Can expanding abroad save the Gap?

The troubled retail giant has announced plans to close a third of its U.S. stores and focus on the Chinese market

The first store in Shanghai opened in Nov. 2010, and now the struggling American brand looks to triple its presence in China by the end of next year.
(Image credit: Ryan Pyle/Corbis)

Once the world's largest specialty clothing chain by revenue, Gap has struggled in recent years to keep up with trends and keep customers coming into its ubiquitous stores. Last year, it attempted an unsuccessful rebrand. On Thursday, the once iconic American retailer announced plans to close 200 North American Gap brand stores (Gap, Banana Republic, and Old Navy) by 2013, and to triple its stores in China by the end of next year. Is shutting a third of its stores at home and heading abroad going to get Gap back on track?

There is more growth opportunity abroad: "The American consumer — that seemingly unstoppable engine that has powered the global economy for decades — is no longer firing on all cylinders," says Charles Sizemore at InvestorPlace. If there's growth to be found, it's overseas. That doesn't mean you should buy stock in the troubled clothing company, but you might want to your money "in companies following the Gap's strategy."

"The Gap is making the right travel plans"

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And Gap's place in the American market is precarious: This is certainly a "positive move," says retail analyst Edward Yruma, as quoted in the Los Angeles Times. Gap opened too many stores in the U.S., and demand for its offerings is waning. In this economy, "when there's not a sale it's tough to get consumers to buy basics." If they're not getting a steal, they want something new or cutting edge, and Gap offers neither.

"Gap to close about 200 stores in N. America as it expands overseas"

But Gap has problems with style (or lack of it) everywhere: The Gap's inferior designs are hurting it at home and abroad, say Dana Mattioli and Kris Hudson in The Wall Street Journal. It "consistently has failed to come up with compelling styles and was late to some lucrative trends like premium jeans." International sales rose overall in the first half of 2011 as it opened new stores, but fell at overseas stores open for more than a year. "The problem again was style."

"Gap to slash its store count"

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