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Gap to Foray into Brazil - Analyst Blog

By: Zacks.com
Posted: 12/19/2012 10:10:00 AM
Referenced Stocks: AEO;GPS;TJX

After gaining recognition among Brazilian customers by offering its products via duty-free channels, Gap Inc. ( GPS ) is now set to open its first Brazilian stand-alone Gap stores in collaboration with Tudo Bom Comércio Ltda. Located in Sao Paulo, Brazil's largest city, the novel Gap stores will offer complete Gap collections including Gap, GapKids and babyGap. The company expects the store to initiate operations by fall of 2013.

Gap's plan to step in to the Brazilian retail space is guided by its ongoing strategy to expand globally. Brazil, being the fifth largest country in the world and Latin America's largest economy, provides promising opportunities for retailers like Gap. Given such encouraging prospects, Gap has slated down plans to significantly bolster its presence in the Brazilian market in the next five years.

Gap's quest to broaden its scope beyond national borders began in 2006 with the opening of its first franchise operated store outside U.S. Over the years, the company has come a long way in popularizing its brands throughout the world. Moreover, the company's store base has increased significantly in these six years, and it recently celebrated the opening of 300th franchise outlet. Gap's franchise stores are spread across 40 world markets including Asia, Europe, Latin America, the Middle East and Australia.

The company had first set foot in Latin America in 2011 as it opened its first store in Santiago, Chile. The company most recent venture in this region was its store opening in Uruguay. Apart from these, the company has operations in Latin American countries namely Panama, Colombia and Mexico.

Gap is a premier international specialty retailer offering a diverse range of clothing, accessories, and personal care products for men, women, children and babies. Its flagship brands include Gap, Banana Republic, Old Navy, Piperlime and Athleta. Gap products are available worldwide through a network of about 3,000 company-operated stores, more than 300 franchise stores and e-commerce websites. The company competes head-to-head with national and local department stores and discount stores, including American Eagle Outfitters Inc. ( AEO ) and The TJX Companies Inc. ( TJX ).

Currently, Gap's shares maintain a Zacks #2 Rank, which translates into a short-term Buy rating. Our long-term recommendation on the stock remains Outperform.



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