INTERNATIONAL - Gap on Thursday scrapped its plan to spin-off Old Navy and said it would instead work to stem dropping sales, while fewer discounts during the holiday season helped full-year earnings, sending its shares up about 4 percent.
The move came as a surprise as just two months ago the company had stuck to its plan to separate despite several analysts calling for the strategy to be canned due to weak sales and the abrupt exit of Chief Executive Officer Art Peck.
Peck unveiled the plan in February last year when Old Navy was a bright spot for the company, which was struggling with out-of-fashion apparel at its Gap brand.
However, sales for Old Navy have slowed in recent quarters, raising doubts about the brand’s value as a separate entity
“Old Navy’s business has not been good. With the Chief Executive out of the way, this is the right move,” said Jane Hali, at research firm Jane Hali & Associates.