Gap's decision to spin off its Old Navy brand was met with praise, but say challenges that lie ahead for both apparel brands.
Shares of Gap spiked nearly 20% Friday as the planned split garnered praise among analysts, who citedStill, a handful of hesitant analysts noted weakness in both brands' growth, and said they wouldn't buy in just yet.
The company's fourth-quarter results showed both brands are facing challenges — particularly the Gap brand, Trussell said. He pointed to pain in both brands; Gap willRead more:Old Navy recorded flat quarterly comparable sales after a 9% rise in the same period a year earlier. For the full year, the retailer saw 3% comparable sales growth, down from 6% growth the prior year.
Old Navy's performance, though a solid driver of growth for Gap, has proved inconsistent on a longer-term basis. It's seen unchanged or negative comparable performance in nine of the past 20 years, according to Morgan Stanley analyst Kimberly Greenberger. She recommended investors stay"underweight" the stock in their portfolios, and said the spin-off news"offsets Old Navy blues." Morgan Stanley is advising Gap on its Old Navy spin off, which is expected to be completed in 2020.
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