Apparel firm The Gap (GPS) reported good numbers and an improved outlook in Thursday night's Q3 earnings call, spurring a boost in buying activity this morning. Gap owns a handful of brands in addition to its self-named store chain -- Old Navy, Banana Republic and Athleta are just a few of them. All told, Gap owns more than 3,000 stores in North America, Europe and Japan. The firm franchises another 200 locations in emerging markets like the Middle East and Southeast Asia.
Even though the apparel business is supremely competitive, Gap has done a good job of staying one step ahead of the game. The firm's brand is strong, and it's stayed ahead of consumer fashion tastes by catering to a less volatile demographic: young-to-middle aged professionals whose preferences haven't changed much in the last decade or so. While other brands do step into more fickle consumer groups (like Old Navy's focus on a much younger crowd), the firm approaches those markets cautiously, the same way it's handling international growth.
While Gap owns its domestic stores, the firm opted to franchise its emerging market growth, taking considerable risk off of its balance sheet without precluding the firm from growth opportunities abroad. The firm also took the Great Recession as an opportunity to shore up its finances and restructure -- that's helped shove net margins closer to the double-digit range. Currently the firm pays a 12.5-cent quarterly dividend for a 1.43% yield. That payout looks likely to increase in the next quarter.
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