Gap, Inc. continues on its plan to reset the company’s Athleta business after another down quarter for the active lifestyle apparel retailer.
Athleta net sales amounted to $308 million in the fiscal first quarter, a 6 percent year-over-year decline. Comp store sales decreased 8 percent year-over-year.
“In Q1, we continued to work through the over rotation we discussed last quarter towards new more trend forward customers,” offered Gap, Inc. CEO Richard Dickson on the Q1 conference call with analysts. “While we were successful in bringing new customers in the quarter, we still did not have enough compelling products to appeal to our existing customer base and that showed in the brand’s performance.”
He reiterated his commentary from the Q4 call that they expect this year to be choppy as the company focuses on “fixing the fundamentals.”
Dickson still believes the brand has a “valuable place in both our portfolio and the industry” and they continue to invest in design talent and work to find the right balance across the assortment, delivering product that blends fashion, function, and brand relevance.
“But this will take time,” he cautioned. “There is more work to do and we are committed to taking the necessary steps to reset the brand.”
Dickson said they made progress in the Athleta brand in 2024, primarily through a lot of discipline and rigor, which he said is actually showing up in better profitability.
“What we need to do more work on to break through is get our product and marketing to get back to top line growth,” he added.
“Now we’re continuing to work through what we shared last quarter, which was an over rotation towards a new, more trend forward customer,” he continued. “And by the way, we’ve been successful in bringing new customers into the brand, and we did also see new customers in the quarter, but we still don’t have enough compelling products to appeal to our large existing customer base, and that’s showing up in the brand’s performance.”
Consolidated Gap, Inc. net sales for Q1 were $3.5 billion, up 2 percent year-over-year, with comparable sales up 2 percent. Old Navy net sales were $2 billion with a +3 percent comp, Gap brand net sales were $724 million with a +5 percent comp, and Banana Republic net sales were $428 million with a flat year-over-year comp.
Brand momentum at Old Navy and Gap reportedly continued, though comps for Gap decelerated from +7 percent in Q4 to +5 percent in Q1, and Old Navy remained at a +3 percent comp. Banana Republic comps slowed from +4 percent to flat, while Athleta’s comps deteriorated from down 2 percent to down 8 percent.
Consolidated AUR was said to be “down modestly,” but that it was primarily due to higher promotional activity at Athleta.
Looking ahead, the company continues to expect net sales to be up 1 percent to 2 percent year-over-year. The outlook reportedly assumes ongoing strength at Old Navy and Gap, stabilizing performance at Banana Republic, and a longer recovery timeline at Athleta.
Image courtesy Athleta/Gap, Inc.
