Gap, Inc. is celebrating strong fourth-quarter results, which rounded out an exceptional year for the parent of the Gap, Athleta, Old Navy, and Banana Republic retail banners as comps were positive across the legacy brands. Athleta, however, had a more challenging quarter, with comps down 2 percent while maintaining market share and more work to do as management looks to continue efforts to reset the brand.
Richard Dickson, President and CEO of Gap, Inc., told analysts on the company’s Q4 conference call that Athleta stabilized revenue for the full year, delivering a flat comp and improvements across several key metrics.
“The brand re-entered the cultural wellness and sports conversation through major activations that engaged key brand partners like Simone Biles and Katie Ledecky on the world stage in Paris, and, most recently, Lexie Hull and Kate Martin,” he offered. “In addition, we meaningfully increased the number of new and reactivated customers.”
Dickson said on the call that he was encouraged by Athleta’s ability to maintain its rank as the No. 3 brand in the women’s active category this year and the only brand in the Top 3 to gain share.
“While the brand maintained market share in the fourth quarter, it did not meet our expectations,” added CFO Katrina O’Connell, and the team will be taking away important learnings and insights for 2025 as we continue to reset the brand.”
O’Connell also noted that AURs were up higher than pre-pandemic levels across all banners, with the exception of Athleta.
“Despite a strong start to the holiday season, Athleta struggled to keep up its core loyal customers engagement during the peak holiday shopping moments,” Dickson noted. “In 2025, we will be strengthening our product and ensuring newness to excite our core customer base while continuing to inspire new customers.”
Dickson said that Athleta had made progress in several areas in 2024, but he noted that the company is still in the process of resetting the brand, which, in the near term, may result in choppy quarterly performance.
“We have more work to do to implement our reinvigoration playbook and realize the brand’s full potential. Our ambitions for Athleta remain high,” Dickson said.
Looking ahead, O’Connell forecasted Gap, Inc.’s growth of approximately 1 percent to 2 percent year-over-year, including an estimated 30 basis-point unfavorable impact from foreign currency due to a stronger U.S. dollar.
“Our outlook assumes ongoing strength at Old Navy and Gap, stabilizing performance at Banana Republic, and a longer recovery timeline at Athleta,” O’Connell shared.
During the Q&A session, Dickson reiterated that resetting Athleta is still top-of-mind.
“We’re very ambitious with Athleta,” Dickson said. “Despite having a challenging quarter, we delivered a flat comp for the year. So, we have seen improvements across several key metrics, and we also gained share. All in all, I’m feeling really optimistic and proud of the team’s results. We are moving into a continuous improvement model and expect and anticipate another exciting 2025.”
When asked to elaborate on the plans to reinvigorate the Athleta business, Dickson said that it’s essential first to recognize Athleta is the number three brand in the women’s active space.
“It’s an important brand in the industry, and it’s an important brand in our portfolio,” he continued. “It’s also important, as I mentioned, on an annual basis, Athleta delivered a flat comp for the year. That’s up against a double-digit decrease from the year prior. So, we’ve seen improvements across several key metrics. And, most notably, we gained market share.
“The progress we’ve been making around the brand’s identity, we launched new activations. We’ve been re-entering the cultural conversation, reinforcing our confidence in the long-term opportunity, and we acknowledge that we have continued work to do to continue to reset the brand. In the quarter, we didn’t meet our expectations. And, specifically, we need to do more to excite our core customer during the holiday period,” continued Dickson.
Dickson also acknowledged that the company used promotions during the holiday period as a lever to engage with customers during the quarter.
“The good news is that we successfully managed our inventory, and we’re starting the year with better inventory composition in comparison to the same time last year,” he continued. “We have seen the drops that we’ve had in our color drops, our fashion drops. They’ve attracted new customers. We’ve done a great job reactivating customers, but ultimately, we lacked the depth of product interest of our core customers. And now, we will find that right balance as we move into a focus for 2025. I will reiterate that our ambitions remain high for this brand; we love the category. It’s the largest category in the industry, but we have more work to do.”
Image courtest Gap, Inc./Athleta
