JUMP REPORT

(Bloomberg) — Gap Inc. and Synchrony Financial are parting ways after they couldn’t reach an agreement to renew their longstanding card partnership.The clothing retailer has decided to shift the portfolio to Barclays Plc beginning in May 2022, it said in a statement Tuesday. Synchrony said in a regulatory filing that it expects to recognize a gain on the sale of the portfolio when it unloads it next April.“Synchrony was unable to reach contractual and economic terms with Gap that made sense for our company and our shareholders,” the Stamford, Connecticut-based firm said in the filing.Synchrony shares dropped 3.7% to $41.55 at 2:34 p.m. in New York, the second-worst performance in the 65-company S&P 500 Financials Index. The lender plans to use about $1 billion of the proceeds from the sale of the portfolio to buy back shares and invest in “higher growth programs,” according to the filing.Gap and Synchrony have offered cards together for more than two decades, and the lender counts the retailer as one of its five largest partners. The portfolio represents about 5% of the bank’s roughly $80 billion in receivables.It’s the second time Synchrony has opted not to renew a partnership with a major retailer after Walmart Inc. shifted its portfolio to Capital One Financial Corp., a move that was first announced in 2018. The decision comes just a few weeks after the lender installed Brian Doubles as its new chief executive officer, replacing its longtime leader, Margaret Keane.“This is a speed bump,” Jon Arfstrom, an analyst at RBC Capital Markets, said in a note to clients. “We do not believe this loss (and Walmart in 2018) are due to any uncompetitive positioning for Synchrony, and we believe it comes down to preferences and negotiations and bottom-line profitability.”Gap, like most of its mall-based peers, has struggled to attract customers during the coronavirus pandemic. “We faced one of the most difficult years in our company’s history,” Chief Executive Officer Sonia Syngal said last month as Gap capped its fiscal year with fourth-quarter sales that fell short of Wall Street’s expectations.What Bloomberg Intelligence Says:“Revenue and earnings from the Gap partnership have been steadily shrinking, so the retailer’s move to Barclays should reduce Synchrony’s costs and shift resources to new, high-potential cards with Venmo and Verizon.”– David Ritter, BI fintech analystClick here to read the research.Its Banana Republic brand, which primarily sells work clothes, has been particularly weak. One bright spot for the retailer is its Athleta activewear brand, which passed $1 billion in sales in 2020.Gap said the new credit-card program will be a key component of the revamped rewards program it launched in September. Barclays will issue both private label and co-brand credit cards for Gap, with the latter using Mastercard Inc.’s payment network.“With our shared values and focus on inclusion, we look forward to working with Gap Inc. and Barclays to deliver an enhanced card program to their customers,” Linda Kirkpatrick, president of Mastercard’s North America business, said in an emailed statement.It will be Barclays’s first private-label card, and the bank has already begun investing in the systems it will need to provide the program, said Denny Nealon, CEO of the U.S. consumer bank at Barclays. The bank has also recently been investing in data and analytics and other efforts to improve technology.Barclays has been looking to diversify its card partnerships, which have long focused on airlines, cruises and hotel chains. The firm recently debuted a new card with the nonprofit AARP.“We’re absolutely thrilled to join forces with Gap, it’s an iconic American brand, its got a huge customer base,” Nealon said. “We think we can help them drive growth and success.”(Updates with executive commentary beginning in 11th paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

It aggressively expanded its direct-to-consumer channel, nurtured customer loyalty with its free yoga classes and events, and repeatedly exceeded Wall Street’s expectations with its double-digit sales growth. Gap (NYSE: GPS), the parent company of Gap, Old Navy, and Banana Republic, fared worse. It struggled with sluggish mall traffic and intense competition from fast-fashion retailers, while its messy turnaround efforts, abrupt CEO changes, and weak sales growth all disappointed investors.

Gap Inc. said Tuesday that it has signed long-term credit card agreements with Barclays PLC [s:bcs], which will exclusively issue Gap Inc. cards, and Mastercard Inc. , which will issue co-branded cards across the namesake, Banana Republic, Old Navy and Athleta brands. Barclays will begin issuing cards in May 2022. The credit card program is a key component of Gap’s growth strategy and new rewards programs, the apparel retailer said. Synchrony Financial announced earlier on Tuesday that it will not renew its partnership with Gap. Shares of Gap fell 2.6% in early Tuesday trading, but have rallied 58% for the year to date. The S&P 500 index is up 9.9% for 2021 so far.

Gap Inc. (NYSE: GPS), a collection of purpose-led, lifestyle brands including Old Navy, Gap, Banana Republic and Athleta, and the largest specialty apparel company in the U.S., announced today that it has entered into new, long-term credit card program agreements with Barclays and Mastercard.

Shares of Synchrony Financial fell 0.7% in premarket trading Tuesday, after the consumer financial services company disclosed that it will not renew its financing partnership with apparel retailer Gap Inc. when it expires in April 2022. Gap’s stock was still inactive ahead of the open. Synchrony said the partnership with Gap represented about 5% of its loan receivables. “Synchrony was unable to reach contractual and economic terms with Gap that made sense for our company and our shareholders,” Synchrony stated in an 8-K filing with the Securities and Exchange Commission. The company expects to recognize a gain from the sale of the portfolio in the second quarter of 2022, and plans to use about $1 billion of capital to buy back stock and to invest in higher growth programs. Synchrony’s stock has rallied 24.3% year to date through Monday, while Gap shares have soared 62.3% and the S&P 500 has advanced 9.9%.