Guess?, Inc. (GES), The Gap Inc. (GPS): Will Asia Be the Key Driver Behind These Retailers’ Success?

Additionally, the changing trends in Japan (inclination towards economical clothing) have influenced The Gap Inc. (NYSE:GPS) in expanding its Old Navy stores, which is positioned at the lower end of the market, offering high value for money. Moreover, internet retailing in Japan has escalated in recent times, which resulted in Gap launching its first e-commerce site solely dedicated to the Japanese consumer during 2011.

Other than apparel retailers, retail chains such as Costco Wholesale Corporation (NASDAQ:COST) have exhibited strong interest in international expansion, especially in the Asian Markets.

During the past four years, Costco Wholesale Corporation (NASDAQ:COST)’s revenue from international markets grew 15%; in comparison, its revenue in the U.S. market only grew 4%. During the second quarter of fiscal 2013, the company reported a large volume of sign-ups from Australia and other Asian markets. It further reported that in the past, it has recorded 20,000 to 60,000 sign-ups on the first day of a new store launch, therefore, the company will continue to expand its operations. Earlier this year, Costco announced that by the end of fiscal 2013, it plans to open six new stores across Asia.

Going forward, Costco Wholesale Corporation (NASDAQ:COST) is expected to launch fourteen new stores this year, out of which only four are targeted at the U.S. market. This clearly exhibits that even a value retailer such as Costco is heading towards revenue diversification by expanding in the Asian market, as generating strong organic growth through the U.S. market is getting seemingly difficult.

Takeaway

I believe that U.S. apparel retailers such as The Gap Inc. (NYSE:GPS) and Guess?, Inc. (NYSE:GES) will benefit from changing consumer preferences in Japan and increasing disposable income of the Indian and Chinese consumers.

At present, U.S. apparel retailers that are struggling to report profits must consider Asia as a future revenue driver and slow down expansion in North America. Increasing urbanization and robust economic growth across Asia offers a huge upside on their potential investment contrary to the saturated North American market.

The article Will Asia Be the Key Driver Behind These Retailers’ Success? originally appeared on Fool.com and is written by Ashit Gulati.

Ashit Gulati and Equity Dimensions have no position in any stocks mentioned. The Motley Fool recommends Costco Wholesale and Guess?. The Motley Fool owns shares of Costco Wholesale and Guess? Ashit is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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