Gap Inc. said Athleta’s sales increased 29 percent in the fourth quarter with comparable sales up 26 percent.
Gap Inc. said promotional activity at Athleta was well below last year, driving margin expansion in the quarter. As part of Athleta’s long-term growth strategy, new product launches in the quarter, specifically inclusive sizing and sleep, continued to drive brand awareness and customer engagement. New customer acquisition increased 70 percent versus last year.
For the year, Athleta’s sales grew 16 percent and sales surpassed $1 billion. At the close of the year, Athleta finished with 199 stores, opening 11 and closing two during the year. Gap said it plans to open 20 to 30 Athleta stores in fiscal 2021.
Companywide, the fourth-quarter fiscal year 2020 net sales were $4.4 billion, a decrease of 5 percent compared with last year. COVID-19-mandated store closures in international markets and softer store traffic in select U.S. regions with stay-at-home restrictions impacted sales by an estimated 4 percentage points. In addition, strategically planned permanent store closures had an estimated sales impact of about 5 percentage points.
Online sales grew 49 percent compared with last year. Online represented 46 percent of net sales in the fourth quarter, which was an increase of over 17 percentage points versus last year. Store sales declined by 28 percent in the quarter, with impacts from COVID-19 and strategic closures noted above.
Comparable sales for the quarter were flat. The comparable sales calculation reflects online sales and comparable sales days in stores that were open.
Among its other chains beyond Athleta, Old Navy’s net sales increased 5 percent, with comparable sales up 7 percent. Gap’s net sales were down 19 percent, and comparable sales were down 6 percent. Banana Republic’s net sales were down 27 percent, and comparable sales were down 22 percent.
Reported operating income was $134 million, or 3.0 percent of sales, leveraging 820 basis points versus last year’s operating margin, due to prior year flagship store impairments and separation-related costs. Adjusted operating income, excluding the $56 million impairment charge for Intermix, was $190 million, or 4.3 percent of sales, a decrease of 160 basis points compared with adjusted operating income for the fourth quarter fiscal year 2019.
The company’s diluted earnings per share was 61 cents for the fourth quarter of fiscal year 2020, including approximately 45 cents a share for non-recurring tax benefits and approximately 12 cents in impairment charges related to the Intermix business resulting from a strategic review. In the year-ago period, the net loss was $184 million, or 49 cents a share.
For the year, sales were down 15.8 percent to $13.8 billion from $16.4 billion a year ago. The net loss came to $665 million, or $1.78, against earnings of $351 million, or 93 cents, a year ago.
Looking ahead, the company said it expects diluted earnings per share to be in the range of $1.20 to $1.35. Net sales are expected to reflect mid-to high-teens growth versus fiscal year 2020, which assumes COVID-19 impacts persisting in the first half of 2021 and a return to a more normalized, pre-pandemic level of net sales in the second half of 2021.
“We faced one of the most difficult years in our company’s history and, throughout, our teams showed resilience and determination as we navigated unprecedented disruption in our industry to set a course for long-term growth. Our powerful brands moved to the offense with purpose-led marketing and strength in relevant categories, like Active and Fleece, allowing us to gain meaningful market share quarter-over-quarter in a fragmented environment. This was enabled by our $6 billion online business and advantaged digital capabilities allowing us to expand our reach to more than 183 million customers this year,” said Sonia Syngal, CEO, Gap Inc. “We are focused on executing against our Power Plan 2023 and delivering profitable growth in 2021.”
Photo courtesy Athleta