Gap Inc. (NYSE:GPS) announced it would be working with franchise partner Arvind Lifestyle Brand to open 40 new Gap stores in India next year, starting with locations in Mumbai and New Delhi.
The retailer simultaneously reported that second quarter profits are up 9.6 percent to $332 million, and net sales rose 2.9 percent to $3.98 billion. The results topped analysts' estimates, a development that can be attributed to shopper enthusiasm toward discount clothing at Old Navy, reported Bloomberg.
Gap's comparable sales in the second quarter were down 5 percent to $1.4 billion globally. U.S. sales also fell 5 percent, to $850 million.
Gap's expansion, like those of other fashion brands, is a way to help balance out falling sales at home and face fierce competition from fast fashion brands such as Zara and H&M, reported Financial Times.
Last year, Gap opened its first stores in Brazil, Hungary, Paraguay, Peru and Costa Rica. The retailer also plans to expand into Austria and Slovenia—totaling 44 markets.
"For us, India is the last major market without an international shopping experience and an important next step in our global expansion strategy," Stefan Laban, senior VP of Gap International told the Financial Times. "We've been looking to expand there for a number of years but only now do we really feel that the timing is right."
Laban believes Gap fashion will resonate with shoppers in India, where half of the population is under 25.
Arvind Mills, a long-time Gap supplier, operates more than 1,000 retail outlets for U.S. brands, including Nautica and Tommy Hilfiger.
The move is the latest example of aggressive pushes by U.S. retailers into emerging markets. Walmart recently invested $103 million in Indian operations with the goal of expanding the number of wholesale stores as well as its online presence. Fast fashion retailer Zara, under Inditex, entered the Indian market a few years ago, and H&M is also planning new outlets in India.
The nature of Gap's expansion into India will be determined by initial success and property availability. Although online shopping is growing rapidly in India, Gap has no plans at this time to focus on that end of the business.
-See this Financial Times article
-See this Bloomberg article
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