Gap Inc. said its Athleta women’s activewear concept delivered another strong quarter, benefiting from its ability to quickly react to trends and targeted marketing efforts.
“Simply put, Athleta is on fire,” said Art Peck, president and CEO, Gap Inc. on his company’s third-quarter conference call with analysts. “Top and bottom line momentum continues. We’re seeing exceptional growth outpacing the industry with operating margin expansion.”
Peck said while “many things are driving” Athleta’s success, one major contributor is that half of the assortment in the mix is on a pipeline of six to 11 weeks. Said Peck, “This allows us to responsibly buy the initial assortment and then feed units into the business as we see market share opportunities.”
He also said the chain is ”making highly targeted and highly efficient marketing investments focused on customer acquisition, which continues to grow the customer file and continues to accelerate brand awareness.”
Peck added that the back-to-school period has become more important for Athleta with its girls’ line launching earlier this year and now in all stores. Said Peck, “And we were not disappointed and, importantly, this business has been added with no incremental ROD and minimal expense, making it highly accretive.”
Online, Athleta “continues to grow faster than the industry,” Regarding its physical stores, Peck added. “We continue to also thoughtfully expand our retail presence, opening seven new stores this quarter and about 15 on the year. We anticipate the total size of the fleet to be about 150 stores as we exit 2017, and we’ll continue to open new doors into next year.”
Companywide, Peck noted that one of its four growth pillars remains “investing in growth and value in Active; and importantly, in Active, that extends into the performance lifestyle space.”
Peck highlighted the flagship Gap chain’s performance in Active. He said, “Super solid traction also there in the Active and in the performance lifestyle space. Excellent traction in GapBody.”
He didn’t discuss the Active category’s performance at Banana Republic or Old Navy.
Gap’s three other growth pillars are accelerating its online and mobile business; reducing the company’s exposure to traffic-challenged real estate through rationalization, largely in Gap and Banana Republic brands; and substantially improving the productivity of the business.
Gap Inc.’s earnings advanced 12.3 percent in the quarter to $229 million, or 53 cents a share. Excluding non-recurring items, the company earned 58 cents per share, beating analysts’ average estimate of 54 cents.
Net sales rose about 1 percent to $3.84 billion. Analysts had expected sales of $3.76 billion. Same-store sales rose 3 percent while analysts were expecting a 1.01 percent gain.
Gap Inc. raised its full-year adjusted profit forecast to $2.08 to $2.12 per share from its previous estimate of $2.02 to $2.10.
Photo courtesy Athleta