Apparel retailer Gap calls off plan to spin-off Old Navy

(Reuters) – Apparel retailer Gap Inc (N:) on Thursday called off a plan to spin-off its Old Navy brand due to weak business performance, costs and the complexity of splitting into two.

It also announced the departure of Neil Fiske, chief executive officer of the Gap brand and forecast adjusted 2019 earnings to be moderately above its prior guidance of $1.70 to $1.75 per share due to fewer-than-anticipated promotions during the holiday season.

Shares of the San Francisco-based company rose 11% in extended trading after it also said net sales would likely be at the higher end of its previous outlook.

The move to cancel the separation plan comes as a surprise as the company had in November reiterated it would go ahead with the spin-off of the better-performing Old Navy from the namesake brand. The plan was first unveiled in February last year.

Old Navy has been a bright spot for Gap as its wide range of budget apparel made it more attractive to a broader base of customers, but sales in recent quarters have wavered.

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