Gap's World View

Pressler told the group that 200 of the 260 new stores slated for opening through 2007 will be Old Navy locations. "Our real estate plans also include international expansion," said Pressler, who pointed out that the company now operates nearly 250 Gap stores in Japan, France and the UK. "We have a sizable business in these countries, but we believe there is still plenty of room for growth," the Gap CEO said. While Gap maintains about an 8% market share of apparel in the US and Canada, it captures less than 1% in the European Union, Japan and China, which together represent nearly half of the world's total apparel sales.

To capitalize on opportunities to expand in those geographic areas, Gap expects to open at least 50 additional stores in the UK, France and Japan through 2007, according to Pressler. This includes launching Banana Republic in Japan this fall. "We will position the brand in the premium segment, given the Japanese customers' strong affinity for American icon brands and luxury products," Pressler said. Gap also expects to expand to smaller countries, he added, pointing out that "In fragmented and smaller markets we expect to pursue franchising as it requires minimal capital investment." In 2006 the company " will begin to explore opportunities to enter China," according to Pressler's presentation. He called China "a huge potential opportunity for us because there is no dominant player."

Along with these efforts, Gap plans to continue expanding its Old Navy Maternity, Old Navy Plus Sizes, Banana Republic Petites and Gap Maternity stores. At the end of the first quarter, Old Navy Maternity was in 350 stores, Old Navy Plus Sizes was in 176 stores, Banana Republic Petites was in 27 stores and Gap Maternity was in 68 stores. Gap's newest brand, Fourth and Town, will launch in four stores in the Chicago area and one in New York this fall. The new brand targets women over age 35, sometimes called "Boomer Women," who have more discretionary income than many other market segments and who represent a largely untapped market for Gap, Pressler said.

Gap has its eyes on the Internet too, Pressler said, declaring that "We plan to become the world's best online apparel retailer." The online division, Gap Inc. Direct, tallied more than $500 million in sales last year, but the company sees room for improvement. "We are completely redesigning and rebuilding our web sites to improve the online customer experience," Pressler said.