In an effort to expand its brand portfolio as well as further
firm its position in the growing global luxury market,
) recently acquired INTERMIX Holdco Inc. - a women-centric luxury
apparel retailer in the U.S. Gap concluded the deal on the last
day of 2012 by paying $130 million in cash.
INTERMIX is a multi-brand luxury fashion retailer in North
America, which offers fashionable apparel for women from the
industry's most popular designers and brands that provides it a
clear competitive advantage. The company offers its products
through a network of 32 boutiques in North America and an online
We believe that the acquisition will not only help Gap in
expanding its brand offerings, but will also regain its fashion
leadership status. Further, we believe that Gap's international
presence and infrastructure would help INTERMIX to emerge as a
globally recognized luxury retailer in the same way as it
facilitated Athleta brand acquired in 2008 to gain a significant
position. Started through a catalog business, Athleta brand
- with the help of Gap's innovative ideas - has now approximately
35 stores and an e-commerce platform.
Gap, which has gone through a phase of declining
comparable-store sales and reduced profitability, is now coming
back on the growth track with the help of its turnaround
strategies as evident from its solid comps and sales performance
in the recent months.
As part of its strategy, the company is planning to
deliberately reduce its Gap North America store count to 950 by
the end of fiscal 2013. Contrary to this, the company continues
to aggressively expand on the international front through both
company-operated and franchise stores. Further, it is aiming to
generate 30% of total sales from overseas operations and online
business by 2013.
Gap's long-term strategic moves, along with its disciplined
cost management measures have not only provided it with financial
flexibility, but also helped reduce operating expenses. Moreover,
Gap's globally-recognized brands complement one another, enabling
the company to leverage its position in the sector.
Gap, which competes with
American Eagle Outfitters, Inc
), currently has a Zacks #2 Rank that translates into a
short-term 'Buy' rating. Moreover, we maintain a long-term
'Outperform' recommendation on the stock.
AMER EAGLE OUTF (AEO): Free Stock Analysis
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