Gap eyes international business to boost sales

Thursday, 28 October 2010 05:58 -     - {{hitsCtrl.values.hits}}

SAN FRANCISCO/NEW YORK (Reuters) - Gap Inc is focusing on finding more sales online and outside its largely mature U.S. market and may expand its lower-priced Old Navy chain outside North America, the apparel retailer said.

The company said it expects online and international sales to account for more than 25 percent of net sales by the end of fiscal year 2013, up from 19 percent at the end of fiscal 2009.

Gap, which operates its namesake stores, Old Navy and Banana Republic, said it expects to be in 80 countries by the end of 2010, compared to 25 at the start of the current fiscal year, aided by online sales and third-party deals.

Aside from expansion of the Old Navy chain — a bright spot for Gap that has been enjoying improved sales after a successful turnaround — the company also said it may use its Gap stores opening in China and Italy this fall to spur growth through future outlet stores and online sales in those markets.

Gap, as previously announced, is opening four flagship stores in China next month. It plans to open outlets there in 2012.

The company will also begin to sell online in Japan next year.

In remarks to investors, Gap CEO Glenn Murphy said the market in North America for much of the company’s business is “mature.”

The company — which analysts forecast will post $14.5 billion in sales this year — has struggled to improve sales at its over 1,000 Gap stores in North America after a long string of sales declines.

Merchandise mistakes and a drop in quality sent Gap shoppers to a growing pool of competitors earlier in the decade, from Kohl’s to Abercrombie & Fitch.

Although Gap has made many fashion and quality improvements, while also cutting costs and improving profit margins, the company still has not consistently lured back those shoppers to regain consistent higher sales at the chain.

In September, Gap’s sales at stores open at least a year, a key retail metric known as same-store sales, fell 2 percent, missing Wall Street forecasts.

Recent high-profile launches of jeans and black pants represent Gap trying to tap into its roots as the quintessential seller of casual American style.

Gap plans to double online net sales to $2 billion by 2015 from $1 billion in 2008. Those sales include its Piperlime online shoe store and its Athleta online store that sells athletic gear.

The company also plans to double the number of its franchise stores to 400 by 2015.

The company’s remodel of its Old Navy stores will continue, Gap said, estimating that 35 percent of stores will be remodeled by the end of next year.

The more upscale Banana Republic chain will also test new store formats.

In Gap’s most recent second quarter, international and direct-to-consumer sales represented 20.6 percent of total sales.