By Thomas J. Ryan
<span style="color: #999999;">Gap Inc. said growth at Athleta slowed in the third quarter due to in-store traffic and assortment challenges, but expansion for the concept was ramped up to 30 stores for the current year.
“Our team remains focused on growing market share and continues to believe that our inclusive brand positioning, unique product offering and high touch experiential store service model sets us up to win in this competitive retail landscape,” said Teri List-Stoll, EVP and CFO, Gap Inc. about Athleta on a conference call with analysts. “We’ve accelerating store openings to around 30 this year, in line with our strategy to accelerate growth, and we now expect to end the year with 190 Athleta stores.”
Previously, Gap planned to open 25 Athleta stores this year.
List-Stoll handled most of the details of the call with the exit of Art Peck, who stepped down as CEO on November 7. Robert J. Fisher, a son of the Gap’s founders and currently the company’s non-executive board chairman, replaced Peck on an interim basis.
Regarding the third quarter, List-Stoll said Athleta grew market share and maintained a strong performance in key franchise collections like Powervita, City and Hybrid. The Athleta girls’ business also continued its momentum, expanding double-digits.
“That said,” added List-Stoll, “we did see some softness in the business at the start of the quarter, which we quickly diagnosed as largely being associated with two levers; in-store traffic and assortment mix.”
Regarding in-store traffic, List-Stoll said the company believes Athleta was impacted by some changes made to its marketing messaging and by how in-store product was displayed, both of which have since been adjusted for the fourth quarter.
He added, “Given Athleta’s lower brand awareness, as compared to our other brands, we have been increasing marketing investments and are still working to refine our messaging in a way that drives both in-store and online traffic.”
The assortment presentation challenges were attributed to two issues. First, initial Q3 flows were “more far forward in color and weight, which didn’t work well, particularly in light of the warmer weather at the start of the quarter.” Secondly, the assortment mix over-indexed to performance wear at the expense of lifestyle.
Said List-Stoll, “We’ve taken immediate steps to rebalance our product assortment in Q4 toward a more appropriate mix of performance, which has historically made up around 50 percent of our total versus the 60 percent in Q3. As weather shifted in October, we saw improving trends in stores with positive indicators such as higher average transactions and improving sales over traffic, and we’re optimistic about carrying this momentum into Q4. We feel good about our holiday gifting assortment and added an additional flow-through in certain newness and give our customers a reason to keep coming in and shopping with us throughout the season.”
Online, Athleta continued to have double-digit growth. Said the CFO, “Athleta is actually about half online, given its heritage, and still is posting double-digit growth there.”
List-Stoll also introduced Mary Beth Laughton, who became Athleta’s president and CEO in September, to the analyst community. Laughton was most recently EVP of omni-retail for Sephora U.S. and had previously spent nine years at Nike. Laughton replaced Nancy Green, who became president and chief creative officer of Old Navy.
Said List-Stoll, “Mary Beth, who was most recently at Sephora, brings a strong background and proven track record of results in both digital and store operations. We welcome her insights and are confident that she is the right leader as the brand continues upon its path toward $2 billion in revenue.”
Photos courtesy Athleta
