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Gap to spin off Old Navy as stand-alone company, stock skyrockets more than 25%

The Gap Inc. shares skyrocketed more than 20% in after-hours trading Thursday after the retailer said it would split into two publicly traded companies, turning Old Navy into an independent entity.

“The spinoff will enable each company to maximize focus and flexibility, align investments and incentives to meet its unique business needs and optimize its cost structure to deliver profitable growth,” the company said in a statement.

Gap GPS, +0.16% said the Gap, Athleta, Banana Republic, Intermix and Hill City brands will remain grouped together in a yet-to-be-named company. Sales at the flagship Gap brand fell 5% globally in the fourth quarter, and Gap plans to close about 230 Gap stores in the next two years as part of an effort to “revitalize” the brand, which has sagged for years.

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