Friday 01 March 2019 3:45 pm | Updated: Monday 03 June 2019 1:31 am

Gap shares surge on plans to close 230 stores as it splits off Old Navy

Gap is set to split off Old Navy into its own brand, it said today as it revealed 230 planned store closures.

The news sent shares soaring in the late afternoon, with their value climbing 19 per cent to $30.21.

As a part of the restructuring, Gap will split into Old Navy and an as yet unnamed company – which will retain the Gap, Athleta, Banana Republic, Intermix and Hill City brands.

Board chairman Robert Fisher said: “Following a comprehensive review by the Gap board of directors, it’s clear that Old Navy’s business model and customers have increasingly diverged from our specialty brands over time, and each company now requires a different strategy to thrive moving forward.”

By the end of its 2019 financial year, Gap expects to close 130 of its stores while opening at least 80 Old Navy and Athleta locations.

At the end of 2018, Gap had 1,242 stores around the world, including 152 stores in Europe.

Most of the closures are expected in north America.

Fisher said that the the separation will leave the two companies “well positioned to achieve their strategic goals and create significant value for our customers, employees, and shareholders”.

President and chief executive Art Peck said Gap has been “expanding omni-channel customer experience, building our digital capabilities and improving operational efficiencies”.

“Today’s spin-off announcement enables us to embed those capabilities within two standalone companies, each with a sharpened strategic focus and tailored operating structure,” Peck, who will remain in his position at the new company, added.

The umbrella company containing Gap, Banana Republic and Intermix is expected to deliver around $9bn (£6.79bn) in annual revenue.

The restructuring is aimed at improving the profitability of Gap's brands, with a focus on building Gap's existing customer base.

As a result of the changes, company expects to see an annual sales loss of $625m (£472m) as a result of the store closures.

Gap will keep some stores open in an effort to introduce a “healthier channel mix”, with “nearly 40 per cent of sales coming from online”.