Specialty apparel retailer Gap Inc. (NYSE:GPS) announced Wednesday that it will open its first Piperlime retail store this fall, at 121 Wooster St. in the SoHo neighborhood of New York City.  Piperlime which begun as an online shoe store in 2006, now has developed into a full fledged online boutique. The brand offers customers a unique mix of private label and leading brands in footwear, apparel and accessories for women and men, as well as footwear for kids.
We believe the decision of launching Piperlime into brick and mortar is primarily influenced from the recent success of Gap’s brand Athleta in the retail stores format. Gap competes with other specialty retailers like Aeropostale (NYSE:ARO), American Eagle (NYSE:AEO), Abercrombie & Fitch (NYSE:ANF) and Urban Outfitters (NASDAQ:URBN).
Piperlime’s entry into bring and mortar is influenced from Athleta’s success
We believe that Piperlime’s foray into stores format is directly influenced by the success of Athleta stores in 2011. Athleta which used to offer only online women’s sports and active apparel until 2010, was Gap’s primary focus of retail expansion in 2011, growing to 10 stores at the year end compared to one store a year earlier. Sales at Athleta and Piperlime, which are reported together, rose to $301 million in the year that ended January 28, a massive 22 percent increase from the previous period, the highest growth rate for any of Gap’s brands.
Additionally, an expansion into the retail segment for new concept brands such as Piperlime and Athleta makes sense because contrary to Gap’s traditional brands, the competition is much lower in these retail segments. Furthermore a lack of significant players in these apparel categories, provide Gap ample opportunities to quickly expand and penetrate into the U.S. apparel market.
We have a Trefis price estimate of $29.89 for Gap’s stock — a premium of around 6% to the current market price.Notes: