The company's shares were up 17.7 percent at $29.89 in extended trading.
Ironically, lack of same-store sales growth at Old Navy hurt fourth-quarter overall sales.
After the separation, Art Peck, now the president and CEO of Gap Inc., will hold the same position with "NewCo", and Sonia Syngal, current president and CEO of Old Navy, will continue to lead the brand as a standalone company.
"The reality is that Old Navy's strength has essentially been funding Gap and Banana Republic", said Nomura analyst Simeon Avram Siegel.
Old Navy has hit its stride with a broad base of consumers as a low-cost apparel destination, while Gap and Banana Republic haven't fared as well.
Kim summit: North Korea says it will not change stance
U.S President Donald Trump's motorcade returns after dinner with DPRK leader Kim Jong Un in Hanoi, Vietnam, February 27, 2019. The North Koreans must be made to see that the USA side has viable options other than accepting whatever Pyongyang offers up.
A good number of the closures are expected to happen throughout 2019, and the remaining closures will happen in 2020 as leases for the rental properties expire.
Sonia Syngal will retain her title as president and CEO of Old Navy, according to a statement from Gap.
Gap Inc.is refusing to tell The Canadian Press exactly how numerous 230 stores it is closing will be in Canada, but says the majority of global network closures will be in North America. It will have annual revenue of about US$9 billion, compared to Old Navy's US$8 billion, the company said. Board Chairman Robert Fisher acknowledged the opposing directions as one of the factors behind the split, "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".
Gap's chief executive Art Peck will hold the same position at the new company after the separation. Old Navy would have been too valuable for Gap to simply sell off. Tallents said he'd expect an overhaul of Gap's marketing and customer experience strategies as part of the revamp.
"It'll work out for Old Navy", Cohen said, "because Gap has been an albatross around Old Navy's neck". A year ago, the Gap brand had 725 stores worldwide. The company blamed an absence of new products and macro-economic issues for a drop in traffic to the Old Navy stores during the crucial December shopping season.