The Gap, Inc.

  • Overview

The ubiquitous clothing retailer Gap has been filling closets with jeans and khakis, T-shirts, and poplin since the Woodstock era. The firm, which operates about 3,400 stores worldwide, built its iconic casual brand on basics for men, women, and children, but over the years has expanded through the urban chic chain Banana Republic, family budgeteer Old Navy, online-only retailer Piperlime, and Athleta, a purveyor of activewear. Other brand extensions include GapBody, GapKids, and babyGap; each also has its own online incarnation. All Gap clothing is private-label merchandise made exclusively for the company. From the design board to store displays, Gap controls all aspects of its trademark casual look.

Geographic Reach

The Gap rings up about 85% of its sales in North America. Asia, including Japan and China, is the retailer's second biggest market accounting for about 8% of sales, followed by Europe (the UK and Ireland, France, Italy) contributing about 6%. Gap has 300-plus franchise stores across Asia, Australia, Eastern Europe, Latin America, the Middle East and Africa.

Sales & Marketing

Gap upped its advertising budget by nearly 20% in fiscal 2013 (ended January) to $653 million compared with $548 million the prior year. The company communicates with consumers via television and print.   

Financial Performance

Gap's annual sales comparison hasn't looked so good in years. Fiscal 2013 (ended January) sales rose nearly 8% to $15.6 billion, while net income rose 36% over the same period. The increase was driven by a rise in sales of $735 million at its stores and $367 million from its direct business. Rising same-store sales at the company's North American stores -- up 6% at Gap and Old Navy, and 5% at Banana Republic -- reversed years of mostly negative comparisons. Also, the addition of new stores overseas, partially offset by the unfavorable impact of foreign exchange rates, drove sales upward. Direct sales got a boost from growth of the online business across all of the company's brands. Nevertheless, the $15.6 billion Gap rang up in fiscal 2013 was still below the $16 billion or more than company took in in the years prior to the Great Recession.

Strategy

Gap is working hard to get its groove back in the US and to expand its brand globally. For the first time in years, Gap opened more stores than it closed in North America in fiscal 2013, after years spent right-sizing the chain. Back in growth mode, the retailer opened 25 new Athleta stores, 30-plus stores in China, and its first Old Navy store in Japan in fiscal 2013. Indeed, growth in Asia outpaced growth in Europe, with Asia (230 stores) surpassing Europe (208 stores) for the first time.

Going forward, the company plans to begin opening Old Navy stores outside North America and add more stores in China (the source of about 25% of its clothing). After opening stores in Paris and London, Gap chose Italy as the next stop on its European expansion tour, with stores debuting in Milan in late-2010 and Rome in 2011. More recently, it has been mining retail markets in Africa, Asia, and Latin America, including Brazil, Chile, Colombia, and Panama. The retailer put down roots in Mexico in late-2012 when it opened a standalone store in bustling Mexico City. More stores are planned for Colombia and Uruguay.

On the fashion front, color has made a comeback at mainchain Gap stores, after years of uninspiring fashions in shades of black, white, and gray. Gap continues to promote its lesser-known online-shoe brand Piperlime and Athleta, a direct-marketer of women's active wear. Since acquiring Athleta in 2008, Gap has added about 35 retail stores to Athleta's portfolio.

Mergers and Acquisitions

Buoyed by its improving fortunes, in 2013 Gap acquired New York-based Intermix, a multi-brand specialty retailer of luxury and contemporary women's apparel and accessories, for about $130 million in cash. Intermix operates about 30 stores across North America and an online shopping site.

Ownership

The founding Fisher family owns about 40% of Gap Inc.

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