On the retailer’s fourth-quarter analyst call, Bob Martin, Gap, Inc.’s executive chairman and interim CEO, insisted the departure of Mary Beth Laughton as president is due to continued product missteps and not from the deteriorating health of its women’s activewear brand.
On Thursday, Gap said Laughton, who had been leading the Athleta business since October 2019, had left the company as the chain endured a challenging holiday period due to continued product acceptance challenges. Athleta’s comps were down 5 percent in the fourth quarter.
“We believe Athleta has incredible potential but has suffered product acceptance issues over several quarters,” said Martin. “As we look to seize the potential and remain competitive amid the dynamic landscape, we believe now is the right time to bring in a new leader who can position Athleta for long-term success.”
The weakening trends at Athleta have also been blamed on a demand shift from athleisure to occasion and work-based categories as consumers dress up more and head back to work with pandemic concerns easing.
The 4 percent same-store decline followed flat comp growth in the third quarter, an 8 percent comp decline in the second quarter and a 7 percent decline in the first quarter.
In February 2022, Gap said it still expected Athleta to deliver a mid-double-digit revenue compound annual growth rate (CAGR) over the next several years, but growth could slow over the next few quarters due to weakening in the active category.
During Gap’s fourth quarter call on Thursday night, Martin said, “On Athleta, we know that the brand can, and will, do better. Its foundational brand health is intact, and its ‘Power of She’ positioning continues to resonate. But at the end of the day, it all comes down to product. Core bottom silhouettes continue to perform true to Athleta’s performance DNA and remain stable in our customers’ wardrobes. However, print and color misses are examples of where we are not meeting her expectations fully.”
Athleta’s net sales in the fourth quarter increased 0.7 percent to $439 million from $436 million a year ago.
In the full year, Athleta’s comparable-store sales were down 5 percent against a gain of 12 percent in the year-ago period. Sales advanced 2.2 percent to $1.48 billion from $1.45 billion a year ago.
In recent years, Gap set a goal for Athleta to reach $2 billion in sales in the current fiscal year.
Athleta closed the year with 257 locations in the U.S. and Canada, against 227 at the same time a year ago. Forty stores opened, and ten closed.
For the current year, Gap said it would slow overall expansion, with the planned openings of 30-to-35 Old Navy and Athleta stores in total while closing 50-to-55 Gap and Banana Republic stores.
Martin said he would work closely with the Athleta team to lead through the transition until the company hires a new brand president. He said, “I will lean in while we search for a new leader supported by a strong leadership team inside Athleta, who will continue to drive the business in the interim. Additionally, we just hired a new head of brand creative, scheduled to join in May, known for bringing vision, voice and a clear point of view to brands of all sizes.”
He thanked Laughton, who had formerly worked for Sephora and Nike, for her “many contributions” to Athleta.
Asked by an analyst what type of leader the company is looking for to guide Athleta and what repositioning the brand required, Martin said, “It all comes down to product. And the acceptance issues we’ve seen from customers are where we’ve not hit the right stride with them in performance. We’ve lost a little of the franchise around our basics and where we always have to be on top of it, whether it’s color, style or whatever. We had too many misses in there, and, right now, we are plagued with some execution issues, I would say, around the business improvement plan (BIP). Those things have dampened the recovery as we have moved back toward performance. There are strong points in the assortment. So, I don’t want to miss that. Today, low and bottoms, knit bottoms are performing pretty well. Everything in our basic assortments, jumpsuits, right now, are trending well. And we’ve hit some of those items, but we are just not on target with the consistency of performance against our customer, who she is, and the style she’s looking for. So, it comes around to getting that design, that styling right and get it where it’s delivered to her in an experience she’s looking for.”
Photos courtesy Athleta
