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Gap Inc. is on the road to Rio.
This story first appeared in the December 19, 2012 issue of WWD. Subscribe Today.
The San Francisco-based apparel retail giant said Tuesday that it had reached a franchise agreement with Tudo Bom Comércio Ltda. to open stores in Brazil, Latin America’s largest economy.
Gap’s first stores in the country are scheduled to open next fall in São Paulo, followed by units in Rio de Janeiro. The stores will incorporate merchandise from the collections of Gap, GapKids and babyGap. The number of stores in each market hasn’t yet been determined.
Gap is a relative newcomer to Latin America, having entered South America with its first stores in Chile last year. Since then, it’s opened its doors in Panama, Colombia, Mexico and, most recently, Uruguay. In Brazil, Gap merchandise had only been available in duty-free shops.
Since opening its first franchise stores in 2006, Gap’s portfolio outside the U.S. has grown to 300 units in 40 markets throughout Asia, Europe, the Middle East and Australia as well as Latin America. In addition to its nondomestic franchise units, at the end of the third quarter, it operated 631 of its own stores outside the U.S. and Puerto Rico, including 469 under the Gap banner.
The move into Brazil is significant not just for the market’s size — its 2011 gross domestic product last year was just shy of $3 trillion — but because of the nation’s potential. For the past two years, Brazil has secured the top spot on A.T. Kearney’s Global Retail Development Index, which uses factors ranging from economic vitality to cultural openness to rate the opportunities for retail expansion within individual markets. Following Brazil with spots in the top five among the so-called BRIC markets were China, third; India, fifth, and Russia, which fell 15 spots to 26th.
“Brazil is a critical next step in our global expansion strategy, and we are excited to introduce our store experience to customers,” said Stefan Laban, managing director of strategic alliances at Gap. “Given that Brazil is the fifth-largest country in the world and the largest Latin American economy, we feel that this market provides us with an incredible growth opportunity.”
While Gap’s operations in the U.S. have been growing well this year, its international operations have struggled along with the economies of Europe and Asia. Franchise sales for the first nine months of the fiscal year rose 21 percent to $248 million as Gap and Banana Republic’s footprints expanded, but year-to-date same-store sales for the international unit were down 4 percent on top of a 7 percent decline last year.