Gap is going bananas after announcing it's spinning off Old Navy

Business Insider/Jessica Tyler

Gap shares surged late Thursday, gaining 19%, after the retailer announced it was spinning off its Old Navy unit.

“Following a comprehensive review by the Gap Inc. 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,” Robert Fisher, Gap Inc.’s Board Chairman said in a press release.

The decision comes as Gap stores have struggled while Old Navy has thrived. For the fiscal year, global Gap comparable sales fell 5% year-over-year while Old Navy’s rose 3%.

A spin-off of the Old Navy brand has been begged for by some Wall Street analysts. In August, Jefferies analyst Randal Konik wrote a note titled, “Dear B.O.D. of GPS… Please Change Name of Company to Old Navy.”

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