Jun 24, 2010
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Gap plans four China stores this year

Jun 24, 2010

NEW YORK, June 23 (Reuters) - Gap Inc (GPS.N) will open its first four owned and operated China stores in Beijing and Shanghai later this year and simultaneously launch an online shopping site for the key consumer market.

Gap - Woman's collection 2010

China, as the third largest clothing market in the world, provides a growing middle class with a high interest in America's casual style.

The new Gap stores will stock apparel for women, men, children and babies, and include the new 1969 jeans line that has proved successful at reminding shoppers of Gap's strength in classic, easy looks like jeans, khakis and T-shirts.

Gap's plan to enter the China market, first announced last fall, is part of a larger international expansion on the heels of recent stabilization at the company's domestic stores.

"Our intent is to really get these four stores solidified ... and really learn from that launch what the preferences are of the Chinese consumer," John Ermatinger, president for Gap in Asia, told the Reuters Consumer and Retail Summit in New York. "You really don't know until you welcome them through the doors."

Ermatinger said Gap would announce new store locations in Hong Kong next year and eventually would consider bringing other brands beyond its namesake chain to the region.

Chief Executive Glenn Murphy told investors in October that while European and Japanese brands like H&M (HMb.ST), Zara (ITX.MC) and Uniqlo (9983.T) already operated in China, a significant presence by U.S. apparel brands was missing.

Gap operates about 3,100 stores in the United States, UK, Canada, France, Japan and Ireland. It has also recently expanded its international footprint through franchise deals in other parts of Asia, the Middle East, Europe and Latin America.

Over the past two years, the owner of the Gap, Old Navy and Banana Republic brands has been boosting profit margins by cost-cutting. A recent turnaround in sales has been welcomed by Wall Street.

In May, the company posted a 1 percent gain in overall same-store sales -- a common measure of retail strength -- versus a 6 percent decline in May 2009.

Gap said it would open its China headquarters in Shanghai, led by Redmond Yeung as president and Lorenzo Moretti as managing director.

The two executives, who will report to Ermatinger, have previous experience with top retailers such as Best Buy(BBY.N), Tesco (TSCO.L) and Marks & Spencer (MKS.L).

Gap will partner with e-commerce company Shanghai Yi Shang Network Information Co. Ltd. on the website.

Gap shares closed at $20.47, up 3 cents, or .15 percent on the New York Stock Exchange. It hit a 52-week high of $26.34 in April. The shares are trading below both their 20 day and 50 day moving average.

(For more on the Reuters Consumer and Retail Summit, see [nLDE65K1WY])

(Reporting by Alexandria Sage; Editing by Michele Gershberg, Leslie Gevirtz)

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