Gap to Expand in China

By Laurie Burkitt and Suzanne Kapner 

SHANGHAI--U.S. clothing chain Gap Inc. is looking to China, one of the world's fastest-growing and competitive apparel markets, to offset sluggish sales back home.

The San Francisco company, which operates Gap, Old Navy, Banana Republic and Athleta, plans to open 25 new Gap stores and up to 10 Gap outlet stores in China in 2014, said Jeff Kirwan, president of Gap's China division, in an interview Saturday. Currently, the company has 80 stores there.

"The opportunity in China is undeniable," said Mr. Kirwan, adding that Gap is seeing strong growth in its China-based retail outlets and online.

Gap is also rolling out its lower-end Old Navy brand to cater to China's cost-conscious consumers, with plans to open five this year, Mr. Kirwan said. It launched its first, a 22,000-square-foot store, in Shanghai on Saturday.

Gap has focused on international expansion to counter slowing growth at home. U.S. sales at its namesake brand fell about 7% in the fiscal fourth quarter to $1.05 billion, compared with $1.13 billion a year earlier. U.S. sales of Old Navy and Banana Republic were down in the period as well.

The company had net income of $307 million in the quarter ended Feb. 1, compared with $351 million a year earlier. Net sales fell to $4.58 billion from $4.73 billion a year earlier.

U.S. retailers have been struggling with falling mall traffic and a harsh winter, including heavy snow fall that has forced retailers to close some stores for part of January and February.

Demand for clothing in China is high, with sales of apparel in urban areas projected to reach $156 billion by 2017, up 58% from 2013, according to estimates from the Boston Consulting Group.

Sales jumped to $99 billion in 2013, up 29% in 2011, the consulting firm said.

Write to Laurie Burkitt at [e-mail] and Suzanne Kapner at [e-mail]

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