'I think we could see a dramatic comeback' if CEO Art Peck plays his cards right, Jim Cramer says.
Gap's split up is a"sobering reminder" that companies cannot"repurchase" their way to greatness," CNBC's Jim Cramer said Friday.
Gap's decision to separate Old Navy into an independent publicly traded company from its other brands unlocked value, sparking the stock's 16 percent rise following the Thursday announcement, Cramer said. The company posted mixed results for the holiday quarter. With the spin off, Old Navy can grow on its own, Cramer said. The host pointed out that its same-store sales grew 3 percent despite an"anemic" fourth quarter. On the other hand, the flagship store Gap saw same-store sales shrink 5 percent, Cramer said.
"In short, buybacks don't mean squat without a compelling growth story. That's why Art Pell wants to change the narrative in one fell swoop," he said."If he can spin off Old Navy then close the underperforming stores that remain under the Gap umbrella, I think you'd see a dramatic comeback with this stock."
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