Popular Clothing Brand to Undergo Restructuring

Multinational fashion retailer Gap Inc. has announced its plans to restructure its organization. The company made the announcement in late February. According to Gap Inc., it intends to split its group of companies into two by 2020. Its Old Navy brand will become a separate company, and another business will be formed. This new business will consist of the retailer’s other brands, such as Gap, Athleta, and Banana Republic. As a result of the reorganization, the retailer will close 230 of its stores, which are mostly in North America. The company has already shut down 68 stores, but 742 stores are still operating worldwide. The decision to restructure resulted from Gap Inc.’s plummeting sales. According to financial records, overall sales in Gap stores decreased by 5% in 2018. Profits also decreased from $396 million to $372 million in last year’s final quarter. While sales in Gap stores have declined, sales of Old Navy products increased by 3% within one year. Old Navy’s success is the reason why Gap Inc. decided to turn the brand into a separate company. This change will allow Old Navy to operate independently and flourish instead of being weighed down by other Gap Inc. brands. Reactions to Gap Inc.’s announcement were mostly positive. Investors showed their support by buying Gap Inc. stocks after the company publicized the reorganization, boosting the shares by 25%. However, an analyst at credit ratings company Moody's warned that the change may reduce Gap Inc.’s product diversity. As Gap Inc.’s leading brand, Old Navy appeals to a wide range of customers with its extensive selection of items. Thus, making it a separate company would make Gap Inc.’s overall image less diverse.