Gap plans overseas push, expansion of Old Navy

AP News
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Posted: Apr 19, 2011 10:45 AM

Gap is consolidating international operations to accelerate growth overseas and plans to open its first Old Navy stores abroad, in Japan by 2012.

The parent company of Gap, Banana Republic and Old Navy is establishing an international division that will oversee stores across Europe, the Middle East, North Africa, Asia Pacific and South America. The goal is for international and online sales to make up 30 percent of its total by 2013, up from 22 percent in 2010 and 14 percent in 2006.

Stephen Sunnucks, 53, on Tuesday was named president of the division. He was previously president for Europe and International Strategic Alliances divisions.

Gap also said John Ermatinger, currently president of Gap Inc.'s Asia Pacific Region, will establish Old Navy International, beginning in June, with the objective of opening Old Navy in Japan by the end of 2012. Of the 90 countries Gap ships products to, Old Navy is the best-performing Gap brand in over half of those countries, Gap said.

Old Navy, lower-priced and aimed at younger people than sibling stores Gap and Banana Republic, is Gap's largest brand, with North American revenue of $5.4 billion in 2010, compared to Gap's $3.8 billion and Banana Republic's $2.3 billion.

Gap, known for classic American offerings like T-shirts, khaki pants and denim, said its style translates well overseas.

"Our distinctively American aesthetic has resonated very well, everywhere from Milan to Shanghai to Sydney," Sunnucks said in a statement.

CEO Glenn Murphy said the consolidation will let Gap "leverage resources, operate consistently, and grow the business at an accelerated rate."

The San Francisco-based company has focused on international growth in the past year, opening its first stores in Italy and China and expanding online sales to ship to more than 90 countries.

Gap operates about 530 stores across 30 countries outside of North America, including 180 franchise stores in 24 countries. It wants the number of franchised stores to total 400 by 2015.

Gap's net income rose to $1.2 billion in the latest fiscal year from $1.1 billion the year before. Revenue increased 3 percent to $14.66 billion.

The company posted a 1 percent increase in revenue at stores open at least a year, compared with a 3 percent decline the year before. Gap has revamped stores and product offerings to maintain revenue momentum in the U.S. as competition from "fast-fashion" retailers like H&M and Forever 21 has heightened.

While the company's namesake chain has a way to go to turn around it business, Banana Republic and Old Navy both have seen business steadily improve.