Shares of Gap Inc. (GPS) - Get Report jumped 10% in after-hours trading Thursday after the company said it expects earnings to come in ahead of previous guidance and said it is no longer pursuing a spinoff of its Old Navy business.
Gap now “expects its adjusted fiscal year 2019 earnings per share to be moderately above its previous guidance of $1.70 - $1.75,” the company said in a statement. The company said the improvement came “As a result of better-than-anticipated promotional levels over the holiday period, particularly at Old Navy.”
The company expects total company fiscal 2019 comparable sales to “be at the higher end of its previous guidance range of down mid-single digits.” In addition, net sales are expected to be at the higher end of previous guidance of “down low-single digits.”
Gap also said it is no longer pursuing a spinoff of its Old Navy business. “Our board of directors has concluded that the cost and complexity of splitting into two companies, combined with softer business performance, limited our ability to create appropriate value from separation," said Robert Fisher, Gap's interim president and chief executive officer.
The company said Neil Fiske, president and CEO of its struggling Gap brand, will leave the company.
As a result of reviews conducted for the possible spinoff of Old Navy, "We have learned a lot and intend to operate Gap Inc. in a more rigorous and transformational manner that empowers our growth brands, Old Navy and Athleta, and appropriately focuses on profitability for Banana Republic and Gap brand,” Fisher said.
Shares of Gap rose $1.91, or 10%, to $20.52 in after-hours trading.