gap has seen its margins decrease in the past two quarters and in May forecast gross margin between 36.5% and 37.5% for fiscal 2022, below 2021 levels.
“Gap had a major opportunity to transform into a compelling recovery story once again in 2022, however, the persisting issues at Old Navy have caused a further loss of credibility,” Wells Fargo analyst Ike Boruchow said.

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