San Francisco-based Gap Inc. has announced a plan to split into two independent and separately traded public companies to realize additional shareholder value for its Old Navy brand. Old Navy, a category-leader in family apparel, and a yet-to-be-named company (“NewCo”), which will consist of the iconic Gap brand, Athleta, Banana Republic, Intermix and Hill City. Gap Inc. expects to effect the separation through a spin-off. According to the company, the split will “enable each company to maximize focus and flexibility, align investments and incentives to meet its unique business needs and optimize its cost structure to deliver profitable growth.”
According to a company spokesperson, “Following a comprehensive review by the Gap Inc. Board of Directors, it’s clear that Old Navy’s business model and customers have increasingly diverged from our specialty brands over time, and each company now requires a different strategy to thrive moving forward. Recognizing that, we determined that pursuing a separation is the most compelling path forward for our brands – creating two separate companies with distinct financial profiles, tailored operating priorities and unique capital allocation strategies, both well positioned to achieve their strategic goals and create significant value for our customers, employees and shareholders.”
Art Peck, President and CEO of Gap added, “We have made significant progress executing on our balanced growth strategy and investing in the capabilities to position our brands for growth: expanding the omni-channel customer experience, building our digital capabilities and improving operational efficiencies across the company. Today’s spin-off announcement enables us to embed those capabilities within two stand-alone companies, each with a sharpened strategic focus and tailored operating structure. As a result, both companies will be well positioned to capitalize on their respective opportunities and act decisively in an evolving retail environment.”
What does this mean for the employees?
For some employees of the GAP, this will mean that their positions may be transferred to the new company, but then again, this is a perfect time to restructure and streamline the company, reducing headcount and eliminating those soon to retire with early retirement packages. And, for some employees of Old Navy, most spin-offs have a period of turmoil where previously handled job functions must be re-created or outsourced. Thus, some employees face prosperity and some face peril. Much of the danger resides in administrative positions like human resources, accounting, purchasing and information technology which can be outsourced.
Change is coming. There will always be a tomorrow, no matter how much you may try to ignore it. There are no guarantees in life, or promises for a bright future. Just because something bad hasn't happened yet, doesn't mean it won't. It can happen to anyone, anytime, anywhere. No one is guaranteed to wake up tomorrow and still have a job by evening. Are you now wondering, Am I Next?