Leading global specialty retailer, The Gap Inc. (GPS), in a drive to boost its international operations, seeks to consolidate its foreign business under one division from London. The rationalized division will be headed by Stephen Sunnucks, who will be responsible for all company-operated and franchised stores across Europe, the Middle East, North Africa, Asia Pacific and South America.
Gap currently operates with 530 stores in 30 countries outside of North America, including 140 franchised stores. The company expects to increase its franchised store base to 400 by 2015.
To further accelerate its international growth, Gap also plans to open its first Old Navy store in Japan by the end of 2012. In 1995 Japan got the first Gap namesake store while the first Banana Republic was opened in 2005. Gap at present operates 150 stores, or almost all of its Asian stores, in Japan.
Lackluster sales in North America compelled the company to expand overseas. The month of March saw the company recording a 10% drop in same store sales.
In order to counter the mature domestic markets, Gap’s agenda is to book as much as 30% of total sales from its overseas operations and online business by 2013. To achieve this end Gap has opened its very first stores, numbering four, in China and has launched e-commerce in more than 90 markets.
Based in San Francisco, California, The Gap Inc. is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products for men, women, children and babies. Its flagship brands include Gap, Banana Republic, Old Navy, Piperlime and Athleta.
Gap’s recent expansion into China and Australia is expected to further strengthen its top and bottom line performance, moving forward. The company’s China stores feature the full range of Gap adult, GapKids and babyGap merchandise, while in Australia, Gap will offer its brands through a franchisee.
However, Gap operates in a highly fragmented market and competes with well-established rivals like American Eagle Outfitters Inc. (AEO), and The TJX Companies Inc. (TJX).
Gap’s shares maintain a Zacks #3 Rank, which translates into a short-term Hold rating. Our long-term recommendation on the stock remains ‘Neutral’
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