Gap Inc. announced plans in February 2019 to split from Old Navy and create two independent companies. According to the multiple-brand organization, an evaluation determined that Old Navy’s customers and brand had grown in a different direction from the remaining specialty brands, including Athleta and Banana Republic, that align with Gap’s business model.
While the spin off is expected to be a good move that likely results in optimization and revenue growth for both companies, it will face the common challenges found in splitting one enterprise into separate, publicly-traded entities. It also means that Gap’s supply chain will branch off into two new operations: one for Old Navy and one for the new Gap company, which is being referred to as “NewCo.”
Shay Scott, executive director of the Global Supply Chain Institute at the University of Tennessee, Knoxville’s Haslam College of Business, offered insight into how the two brands may experience disruptions from the split in a May 2019 Supply Chain Dive article.
Given the size of the retailer company, Scott says it’s a bold move for Gap to proceed with the separation. He warns that supplier relationships, logistics and transportation will inevitably be impacted by the change, but that there also will always be unanticipated risk.
While Scott recognizes the challenges of the quick turnaround in restructuring, which is scheduled to be finalized in 2020, he also sees the potential for success in the change.