UPDATE 2-Gap eyes international business to boost sales

* Sees intl, online over 25 pct of net sales by FY ’13

* Eyes doubling online sales by 2015

* Considering opening Old Navy stores abroad

* Shares up slightly
(Rewrites, adds background on sales, strategy, CEO quotes, SAN
FRANCISCO to dateline, bylines)

By Alexandria Sage and Phil Wahba

SAN FRANCISCO/NEW YORK, Oct 14 (BestGrowthStock) – Gap Inc (GPS.N: )
is focusing on finding more sales online and outside its
largely mature U.S. market and may expand its lower-priced Old
Navy chain outside North America, the apparel retailer said on
Thursday.

The company said it expects online and international sales
to account for more than 25 percent of net sales by the end of
fiscal year 2013, up from 19 percent at the end of fiscal
2009.

Gap, which operates its namesake stores, Old Navy and
Banana Republic, said it expects to be in 80 countries by the
end of 2010, compared to 25 at the start of the current fiscal
year, aided by online sales and third-party deals.

Aside from expansion of the Old Navy chain — a bright spot
for Gap that has been enjoying improved sales after a
successful turnaround — the company also said it may use its
Gap stores opening in China and Italy this fall to spur growth
through future outlet stores and online sales in those markets.

Gap, as previously announced, is opening four flagship
stores in China next month. It plans to open outlets there in
2012.

The company will also begin to sell online in Japan next
year.

In remarks to investors, Gap CEO Glenn Murphy said the
market in North America for much of the company’s business is
“mature.”

The company — which analysts forecast will post $14.5
billion in sales this year — has struggled to improve sales
at its over 1,000 Gap stores in North America after a long
string of sales declines.

Merchandise mistakes and a drop in quality sent Gap
shoppers to a growing pool of competitors earlier in the
decade, from Kohl’s (KSS.N: ) to Abercrombie & Fitch (ANF.N: ).

Although Gap has made many fashion and quality
improvements, while also cutting costs and improving profit
margins, the company still has not consistently lured back
those shoppers to regain consistent higher sales at the chain.

In September, Gap’s sales at stores open at least a year, a
key retail metric known as same-store sales, fell 2 percent,
missing Wall Street forecasts.

Recent high-profile launches of jeans and black pants
represent Gap trying to tap into its roots as the
quintessential seller of casual American style.

Gap plans to double online net sales to $2 billion by 2015
from $1 billion in 2008. Those sales include its Piperlime
online shoe store and its Athleta online store that sells
athletic gear.

The company also plans to double the number of its
franchise stores to 400 by 2015.

The company’s remodel of its Old Navy stores will continue,
Gap said, estimating that 35 percent of stores will be
remodeled by the end of next year.

The more upscale Banana Republic chain will also test new
store formats.

In Gap’s most recent second quarter, international and
direct-to-consumer sales represented 20.6 percent of total
sales.

Gap shares were up 3 cents at $19.02 in afternoon trade on
the New York Stock Exchange on Thursday.

(Reporting by Phil Wahba in New York and Alexandria Sage in
San Francisco, editing by Dave Zimmerman)

UPDATE 2-Gap eyes international business to boost sales