), a leading global specialty retailer offering clothing,
accessories and personal care products, primarily competes with
stores like Aeropostale (
Abercrombie & Fitch
American Eagle Outfitters
), J.Crew Group (
) and Urban Outfitters (URBN).
We estimate that the Gap stores contribute around 28% to the
$33.87 Trefis price estimate for Gap's stock.
We Remain Bullish…
The company is executing on its plan to enter 2 of top 5 apparel
markets in the world, Italy and China. Gap has opened a flagship
store in Milan (Italy) and will be opening another in
Rome. Gap has also opened a flagship store in Shanghai (China)
with plans to open a second there as well as two in Beijing.
We anticipate that the opening of new stores in Italy and China,
as well as further expansion into emerging markets like Latin
America and Asia where demand for branded apparel is growing
rapidly, will drive international store sales.
This effect is reflected in our forecasted increases in Gap
Store revenue per square foot, for which we project growth from
$394 in 2009 to $471 in 2016. We remain bullish on Gap's long-term
outlook and maintain a price estimate for Gap stock at $33.87, well
ahead of current market value.
… but is there Downside to our Estimates?
However, there can be a downside to our forecasts if Gap's
international store sales do not increase as anticipated. Despite
recent YOY growth in the company's overall monthly sales,
comparable store sales from Gap's international operations have not
shown any particular strength over the last two months - up 1%
year-over-year (YOY) in October and down 1% YOY in November.
Downside to our forecasts could come from increasing competition
from other specialty retailers like Abercrombie & Fitch or
American Eagle, particularly in emerging markets like Asia. These
markets have seen increases in disposable income and consumer
expenditures. These trends, along with recession in developed
markets (US and Western Europe), has provoked major specialty
retailers across the world to fast-forward their expansion plans in
As we've previously discussed (regarding the company's US
operations), it is imperative for Gap to differentiate its business
model and/or product offerings to prevent stagnation in revenue per
square foot (Trefis: Retail Competition Could Hurt Gap
Stock). If the revenue per square foot for Gap stores instead
falls to $350, it could create 6-7% downside to our price estimate
for Gap's stock.
Drag the trend-line in the chart above to assess the impact
of changes in Gap Store revenue per square foot on Gap's stock
See our full analysis of Gap here