Going ahead with its global expansion plan,
The Gap, Inc
) recently announced the opening of its first Old Navy franchise
store in Philippines in 2014. We believe that the stable
Philippine economy combined with the increasing preference of the
rising middle class for American goods is a positive that will
benefit the company's expansion in the nation.
In order to effectively penetrate into the $1.4 trillion
global apparel retail market, Gap entered into an agreement with
its existing partner Stores Specialists, Inc. to open three Old
Navy stores by the end of 2014. Stores Specialists is a specialty
retailing business established in 1987 and currently operates
Gap's namesake and Banana Republic franchises stores in the
According to the agreement, the company will open two Old Navy
franchise stores in Manila at the beginning of 2014. Apart from
this, the company will open its third Old Navy store by the end
of 2014 in the same city. Manila is not only the second largest
city in the country but also the second most-visited Philippine
destination with over 2 million visitors every year. Therefore,
we believe that opening Old Navy stores in this city is a
strategic fit for Gap's long-term global expansion plan.
This Zacks Rank #3 (Hold) company made its first appearance in
this tropical island by opening its first namesake franchise
store in 2007. Since then, the company has opened 9 franchised
Gap stores and 4 Banana Republic stores.
The premier international specialty retailer is aggressively
going forward with its previously-announced strategy of
franchising Old Navy stores globally. In Apr 2013, Gap declared
its plan to open company-operated Old Navy and Banana Republic
stores in China. At present, it operates stores in the Asian
country under its namesake brands only.
Gap, which competes with
Abercrombie & Fitch Co.
American Eagle Outfitters, Inc.
), has been marching ahead with its long-term plans by reducing
dependency on the North American specialty business, while
increasing its online presence and expanding international
operations. Moreover, Gap aims to generate 30% of its total sales
from overseas operations and online business by 2013 versus 27%
in fiscal 2012.
Gap witnessed a phase of declining comparable-store sales and
reduced profitability but is now gradually returning to growth on
the back of turnaround strategies as is evident from solid comps
and sales performance in fiscal 2013 so far.
We believe that the company's long-term strategic moves and
its cost management measures have not only given it financial
flexibility, but helped in reducing operating expenses as well.
Moreover, Gap's globally recognized brands complement one
another, enabling the company to leverage its position in the
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