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Gap announces India expansion and higher quarterly profits

Gap plans to open its first stores in India in its latest international expansion.

The San Francisco-based retailer, which also owns the Old Navy and Banana Republic chains, said Thursday it will launch a total of 40 franchise Gap (GPS) stores in Mumbai and Delhi in 2015 through a partnership with Indian textile company Arvind Lifestyle Brand Limited. The company said it has imported products from India for years and now it will look to tap into a market with 1.2 billion people.

“More than half of India’s population is under 25 and they are actively embracing fashion in today’s retail environment,” Ismail Seyis, VP of Gap’s global franchise, said in a statement. “We are thrilled to know that our brand awareness is very high and there is a deep affinity for Gap in India. We look forward to gaining a deeper understanding of the marketplace and consumer needs to create the best possible Gap brand experience for the local consumers.”

The move to India is the latest step in Gap’s global expansion plan, which has placed the retailer in almost 50 countries. The company has 3,200 Gap-owned stores around the world as well as nearly 400 franchise-operated stores overseas. Earlier this year, the company announced plans to expand its presence in another ripe Asian market in China, where Gap expects to open 25 stores and 10 outlet stores this year. On Thursday, Gap said it expects to finish 2014 with a total of 110 Gap stores spread across mainland China, Hong Kong and Taiwan.

Last year, Gap expanded its presence in Latin America, opening stores in Mexico and Paraguay, and also in Europe with new locations in Hungary.

Also on Thursday, Gap released second-quarter profits of 75 cents per share, which was up 17% from the same quarter last year. The company’s sales came out just ahead of Wall Street estimates, hitting $3.98 billion for the quarter, up 3% year-over-year. The company also raised its earnings guidance for the full fiscal year to between $2.95 and $3 per share, after previously predicting it would fall between $2.90 and $2.95.

However, the company also reported that its comparable sales were flat in the second quarter after they increased by 5% during last year’s second quarter. Comparable sales for the Gap brand, specifically, were down 5% after rising 6% during the same quarter last year. Old Navy’s comparable sales were up 4%, while Banana Republic’s were flat.