Gap Adds Overseas Stores to Cut U.S. Reliance
Gap Adds Overseas Stores to Cut U.S. Reliance
Jerome Favre/Bloomberg
Gap Inc. merchandise is displayed in the company's store in Hong Kong, China. The company currently only offers apparel under the Gap label in Greater China, a region that typically includes China, Hong Kong and Taiwan.
Gap Inc. merchandise is displayed in the company's store in Hong Kong, China. The company currently only offers apparel under the Gap label in Greater China, a region that typically includes China, Hong Kong and Taiwan. Photographer: Jerome Favre/Bloomberg
Gap Adds Overseas Stores to Cut U.S. Reliance
Jerome Favre/Bloomberg
People walk in front of the Gap Inc. store in Hong Kong, China. Gap is seeking to tap rising Chinese affluence as consumer confidence in the U.S. stagnates around recession levels.
People walk in front of the Gap Inc. store in Hong Kong, China. Gap is seeking to tap rising Chinese affluence as consumer confidence in the U.S. stagnates around recession levels. Photographer: Jerome Favre/Bloomberg
Gap Inc. (GPS), the biggest U.S. apparel chain, expects the share of revenue from online and overseas sales to rise by half in about two years, as it expands in countries including China to reduce reliance on its home market.
“China is probably the cornerstone of our expansion,” Redmond Yeung, president of China operations, said in an interview in Hong Kong today. Overseas stores and Gap’s online business will account for 30 percent of total sales by the 12 months ending Jan. 31, 2014, rising from 20 percent last fiscal year, he said.
Gap is seeking to tap rising Chinese affluence as consumer confidence in the U.S. stagnates around recession levels. Consumers in China, the world’s most populous nation, will spend more on clothes as households with at least 74,000 yuan ($11,600) in annual income surge to 140 million by 2020 from 50 million last year, Boston Consulting Group said in July.
China “is where retail sales are growing fast,” Yeung said. “This is the right time to capture the growing affluence of China’s middle class.”
Gap, which sells clothing under its namesake and the Banana Republic and Old Navy labels, fell 1.8 percent to $17.80 in New York Stock Exchange trading on Nov. 23. The San Francisco-based company’s stock has fallen 20 percent this year.
Greater China Region
The company currently only offers apparel under the Gap label in Greater China, a region that typically includes China, Hong Kong and Taiwan.
Gap opened its first store in Hong Kong today and plans to increase the number of outlets in Greater China fivefold to 45 by January 2013 from nine now. Stores in the cities of Hangzhou and Tianjin will open in the coming weeks, adding to those in Beijing and Shanghai, it said.
Retail sales in China are predicted to more than double to 40.5 trillion yuan in 2015 from 15.4 trillion yuan last year, according to a KPMG report in April.
“Gap is not cheap, but Chinese consumers are having a greater appetite to spend,” Yeung said. “We want to first introduce our iconic Gap brand to Chinese consumers and build on that.”
Gap plans to open the first Old Navy outlet in Asia next year in Japan, Yeung said. The company, whose competitors include Ponzano, Italy-based Benetton Group SpA (BEN) and Hennes & Mauritz AB (HMB) of Stockholm, already has 150 Gap and Banana Republic stores in Japan, the world’s third-biggest economy.
Old Navy products in the U.S. are generally priced lower than clothing from the company’s other two labels, according to their websites.
To contact the reporter on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net
To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net
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