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Gap Furthers Global Expansion Plan - Analyst Blog

Posted: 6/4/2013 11:29:00 AM
Referenced Stocks: AEO;ANF;BKE;GPS

Progressing with its global expansion plan, Gap Inc . ( GPS ), the premier international specialty retailer recently announced the opening of franchise and standalone stores in Paraguay, Hungary and Mexico. Apart from this, the company is planning to extend its international operations to 8 Latin American countries, including, Chile, Panama, Colombia, Mexico, Uruguay, Paraguay, Peru and Brazil.

In order to penetrate deeper into the $1.4 trillion global apparel retail market, Gap entered into agreements with its existing franchise partners in Paraguay and Hungary to open its first flagship store. According to the agreement with its partner Neutral, the company will open its first franchise Gap store in Paraguay by the end of 2013. In Hungary, Gap has signed a deal with Gottex Brands to open 2 franchises Gap stores.

Furthermore, this Zacks Rank #2 (Buy) stock entered into an agreement with its existing partner Distribuidora Liverpool, S.A. DE C.V. to open a stand-alone Banana Republic store in Mexico. Earlier, the company was offering its Banana Republic merchandise under a "shop-within-shop" franchise concept at the Liverpool Department stores.

Gap, which competes with Buckle Inc. ( BKE ), Abercrombie & Fitch Co. ( ANF ) and American Eagle Outfitters, Inc. ( AEO ), has been marching ahead with its long-term plans by reducing its 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, which witnessed a phase of declining comparable-store sales and reduced profitability, is now gradually treading the growth path, based on turnaround strategies as is evident from its 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 reduce operating expenses as well. Moreover, Gap's globally recognized brands complement one another, enabling the company to leverage its position in the sector.

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