Spin-off of Old Navy in doubt amid sudden departure of Gap CEO
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The very abrupt ouster of Gap Inc. CEO Art Peck has raised questions about the company’s future plans.
On Thursday, Gap said that Peck, who joined the company in 2005 and was tapped as CEO in 2015 after serving as Gap’s digital chief, was being replaced on an interim basis by nonexecutive chairman Robert J. Fisher, son of the couple who founded Gap. The retailer, which gave no reason for Peck’s departure, also cut its outlook for the third quarter and the year.
In February, Peck announced plans to spin-off Gap’s fast-growing Old Navy as a standalone company, saying the move would enable each company to maximize focus and flexibility. The plan would create two independent publicly traded companies: Old Navy and Gap. The new Gap Inc. portfolio would have been led by Peck and include the namesake brand, Banana Republic, Athleta, Intermix, Hill City and Janie and Jack.
But with Peck no longer at the helm of Gap and with Old Navy’s former healthy sales sagging in recent quarters ( same-store sales fell 4% in its third quarter), some industry analysts questioned whether the spin-off made sense, at least for the foreseeable future.
“We see little future for a Gap without Old Navy … it is difficult to see how Gap can attract a top-flight CEO to fix the company if it is going to be stripped of Old Navy, its best asset,” Morningstar analyst David Swartz said in a New York Post report.
In the same report, Evercore SI analyst Westcott Rochett called Peck’s departure “definitely shocking,” and said it makes the original timeline of the planned Old Navy separation “extremely difficult.”