Gap said Thursday it plans close about 230 Gap specialty stores over the next two years as it works to restructure its business.
The retailer said it plans to split into two independent publicly traded companies, Old Navy and a yet-to-be named company, which will include its Gap brand, Athleta, Banana Republic, Intermix and Hill City.
Gap said the remaining store fleet will be a "more appropriate foundation" for future growth, with about 40 percent of its future sales expected to come from online and the remaining sales a mix of specialty and value channels such as outlets.
The announcement came as the company reported disappointing sales for the holiday quarter. Its earnings, however, topped estimates.
In the fiscal fourth quarter ended Feb. 2, Gap said net income rose to $276 million, or 72 cents a share, from $205 million, or 52 cents a share, a year ago. Profits were higher than the 68 cents a share, analysts surveyed by Refinitiv were expecting.
The company's sales fell to $4.62 billion from $4.78 billion a year ago. However, it was higher than the $4.69 billion analysts expected.
Same-store sales fell 1 percent during the quarter.
Gap shares surged more than 18 percent on the news.
The company said the store closures will result in an annualized sales loss of about $625 million, and pretax costs of about $250 million to $300 million. The actions will save about $90 million on a pretax basis.
In fiscal 2019, Gap said it expects to earn $2.11 to $2.26 a share. Excluding the costs tied to the store closures, Gap will earn between $2.40 and $2.55 a share. Same-store sales will be flat to slightly higher in the new fiscal year.
Gap plans to buy back about $200 million of its own stock.
This is a developing story. Please check back for updates.
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