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Gap details growth strategy; will test Piperlime store

New York City -- Gap reaffirmed the company’s commitment to reducing square footage at home while aggressively growing its online revenue and international presence during a presentation to investors in New York City. Gap also revealed that it will explore a brick-and-mortar store for its online-only Piperlime division next year.

Gap said it is on track to its goal of a 10% reduction in overall store square footage (as compared with 2007) in North America by the end of fiscal 2012. Gap’s namesake brand will cut its square footage 34% overall (compared with 2007 levels), resulting in 700 U.S. and Canada Gap stores and 250 Gap Outlet stores at the end of 2013.

The plan for Old Navy is to have roughly the same number of stores in North America, but with a smaller footprint, The chain expects to potentially remove another 1 million sq. ft. by fiscal year end 2013.

The company is growing its new athletic apparel brand, Athleta. The division is on target to have opened 10 stores in North America by the end of fiscal year 2011, and 50 locations by the end of fiscal 2013,

Gap’s e-commerce sales were up 19% in the first half of the year. The retailer expects the direct division to hit $1.5 billion in revenue by yearend, and to reach $2 billion in revenue and operating income of $500 million by the end of fiscal 2014.

On the international front, Gap will debut Old Navy abroad within 18 months, opening in Japan. It plans to nearly triple the number of Gap stores in greater China from roughly 15 by yearend to about 45 by the end of 2012. The first Gap flagship in Hong Kong is set to open in a matter of weeks on Queen’s Road, as is the company’s first Banana Republic flagship in Paris later this year.

Gap International president Stephen Sunnucks said the company’s new stores are performing well in China and Italy, and the franchise business experienced 48% revenue growth in the first half of fiscal 2011. The company expects to double its franchise stores to about 400, by the end of fiscal 2014.

The company reaffirmed its fiscal 2011 full year earnings per share guidance of $1.40 to $1.50.

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