Q1: US Store: US$650 per sq.ft. X 1.541 (exchange rate 14 December 1998) = C$1,001.65 per sq.ft.
French Store: FF30,749.39 per sq.mt./10.764 = FF2,856.69 per sq.ft./FF5.537 (exchange rate 14 December 1998) = US$515.93 per sq.ft. X 1.541 = C$795.04 per sq.ft.
Tokyo Store: (911,372 per sq.mt./10.764 = (84,668.52 per sq.ft./115.5 (exchange rate 14 December 1998) = US$733.06 per sq.ft. X 1.541 = C$1,129.65 per sq.ft.
On a per square foot (sq.ft.) basis, the Tokyo store is the most productive.
Q2: Most of the SKUs in the store come from emerging market nations because the costs of production to The Gap are lower in emerging market nations than in more developed economies where labor values are higher. Many of the SKU items will have been produce in more than one emerging market nation for a number of reasons. Among these reasons are that (a) emerging market nations frequently do not possess the necessary levels of capacity and skills to produce all of a product demanded by a global marketing corporation such as The Gap, (b) The Gap may desire to distribute production contracts among a number of emerging market nations to reduce exposure to currency instability, (c) The Gap may desire to distribute production contracts among a number of emerging market nations to reduce exposure to political instability, and (d) The Gap, by distributing production contracts among a number of emerging market nations, can promote price competition among the producers in the several emerging market nations.
3. If it was suspected that the US Federal Reserve likely would raise US interest rates, such action could cause the value of the US$ in relation to other currencies to increase in value. Thus, in such an instance, the prudent action would be to maintain a naked F/X exposure, as the US$ likely would decrease the real cost of the imported products to The Gap. The reverse would be true if the probability was that the US Federal Reserve mi...