Gap: announces Old Navy spin-off; shares jump
(CercleFinance.com) - Gap shares rose on Friday after the US fashion retailer beat consensus estimates for profit in the fourth quarter and announced its plans to spin off its profitable Old Navy brand.
Yesterday evening the company reported fourth-quarter EPS of 0.72 dollar, compared with 0.52 dollar, or 0.61 dollar on an adjusted basis, in the same period a year ago.
In comparison, the consensus was expecting just 0.68 dollar.
Fourth-quarter comparable sales fell, however, by 1%, due to a 53rd week in the previous fiscal year.
Most importantly, Gap said that it plans to separate its "accessible" fashion essentials brand Old Navy, through a spin-off that is intended to generally be tax-free for shareholders.
Concretely, Gap plans to create two independent publicly traded companies: Old Navy in the family apparel business and a yet-to-be-named company which will consist of its other brands such as the Gap brand and Banana Republic.
"We give Gap credit for its bold move to create value for shareholders by spinning Old Navy," analysts at Credit Suisse commented.
"Doing so allows the market to properly value Old Navy for its high margins and strong cash flows," Jefferies said.
Investors definitely agreed with this, with Gap shares jumping 18.5% in early morning trading this Friday.
Copyright (c) 2019 CercleFinance.com. All rights reserved.
Yesterday evening the company reported fourth-quarter EPS of 0.72 dollar, compared with 0.52 dollar, or 0.61 dollar on an adjusted basis, in the same period a year ago.
In comparison, the consensus was expecting just 0.68 dollar.
Fourth-quarter comparable sales fell, however, by 1%, due to a 53rd week in the previous fiscal year.
Most importantly, Gap said that it plans to separate its "accessible" fashion essentials brand Old Navy, through a spin-off that is intended to generally be tax-free for shareholders.
Concretely, Gap plans to create two independent publicly traded companies: Old Navy in the family apparel business and a yet-to-be-named company which will consist of its other brands such as the Gap brand and Banana Republic.
"We give Gap credit for its bold move to create value for shareholders by spinning Old Navy," analysts at Credit Suisse commented.
"Doing so allows the market to properly value Old Navy for its high margins and strong cash flows," Jefferies said.
Investors definitely agreed with this, with Gap shares jumping 18.5% in early morning trading this Friday.
Copyright (c) 2019 CercleFinance.com. All rights reserved.