Gap Inc. is expected to announce that it has signed a franchise agreement to open Gap "store within a stores" inside Mexican department-store chain Distribuidora Liverpool SA. Separately, Gap and Banana Republic stores will open in Egypt and Jordan over the next year.The first Gap store in the Mexican Liverpool stores, selling children's shoes, discount children's shoes and designer children's shoes. The stores are expected to open next spring. Liverpool previously had a wholesale agreement with Gap for about 10 years and sold limited Gap merchandise in Mexico. Under the new deal, more Gap merchandise will be sold in an undisclosed number of Liverpool stores.
Gap also plans to announce that it will introduce an undisclosed number of Gap and Banana Republic stores in Egypt and Jordan through a franchise agreement with Fawaz Alhokair Group, which recently opened Gap and Banana Republic stores in Saudi Arabia. The first Gap stores are expected to open in Egypt and Jordan later this year for the holiday season, while the first Banana Republic stores are expected to open in Jordan next spring and in Egypt next fall.
The expansion abroad comes as Gap is trying to better align the size of its U.S. stores with demand and expects net square footage to remain roughly flat for fiscal 2008.
"The only real growth in square footage beyond 2008 will be in our international and franchise markets," Gap Chief Executive Glenn Murphy said in a conference call with investors earlier this year. Stores within stores, in particular, he said, have a "great return" and "good sales per square foot."
Since Gap started focusing on expanding abroad through franchise agreements two years ago, more than 70 Gap franchise stores and nearly 30 Banana Republic franchise stores have opened. Friday's planned announcement brings the franchise program count to agreements in 21 countries. Under the franchise agreements, Gap sells its goods to the franchisees and partners invest their own money in stores and operations.
Gap announced in May that it will introduce its Gap and Banana Republic brands in Russia through a partnership with Fiba Holding AS, a Turkish holding company with interests in banking and retailing.
By: Jennifer Saranow
Wall Street Journal; September 19, 2008
