UPDATE 1-Gap to remodel 50 Old Navy stores in 2009

* To remodel 50 Old Navy stores

* Open 40 new franchise stores in about 20 countries

* Backs FY09 capex of $350 mln

June 10 (Reuters) - Gap Inc (GPS.N), which operates the Banana Republic, Old Navy and its namesake chains, said it plans to remodel about 50 Old Navy stores in 2009 and open about 40 new franchise stores internationally.

Gap is in the midst of a turnaround effort as it tries to improve its product, stores and merchandising to recapture the loyalty of consumers who have gravitated to rival brands.

In a statement, the company said it was encouraged by results from the new store prototype that it tested in two Old Navy stores in California this year.

"Early results demonstrate the new layouts create a better experience for our customers that better captures the unique energy that's central to Old Navy's fun personality," Chief Executive Glenn Murphy said as part of a presentation at the Piper Jaffray annual consumer conference.

Old Navy, the company's lower-cost chain, has been the hardest hit among Gap's divisions despite shoppers' recent preference for lower-priced chains, but sales at the chain are beginning to improve following successful marketing efforts.

The company also said it plans to open 40 new franchise stores in a total of 20 countries by the end of the year and expand its Outlet business in the United Kingdom, Japan and Canada.

Gap, which also reiterated its capital expenditure outlook of $350 million for fiscal 2009, said plans to expand offerings for online shoe and handbag shop, Piperlime, include the addition of 50 new contemporary apparel labels later this summer.

The company's stock was down 14 cents at $16.80 Wednesday morning on the New York Stock Exchange. (Reporting by Amitha Rajan in Bangalore; Editing by Jarshad Kakkrakandy)