The Gap Inc. (GPS): There Are No Gaps in This Retailer’s Performance

Gap already has initiatives like ‘ship-from-store’ and ‘find-in-store.’ In the first case, for any online order that cannot be delivered within two days from a distribution center, the nearest store steps in. This reasonably assures that buyers find their chosen goods always in-stock while the prompt deliveries minimize cancellations or missed sales.

In the second case, buyers can check the company website to know in advance if a particular item is in stock at a particular store.

Thanks to these initiatives, Gap’s online sales were up 27% in the first quarter. This was a significant achievement given that Abercrombie’s direct-to-consumer sales decreased 10%. American Eagle grew its e-commerce sales by 24%, but from a much smaller base.

However, Gap is about to launch its best initiative, reserve-in-store, later in the year. This will allow customers to reserve an item online, then go to a store, see it, try it on, and then buy it.

The beauty of this move is that it will increase footfall significantly. Customers who are reluctant to place online orders can now reserve the item and go to a store to check it out. Some may buy what they reserved and those who do not can always find something else.

Global expansion plans

Excluding US, the global apparel market is $1.1 trillion in size. Although Gap has around 300 franchised locations in 40 countries, it is vying for a bigger presence. China and Brazil are currently two focus areas.

China, with its 1 billion-plus population and growing western influence, is attractive for any retailer.  What bodes well for Gap is that the market is not yet congested with western brands. The company intends to have 80-85 stores in China by year-end.

Brazil, on the other hand, is Latin America’s largest economy and an emerging market. It too is relatively un-invaded by western apparel retailers, and Gap wants to be there before its peers. By fall this year, the company will open its first store in Sao Paulo, the largest city of Brazil.

Gap also has plans for Japan, Hungary, Mexico, Chili, Panama Columbia, Uruguay, Paraguay, and Peru.

Parting thoughts

Gap’s solid operating performance and growth potential in both domestic and international markets makes a bullish case in favor of the company. The frequent share repurchases and dividends are added perks.

Eshna De has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article There Are No Gaps in This Retailer’s Performance originally appeared on Fool.com and is written by Eshna De.

Eshna 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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