Popular Clothing Brand to Undergo Restructuring

Category: Business


Unlocking Word Meanings

Read the following words/expressions found in today’s article.

  1. plummeting / ˈplʌm.ɪt ɪŋ / (adj) – quickly falling

    A lot of customers are buying computers because of the devices’ plummeting prices.

  2. flourish / ˈflɚrɪʃ / (v) – to grow or do well and be successful

    The company flourished after it partnered with a successful business.

  3. weigh down (something) / weɪ daʊn / (phrasal) – to make things difficult for someone or something

    Too much overtime weighed down the employees.

  4. publicize / ˈpʌbləˌsaɪz / (v) – to make something known to the public

    The company publicized the appointment of its new CEO.

  5. extensive / ɪkˈstɛnsɪv / (adj) – wide or broad

    Her extensive book collection is amazing!


Read the text below.

Multinational fashion retailer Gap Inc. has announced its plans to restructure its organization.

The company made the announcement in late February. According to Gap Inc., it intends to split its group of companies into two by 2020. Its Old Navy brand will become a separate company, and another business will be formed. This new business will consist of the retailer’s other brands, such as Gap, Athleta, and Banana Republic.

As a result of the reorganization, the retailer will close 230 of its stores, which are mostly in North America. The company has already shut down 68 stores, but 742 stores are still operating worldwide.

The decision to restructure resulted from Gap Inc.’s plummeting sales. According to financial records, overall sales in Gap stores decreased by 5% in 2018. Profits also decreased from $396 million to $372 million in last year’s final quarter.

While sales in Gap stores have declined, sales of Old Navy products increased by 3% within one year. Old Navy’s success is the reason why Gap Inc. decided to turn the brand into a separate company. This change will allow Old Navy to operate independently and flourish instead of being weighed down by other Gap Inc. brands.

Reactions to Gap Inc.’s announcement were mostly positive. Investors showed their support by buying Gap Inc. stocks after the company publicized the reorganization, boosting the shares by 25%.

However, an analyst at credit ratings company Moody’s warned that the change may reduce Gap Inc.’s product diversity. As Gap Inc.’s leading brand, Old Navy appeals to a wide range of customers with its extensive selection of items. Thus, making it a separate company would make Gap Inc.’s overall image less diverse.

Viewpoint Discussion

Enjoy a discussion with your tutor.

Discussion A

• Do you think Gap Inc.’s decision to make Old Navy a separate company is a good move? Why or why not?
• What do you think are possible effects of Gap Inc.’s restructuring (e.g. layoffs, rebranding)? Discuss.

Discussion B

• Why do you think some companies have plummeting sales?
• If you owned a company that is experiencing plummeting sales, how would you increase your company’s sales?