Gapping Higher

"The break-up value's higher. It's worth eighty."
--Bud Fox (Wall Street)

Gap (GPS) up nearly 20% after management announced that it will split up the company. Old Navy will be spun off, leaving the flagship Gap brand, Banana Republic, and some miscellaneous stores in the other security--which may be renamed.

Nice to see the pop, for sure, in what seems to be one of the more undervalued names in this market. But not sure I agree with the strategy. A big advantage Gap held was it held brands across various segments of fashion retail. There was likely some synergy there that will be lost.

On the other hand, it will be nice to see the Old Navy franchise spread its wings given its growth story. That, I believe, is what the market is voting on this am.

Will be interesting to see how that affinity holds once the euphoria wears off.

position in GPS