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Thinking Out of Its Box, Gap Explores New Roads For International Growth

Gap Inc. wants to boost its international presence and has a new president of Gap International to explore alternative growth paths, like joint ventures.

NEW YORK — Gap Inc. is looking to break its mold.

The retailer, which has built a global reputation on operating wholly owned stores, said Monday it is considering alternative growth avenues for its international business, including joint ventures, franchising, stores-within-stores and licensing.

At the same time, Andrew Rolfe, a retail operations executive who has experience in bringing brands across borders but none in apparel, was named president of the $1.7 billion Gap International division.

The 37-year-old Rolfe will join Gap in late January. He will be based at Gap’s San Francisco headquarters and will report to Paul Pressler, president and chief executive of the $14.5 billion Gap Inc. He also will be a member of the company’s executive leadership team. Rolfe left last March as chairman and ceo of Pret A Manger, a London-based food retailer one-third owned by McDonald’s Corp., with operations in the U.K., New York, Hong Kong and Tokyo.

Gap said it may soon test other operational models to further international growth, which this year is virtually on hold. At most, five stores will open, but in 2003 so far, there have been no openings. Still, Gap International is the only division that could show an increase in the store count. As part of its ongoing turnaround, Gap has been rationalizing its real estate, and this year will show a 2 percent drop in square footage, and a less than 1 percent drop in concept locations, which are where Gap operates more than one retail format. A Gap, for example, often operates side by side with a babyGap, GapKids or GapBody.

Of Gap’s total of about 3,000 locations running 4,200 store concepts: 261 units featuring 467 concepts are in Germany, France, the U.K. and Japan. The first Gap store outside the U.S. opened in London in 1987. The company does not operate any formats other than the Gap concepts outside North America.

Included in the total store count are the 107 locations in Canada, amounting to 16 Banana Republics, 29 Old Navy units and 187 Gap concepts. The Canadian operations report to Gary Muto, president of Gap U.S.

“At this point, we obviously feel we have significant opportunities to expand internationally, especially with Old Navy and Banana Republic,” a Gap spokeswoman said. “With that said, we are considering strategies that vary by country and could use different business models that work for specific cultures. We will apply some of the lessons we have learned over the years internationally.”

She acknowledged that Gap also is considering entering additional countries, but said the company is not ready to go public on which ones.

“We know our brands have global consumer appeal, and international expansion represents a clear, longer-term opportunity for our company,” Pressler said in a statement. “Andrew has proven leadership skills in strategically growing retail brands globally. Andrew and his team will be responsible for continuing to tailor our business to satisfy customer preferences in existing international markets, while also identifying the best ways to serve other customers around the world who want to shop Gap, Old Navy and Banana Republic.”

But Gap has had some difficulties expanding abroad. It took several years before its stores in the U.K. and Germany performed strongly as Gap learned about local tastes, marketing methods and pricing structures. In addition, its new strategy raises questions over how strict Gap will be about store design and merchandising, given that new partners may be added to the mix and that its reputation is built upon stores that look the same and are merchandised the same, from Tokyo to Topeka.

Since becoming Gap chairman and ceo, Pressler has filled several top jobs by pulling talent out of Disney, where he used to work. By selecting Rolfe, Pressler once again went outside the box. During his five-year tenure at Pret A Manger, Rolfe turned the British company into an international retailer, although it recently has decided to scale back its ambitions in the U.S. He was dismissed last March after a boardroom shakeup that resulted in Pret A Manger founder Julian Metcalfe taking day-to-day control of the chain again. There were disagreements between management and key shareholders over the aggressive expansion pace into the U.S. and Asia set by Rolfe. Despite the past controversy, a Gap spokeswoman indicated, “We think Andrew Rolfe’s leadership skills for growing retail brands is top of the crop.”

Earlier in his career, Rolfe was ceo of Booker Foodservice, a contract and wholesale distribution company in the U.K. catering the industry, and vice president of the European operations for PepsiCo Restaurants International.

“He has a great reputation for strategic thinking, leadership and motivating people,” said Alison Hill, senior client partner, at the London office of Korn/Ferry International.

The last person to be in charge of Gap International was Ken Pilot, who left in August 2002 to run J. Crew and, when Millard Drexler arrived at Crew, then shifted to Polo Ralph Lauren Corp. as president of factory stores and retail concept development. Since Pilot left Gap, responsibilities for running Gap International were shared by Patti Cazzato, senior vice president of international merchandising and planning; Ron Young, the vice president of international finance; country managers, and Pressler.

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