Nov 25, 2011
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Gap says to triple China network in 2012

Nov 25, 2011

HONG KONG - Apparel brand Gap Inc (GPS.N) said on Friday that it aims to triple its store network in China next year, one of the latest foreign brands to target the country's consumer spending growth.

Gap Inc.
Opening of a Gap Store in Shanghai / Photo: Corbis

Redmond Yeung, president of China for Gap, which competes with Uniqlo parent Fast Retailing Co Ltd (9983.T) and Esprit Holdings Ltd (0330.HK) in China, said the company aimed to operate 15 stores in the country by the end of the fiscal year to January, and to triple that number to 45 in fiscal 2012.

"The China market so far has far exceeded our expections," Yeung told reporters on the sidelines of the soft opening of its first store in Hong Kong.

"We are very happy with the results we have achieved in China. That is the reason for this store growth target and why investment in this area is increasing," he said.

Gap, which operates about 400 outlets in Asia, has eight stores in Shanghai and Beijing and plans to open outlets in Hangzhou and Tianjin before the end of this year.

"It is a big investment, but it is good as we control everything," Yeung said. "(China's) 12th five-year plan is very clear that retail business in China is going to grow and double in the next five years ... we would like to be part of that."

San Francisco-based Gap, which also operates Old Navy and Banana Republic brands and competes with Zara owner Inditex SA (ITX.MC) and Hennes & Mauritz AB (HMb.ST), was targeting China's growing middle class, Yeung said.

China's fashion market is expected to triple to more than 1.3 trillion yuan ($201.3 billion) in the next 10 years, driven by rising consumer affluence, Boston Consulting Group said in July.

Per capita spending among urban consumers was 1,150 yuan per year, roughly a fifth of the level in Britain and the United States, it said.

Foreign retailers have flocked to the booming China market, but fragmented distribution networks and the inability of some to localize their products has seen companies pull out, including Best Buy Co Inc (BBY.N) and Home Depot Inc (HD.N).

"Nothing is easy in China but everything is possible," said Yeung. "We are optimistic we can open a lot of stores ... We are committed to expanding in this market."

Concerns that luxury demand could wane hit the shares of some companies in September, but Burberry Plc (BRBY.L) and LVMH Moët Hennessy Louis Vuitton SA (LVMH.PA) have since released optimistic outlooks. Germany's Hugo Boss AG (BOSG_p.DE) had also revised up its sales targets.

Last week, Gap said it earned $193 million for the third quarter ended October 29, compared with $303 million last year.

By Donny Kwok and Rachel Lee

(Editing by Chris Lewis)

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