What’s new: American clothing retailer Gap Inc. is selling its business in greater China to Chinese e-commerce services provider Baozun Inc. for as much as $50 million, Baozun said Tuesday.
Baozun, which has partnered with Gap Greater China since 2018, also signed a series of business agreements to get exclusive authorization to produce, market and sell Gap’s products in China and to design Gap products in China. The agreements will last 10 years and can be renewed for 10 years.
The deal is expected to close in the first half of 2023, subject to customary closing conditions and regulatory approval, Baozun said Tuesday in a filing with the Hong Kong stock exchange.
Baozun said the purchase includes Gap’s Shanghai and Taiwan subsidiaries. The Shanghai company last year reported a net loss of 256.1 million yuan ($35.3 million), while the Taiwan company lost 200 million New Taiwan dollars ($6.3 million).
Gap entered China in 2010 and expanded to more than 200 stores at the peak across the Chinese mainland and Taiwan. Some of the stores closed in recent years as many fast fashion brands withdrew from the market.
The background: Gap is struggling with years of slumping sales globally. The company reported an 8% decline in comparable sales in the second fiscal quarter and a net loss of $49 million, compared with a profit of $258 million in the same period a year ago.
Baozun runs e-commerce and store operations for a variety of brands in China. It has helped Gap’s digitalization in China since 2018. Mark Breitbard, president and chief executive of Gap Brand, said Baozun helped the apparel retailer achieve online growth and penetration in greater China over the past four years.
But Baozun is specialized in online operations, and taking over more than 100 physical stores will be a big challenge, the company acknowledged.
Since the spring of 2022, multiple Covid-19 outbreaks across the country and control measures have depressed physical retail consumption. In the first nine months of 2022, China’s retail sales of apparel products decreased by 4% year on year.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
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