When Old Navy sets sail and splits from Gap Inc. this year, it will be into uncharted territory for both companies.
The separation, first laid out in February, was pitched as a way to let the two sides thrive under corporate structures dedicated to ensuring their growth and success.
But the subtext was that Old Navy was on a roll and being held back, especially by Gap and Banana Republic, and that separating the two would let the Old Navy stock soar.
Investors liked the idea, but doubts started to surface as Old Navy’s growth slowed with comparable sales dropping 4 percent in the third quarter following a 4 percent increase a year earlier.
And Art Peck was ousted in November, muddling the picture. He was chief executive officer of the company and was slated to continue leading Gap, Banana Republic, Athleta and Hill City after the split.
Robert J. Fisher, who is son of Gap founder Donald Fisher and serving as interim president and ceo, said the split would go on.
“The board and I continue to believe in the strategic rationale of the separation,” Fisher said headed into the key holiday season. “As we move forward with the (separation) work, we remain confident in the value creation opportunities it presents.”
So Old Navy will be on its own and pressured to deliver on its growth story, which according to ceo Sonia Syngal will include another 800 stores, bringing the total to around 2,000.
The new stores will mostly be located in smaller towns and will help push the brand’s revenues to $10 billion from $7.2 billion last year.
Already the company has 42 million customers.
“We’ll acquire new customers and drive lifetime value, taking that 42 million customer base, growing it through new stores and through online and getting more deeply connected to our customers to unleash the full potential,” Syngal said.
And while Athleta is promising, Gap and Banana Republic will have to prove themselves in a world of traditional retail that is crumbling.