In an effort to penetrate deeper into the $1.4 trillion global
apparel retail market,
) outlined its growth strategies at the Investor Meet held
yesterday. As per its expansion plans, the premier international
specialty retailer will focus more on broadening its
international presence and online business.
As part of its global expansion plans, Gap firstly intends to
open more franchise stores of its low-priced brand - Old Navy, at
key international locations in fiscal 2013. Last year, the
company, which has a global market share of 0.25%, opened its
first international Old Navy store in Japan. We believe that the
brand possesses huge growth potential as it contributed about
two-fifth of the company's total revenue in fiscal 2012.
Further, this Zacks Rank #3 (Hold) company envisions promising
prospects in the Chinese market and expects it to augur well for
its successful expansion. Additionally
Gap has decided to open company-operated Old Navy and Banana
Republic stores in China as it currently operates stores under
its namesake brands only.
During fiscal 2012, the company opened 33 stores in China and
intends to add approximately 35 new stores in fiscal 2013. With
this addition, it will have nearly 85 stores in China the country
at fiscal 2013 end. Alongside, Gap is eyeing other emerging
economies such as Brazil and India.
Moreover, in order to deal with the changing consumer shopping
habits, Gap will continue to enhance its online capabilities and
develop the omni-channel platform.
Gap, which competes with
Abercrombie & Fitch Co.
American Eagle Outfitters, Inc.
), has been making significant progress with its long-term plans
by reducing its dependency on the North American specialty
business while increasing its online presence and expanding its
international operations. Moreover, Gap has targeted to generate
30% of its total sales from overseas operations and online
business by 2013 versus 27% in fiscal 2012.
Further, for expanding its North American operations, Gap will
increase focus on its smaller brands, the newly acquired luxury
boutique INTERMIX, athletic gear Athleta and online site
PiperLime. We believe that Gap's international presence and
infrastructure would help these brands evolve as globally
recognized trade names.
Gap, which has transitioned through a phase of declining
comparable-store sales and reduced profitability, is now
reverting to the growth track riding on its turnaround strategies
as evident from its solid comps and sales performance in fiscal
We believe that Gap's long-term strategic moves, along with
its disciplined cost management measures have not only provided
it with financial flexibility, but helped reduce its operating
expenses. Moreover, Gap's globally-recognized brands complement
one another, enabling the company to leverage its position in the
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