Is it a good strategy from a business standpoint for Gap Inc. to split into two companies?
On February 28, 2019, Gap Inc. announced that it would split into two companies, in effect spinning off its Old Navy Brand, which had been its most profitable division for a long time. Investors had demanded the split and quickly rewarded it with a huge uptick in the company’s stock price. Aside from the stock market implications, is this a good strategy from a business standpoint? Remember that if the split had happened, Banana Republic and Gap stores would have become two different companies and would not have been able to combine resources, such as real estate deals, distribution, contractor relations, and IT.