Gap Inc. taps global franchises to expand Athleta, Janie & Jack

Dive Brief:

Gap Inc. on Thursday announced an effort to expand its Athleta athleisure and Janie & Jack children's apparel brands worldwide through international franchising.
The initiative will start off mostly online and through shop-in-shops, "and eventually transition into brick-and-mortar store space with proven partners," the company said in a blog post. That includes existing partners with "strong operational capabilities" plus new partners with access to key markets.
The company has leveraged franchises to expand globally for years, and those tie-ups have helped establish The Gap, Banana Republic and Old Navy brands in nearly 40 countries with more than 500 locations and 35 e-commerce sites, the company said.

Dive Insight:

During a meeting with analysts Thursday to further explain the Old Navy spinoff plan, Gap Inc. CEO Art Peck alluded to this work and the success of the company's global franchise model.

More broadly, Peck is portraying what is now called "new Gap Inc." (sans Old Navy) as a way to nurture growth not just at its somewhat tired, middle-aged Gap brand but also at newer ones like Athleta and newly acquired Janie & Jack. The company in March bought the children's apparel brand from Gymboree for $35 million.

"We bought it for nothing," Peck told analysts, also noting the global franchise plans. "[They've got] clean stores, they're under-expressed in outlet ... there's significant and profitable opportunity in front of us with Janie & Jack."

He also offered Athleta as evidence of Gap Inc.'s potential as an incubator. Wells Fargo analysts led by Senior Analyst Ike Boruchow, in comments emailed to Retail Dive, noted that the company's first-ever disclosure yesterday of Athleta's revenue (almost $900 million last fiscal year) reveals that it's grown at a 23% compound annual growth rate over the past six years.

"Management clearly views the concept as an important growth driver at Gap Inc. in the coming years, as they are accelerating investments into marketing, store expansion, outlet, digital and international opportunities," Boruchow said. "For the company, Athleta is a strong point of proof in their ability to incubate smaller niche brands — hence their accumulation of the smaller Hill City, Janie and Jack, Intermix concepts, [which] combined, represent 3% of total sales."

Franchising is nothing new for Gap Inc. The brand first pursued it in 2006 to open its first Gap franchise store in Singapore. In the last three years, the company opened 100 new franchise locations. One of its latest, announced in January, is a partnership with AR Retail S.A., a member of Grupo Promerica, to open 45 Gap, Banana Republic and Old Navy stores in Central America and the Caribbean over the next eight years, the company said Thursday.