One company will continue to be called Old Navy, but the name of the other entity — which will comprise the Gap brand as well as the Athleta, Banana Republic, Hill City and Intermix banners — has yet to be decided, the company said in its announcement. Gap Inc. will also close 230 stores in the coming two years. The company operates about 1,700 owned and franchised Gap stores globally.

"The remaining specialty fleet will serve as a more appropriate foundation for future growth of the brand across the specialty, outlet and online channels," the company said in a separate statement. "There will be a healthier channel mix after the restructuring, with nearly 40 percent of sales coming from online and the remainder split fairly evenly between the specialty and value channels."

“Following a comprehensive review by the Gap Inc. board of directors, 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,” said Robert Fisher, Gap Inc.’s board chairman. “Recognizing that, we determined that pursuing a separation is the most compelling path forward for our brands — creating two separate companies with distinct financial profiles, tailored operating priorities and unique capital allocation strategies, both well-positioned to achieve their strategic goals and [to] create significant value for our customers, employees and shareholders.”

Sonia Syngal will remain CEO of Old Navy, and Gap CEO Art Peck is to head the other company.