Only a few days ago we reported about our balanced view on Gap Inc. (GPS) and thus reiterated our long-term Neutral recommendation on the premier international specialty retailer. Our prime focus in rendering the balanced view was on the progress of the company’s strategic plans.
Most importantly, the strategic plans include reduction of its dependency on North American specialty business, while increasing its online presence as well as expanding its international operations.
Building on that move, The Gap opened its first store in South Africa and has plans to open two more stores in the region, The Wall Street Journal reported.
International turf provides ample long-term opportunities for retailers to enhance their margins. Thanks to globalization, retailers have the opportunity to explore and add newer markets for their products by opening new stores or through e-commerce sites.
Needless to say, only strong and popular brands have the potential to drive growth through the global markets. Popular brands like Ralph Lauren Corporation (RL) and Abercrombie & Fitch Co. (ANF) already have a significant global presence. Thus, the company continues to expand aggressively in the emerging markets through both company-operated and franchise stores.
The Gap intends to triple its store count in China from 15 to approximately 45 during fiscal 2012. Additionally, the company targets to increase its Athleta stores count 5 times from 10 to 50 by end of fiscal 2013.
Moreover, the company’s globally recognized brands complement one another, enabling it to leverage its position in the sector.
Currently, the company maintains a Zacks #2 Rank, which translates into a short-term Buy rating.
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