Gap Strengthens its Chinese Outpost - Analyst Blog
28 11월 2011 - 5:30PM
Zacks
Gap Inc. (GPS)
recently announced the opening of its first flagship store in Hong
Kong and has further plans of opening stores in the Chinese
territory. These new store additions reflect the company’s
intention to further expand its global presence by increasing its
store counts in China through company-operated stores, franchise
and online channels.
Gap opened a 15,000 square feet
store in Hong Kong’s Central District. The store is spread over
four floors and has a Chinese architectural touch for creating an
inviting and inspiring environment for customers, who have the
luxury to shop from a wide array of collections from Gap, GapKids,
babyGap, and GapBody. In addition, Gap has also announced to open
new stores in Shanghai, HangZhou and Tianjin in coming few
weeks.
In a drive to boost international
operations, Gap consolidated its foreign business under one
umbrella, while operating from London. Lackluster sales in North
America compelled the company to explore business in other shores.
In order to counter the domestic market saturation, Gap is aiming
to generate 30% of total sales from its overseas operations and
online business by 2013.
To achieve this end, Gap is making
huge investments in the world’s largest populated country, or
China. China has a tremendous growth opportunity as the company
believes that the consumers in China have greater appetite to
spend. Moreover, it is anticipated that the retail sales in China
will increase over two-folds by 2015 from 15.4 trillion yuan last
year. The company has revealed that by the end of fiscal 2012 it is
going to increase its number of stores five-folds in China to 45
stores, up from the current count of 9 stores.
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 intends to increase its market
share in the $1.4 trillion global apparel market and hence is
focusing on enhancing its franchise store base counts. Over the
last five years, the company has increased its franchise store
count to about 200 that spread across 26 countries. Moreover, with
this announcement, the company’s presence has expanded in 32
countries. Further, Gap wants to increase its franchise store base
counts to about 400 by 2014.
Gap competes with national and
local department stores and discount stores, such as
American Eagle Outfitters Inc. (AEO) and
The TJX Companies Inc. (TJX). Currently, the
company maintains a Zacks #3 Rank, which translates into a
short-term ‘Hold’ rating. Our long-term recommendation on the stock
remains ‘Neutral’.
AMER EAGLE OUTF (AEO): Free Stock Analysis Report
GAP INC (GPS): Free Stock Analysis Report
TJX COS INC NEW (TJX): Free Stock Analysis Report
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TJX Companies (NYSE:TJX)
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