Gap Inc. reported that Athleta’s net sales in the first quarter were up 56 percent versus 2019. Comparable sales grew 27 percent year-over-year and 46 percent versus 2019.

Gap said in a statement, “Athleta drove outsized digital growth, up 113 percent compared to the first quarter of 2019, while achieving record regular-priced sales through gains in relevant product categories and purpose-led marketing. The team made significant strides driving brand awareness during the quarter through the launch of inclusive sizing and with the announcement of a partnership with Simone Biles, the most decorated gymnast in World Championships history.”

Companywide, the company’s first-quarter fiscal year 2021 net sales of $4 billion were up 8 percent compared to 2019. The company estimates that COVID-related closures in markets outside of the U.S. resulted in approximately 2 percent of sales decline versus 2019. Additionally, strategic permanent closures in the Gap and Banana Republic brands as part of the Power Plan 2023 strategy, while earnings accretive, reduced net sales by approximately 5 percent versus 2019. Comparable sales were up 28 percent year-over-year, and up 13 percent versus 2019. The comparable sales calculation reflects online sales and comparable sales days for stores that were open on the same days in both the current and prior comparable period. Market share improved by 9 tenths of a point to last year.

Among its other concepts:

  • Old Navy Global: Net Sales were up 27 percent versus 2019, and the brand maintained its position as the #2 apparel brand in the U.S. [1] Comparable sales were up 35 percent year-over-year and up 25 percent versus 2019.
  • Gap Global: Net Sales declined 16 percent versus 2019, with permanent store closures resulting in an estimated 11 percent sales decline, and international COVID-closures driving an estimated 4 percent decline on a 2-year basis. Comparable sales increased 29 percent year-over-year and decreased 1 percent versus 2019.
  • Banana Republic Global: Net Sales declined 29 percent versus 2019. Comparable sales were down 4 percent year-over-year and down 22 percent versus 2019.
  • Gap Inc.’s first-quarter online sales grew 82 percent versus the first quarter of 2019 and represented 40 percent of the total business. Store sales declined 16 percent versus the first quarter of 2019, primarily due to strategic closures and COVID-closures outside of the U.S.

Gap Inc.’s first-quarter online sales grew 82 percent versus the first quarter of 2019 and represented 40 percent of the total business. Store sales declined 16 percent versus the first quarter of 2019, primarily due to strategic closures and COVID-closures outside of the U.S.

“Our Power Plan 2023 is taking hold. Investments in demand generation, coupled with macro tailwinds, supercharged our brands. Gap Inc. delivered sales growth of 8 percent over 2019 pre-COVID levels, with particular strength at Old Navy and Athleta, a healthy and growing Gap business in North America, and market share gains that outpaced the industry,” said Sonia Syngal, CEO, Gap Inc. “As stores traffic came back, we sustained our digital dominance with 82 percent online growth versus 2019. And while Active and Fleece continue to soar, we saw a resurgence in summer fashion with dresses rebounding, showing that customers are emerging from the crisis wanting to express their style without sacrificing the comfort and digital convenience they’ve become accustomed to. Through the power of our brands, platform and portfolio, we deliver it all.”

2021 Outlook
The company raised its reported full-year diluted earnings per share guidance to be in the range of $1.55 to $1.70. Excluding charges associated with divestiture activity related to the Janie and Jack and Intermix businesses, full-year earnings per share on an adjusted basis are expected to be in the range of $1.60 to $1.75. This outlook does not include the potential impacts of its ongoing strategic review of the European business. In addition, the company continues to closely monitor the impact of COVID-19-related store closures globally and challenges related to supply chain and port congestion. Previously, Gap was forecasting earnings to be in the range of $1.20 to $1.35 per share.

  • Net Sales: The company now expects net sales growth for fiscal year 2021 to be in the low-to-mid-twenty percent range versus 2020, an increase versus the previously communicated net sales growth guidance of mid-to-high teens. The company noted that this outlook reflects lost revenue attributable to the divestitures of Janie and Jack and Intermix, which together represented approximately 2 percent of annual company sales.
  • Operating Margin: Updated reported and adjusted operating margin guidance of about 6 percent, up from previous guidance of about 5 percent, reflects the strong first-quarter performance and accelerated progress toward the company’s objective of achieving a 10 percent operating margin by the end of 2023. Operating margin guidance anticipates a modestly higher level of SG&A spends, as a percentage of sales, in the second quarter versus the first quarter.
  • Effective Tax Rate: The company now expects its reported fiscal year 2021 effective tax rate to be about 24 percent. Excluding the income tax benefit related to divestiture activity, the company expects its adjusted fiscal year 2021 effective tax rate to be about 25 percent.
  • Interest Expense: The company continues to expect a net interest expense of approximately $210 million for fiscal year 2021.
  • Inventory: The company now expects inventory growth at the end of the second quarter of up high-single-digits to mid-teens versus the year ago quarter. The increase is driven by higher in-transit inventory as supply chain challenges continue to drive port congestion and longer lead times.
  • Share Repurchases: The company announced the resumption of its share repurchase program, which has $800 million of its $1 billion authorization remaining. Subject to market conditions and other considerations, the company currently intends to repurchase up to $200 million of shares under the program in the remainder of fiscal year 2021.
  • Capital Expenditures: The company continues to expect capital spending to be approximately $800 million for fiscal year 2021.
  • Real Estate: The company continues to expect to open about 30-to-40 Old Navy and 20-to-30 Athleta stores in 2021 and close approximately 75 Gap and Banana Republic stores in North America.

“We’re pleased with the strong results we’ve seen this quarter. The actions we’ve taken, aligned with our Power Plan 2023 strategy, to reduce discounting, restructure our fleet, and divest our smaller businesses are enabling continued investment in growth and driving us toward our operating margin goal of 10 percent in 2023,” said Katrina O’Connell, executive vice president and CFO, Gap Inc.

Photo courtesy Athleta