Despite Gap's (NYSE:GPS) recent tough times, the company seems ready for some world travel. Tuesday, Gap announced plans to expand into the Middle East. I'm wondering whether many Gap shareholders would prefer that the company fix problems in its own backyard.
According to Gap's press announcement, the company has forged an exclusive agreement with Al Tayer Group to introduce the Gap and Banana Republic brands into the United Arab Emirates, Kuwait, Qatar, Bahrain, and Oman. Its goal is to open 25 Gap stores and 10 Banana Republic stores by 2010; the first Gap stores will be opened later in 2006, and the first Banana Republic storefronts will follow in 2007.
According to the press announcement, Gap and Al Tayer hope to attract the "young and affluent population" in the Middle East. Through the agreement, Gap says that it will have increased its' brands global reach into 12 countries (for The Gap) and nine countries (for Banana Republic) by 2010. The deal marks Gap's second recent franchise arrangement; the first brought Gap stores to Malaysia and Singapore.
Retail hawks may already be aware of Gap's recent struggles. It's endured several years of lagging sales, and its latest quarter was no exception, lending additional urgency to the problems at hand. Top executives have been leaving at a rapid clip. President and CEO Paul Pressler -- who previously worked at Disney (NYSE:DIS) -- was brought on board to mend Gap's problems, but it's increasingly clear that many shareholders would rather see him move along. (He may not have gotten a bonus this year, but he certainly hasn't been hurting for compensation.) Despite the common arguments in favor of Gap's strong balance sheet and brand, the company has a lot to fix.
Why expand internationally when there's so much to be mended right here at home? With Gap's fashion mix clearly failing to connect with customers, the retailer's mandate seems obvious. Gap should get its fashion sense back before taking on the world.
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Alyce Lomax does not own shares of any of the companies mentioned.
