Gap Inc. to Grow as Banana Republic Plans to Establish an International Presence
The apparel industry is certainly fierce, but Gap Inc. (NYSE:GPS) undoubtedly knows how to stay on top of the game. Competing with many powerful companies like Abercrombie & Fitch (NYSE:ANF), Aeropostale (NYSE:ARO) and American Eagle Outfitters (NYSE:AEO), Gap Inc. has three different branches out of which it sells clothing, accessories and products to men, women and children. These branches are Old Navy, Gap and Banana Republic.
The Future of Banana Republic
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We see a positive future for Gap Inc., in part due to Banana Republic. Banana Republic provides apparel and accessories to teenagers and young adults, and currently makes up 16.64% of the stock price.
Although Banana Republic saw a decline in revenue per square feet from 2005 to 2009 (dropping from $550 to $440), with the stabilizing economy, we expect this to reverse. Moreover, we expect the number of Banana Republic stores to increase as the company goes international.
International Expansion
Currently, there are an estimated 622 Banana Republic stores – the vast majority of which are located in the US and Canada. Only 5% of Banana Republic stores are located outside of the US and Canada, leaving much room for Gap Inc. to expand their Banana Republic stores internationally. We expect the number of Banana Republic stores to increase over the next few years, rising to over 700 in 2014.
Banana Republic plans to establish a presence in Italy, which, if well received, will significantly increase their reputation in the fashion industry. Banana Republic also has a favorable opportunity to establish a presence in Asia, which could be quite beneficial for Gap Inc., as disposable income continues to increase in many Asian countries.
With Banana Republic starting to grow after struggling through tough economic times, Gap Inc.’s future is looking bright.
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