Gap’s update on its global strategy says much about the shift in the balance of power for multinational fashion retail groups – acknowledging difficult times in North America, but also the key role that international markets will play in future growth.

In one respect, nothing has changed: the company reaffirmed its target of 30% of sales coming from international and online businesses by the end of fiscal 2013; and to illustrate the story so far, it pointed to the 16% growth in retail sales outside North America in the first half of the year, and the 19% surge in e-commerce revenue.

But the big news came in the detail of exactly how Gap expects to achieve this: by closing nearly 200 Gap stores in North America by the end of fiscal 2013, bringing the roster down by more than 20% to 700.

That’s an acceleration of a strategy which the business has been pursuing for the past few years and, while the region’s stuttering recovery has undoubtedly prompted the move, it’s also a tacit acknowledgement that the saturated retail market built up in the years following the millennium was unsustainable.

Company chairman and CEO Glenn Murphy was keen to avoid accusations of deserting his domestic market, however. “This is not a condemnation of our home country, but we are making a prediction that it’s slow growth here,” he said.

Gap also admits that it hasn’t got everything product-related right at home, confessing that its women’s wear offer in particular is not chiming with consumers traditional or new.

The store closure programme will be accompanied by increased diversification in the US: athletic apparel brand Athleta is expected to have 10 stores in North America by the end of this fiscal year, and 50 by the end of fiscal 2013, while Piperlime is expanding its apparel assortment, testing men’s apparel and will “explore” a store concept next year.

Meanwhile, Gap's overseas expansion follows a familiar enough pattern: increasing the number of Gap stores in greater China from 15 at the end of this year to 45 by the end of fiscal 2012; opening the first Gap flagship store in Hong Kong imminently, to be followed by the first Banana Republic flagship store in Paris later this year.

More insightful was Gap International president Stephen Sunnucks’ outlining of the company’s international template for new markets: enter with brand-building flagship stores, then follow with outlet and smaller stores in outlying areas, plus an online presence.

This model already applies to Gap and Banana Republic, Sunnucks said, but could also be used “over time” for value-oriented Old Navy – which Gap plans to bring to Japan in the next 18 months.

Other markets will use the franchise model, whose numbers are expected to double to 400 by the end of fiscal 2014, and Sunnucks was keen not to let short- to medium-term market pressures in countries like the UK and Japan distract from the validity of the company’s long-term strategy.

Finally, online. Gap Direct president Toby Lenk expects to hit US$1.5bn in revenues by the end of this fiscal year, leaving the division on track to reach $2bn in revenue and $500m in operating profit by the end of fiscal 2014.

Online activity is likely to become ever more crucial as Gap’s international footprint expands in emerging markets: in China, online orders have been received from no fewer than 330 cities all over the country – an indication of how internet-literate the country’s emerging consumer base is.

But there are challenges for Gap’s international business beyond handling its expansion plans.

Comparable store sales for Gap International fell in the first half of this fiscal year, with Sunnucks admitting the company’s shortcomings in women’s apparel in particular.

“I needed to keep people focused on the product side,” Murphy told investors in acknowledgement of Gap’s room for improvement in this area.

Meanwhile, he will be hoping that that product focus – along with this revamped corporate strategy – will turn around a disappointing performance in the first half of this year, when net profit fell 21% to $422m.