FILE -  A Gap clothing store is pictured in Winter Park, Fla., Aug. 23, 2018. Gap said Feb. 28, 2019, that it's creating two independent publicly traded companies — low-priced Old Navy and a yet-to-be named company that will consist of the iconic Gap
FILE - A Gap clothing store is pictured in Winter Park, Fla., Aug. 23, 2018. Gap said Feb. 28, 2019, that it's creating two independent publicly traded companies — low-priced Old Navy and a yet-to-be named company that will consist of the iconic Gap

Gap Inc. said Thursday that it would separate its Old Navy brand into a publicly traded company in order to focus on its struggling namesake apparel business, sending its shares up 18 percent. 

Old Navy has had a better success than the Gap brand in recent years as a wide range of budget apparel has made it more appealing to a broader base of consumers. 

"It's clear that Old Navy's business model and customers have increasingly diverged from our specialty brands over time," Gap's Chairman Robert Fisher said. 

FILE - An Old Navy Store is seen in Paramus, N.J.
FILE - An Old Navy Store is seen in Paramus, N.J.

The company also said it planned to close 230 Gap specialty stores over the next two years. 

Gap's overall same-store sales fell 1 percent in the fourth quarter ended Feb. 2, compared with analysts' average estimate of a 0.3 percent rise, according to IBES data from Refinitiv. 

Gap, Athleta, Banana Republic and the remaining brands will be part of a yet-to-be-named company. The separation is expected to be completed by 2020, Gap said. 

The company's shares were up 17.7 percent at $29.89 in extended trading.