Gap’s (GPS) Athleta Extends Tie-Up With REI to Bolster Sales

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The Gap, Inc. (GPS Quick QuoteGPS ) is making concerted efforts to boost assortments across its brands. In a latest development, the company’s Athleta label shared the news of its extended wholesale partnership with REI Co-op, a Seattle-based major outdoor retailer. This expansion enables Athleta to offer a curated selection of the products to 135 REI doors nationwide as well as online. Prior to this, Athleta’s assortments were sold in about five REI locations.

The assortments will consist of the selected styles of Athleta’s lifestyle apparel and accessories, which are designed by women for women. Shoppers can avail the brand’s core lifestyle with hike and yoga bottoms apart from tops and accessories. We note that REI will have a specified array of sizing options starting from size 0-26 in hiking and fitness apparel designs, both across its chain of physical stores and online at REI.com. This will enable women to have varied sizing options to shop, thus enabling them to enjoy active lifestyles.

Women’s athleisure label Athleta is a purpose-driven brand and seems on track to deliver $2-billion in sales by 2023. The brand is focused on increasing the new touchpoints to gain customers. Through the latest expansion, management looks to widen Athleta’s footprint to more locations, thus reaching out to more buyers.

Gap’s Athleta brand has been standing out for a while now. During second-quarter fiscal 2021, net sales surged 35% for the brand while the comparable sales (comps) increased 27% from the figure achieved in the comparable period of 2019. The brand’s comps improved 13% on a year-over-year basis. Segmental results gained from performance lifestyle products, strong customer loyalty and an inclusive sizing strategy. Solid omni-channel offerings and product categories are further driving the brand.

What’s More?

Gap is on track with the execution of its Power Plan 2023, which focuses on opening highly-profitable Old Navy! and Athleta stores while closing the underperforming Gap and Banana Republic shops. As part of the plan, the company expects the Old Navy and Athleta brands to contribute to about 70% of sales by 2023. During the second quarter of fiscal 2021, the Old Navy and Athleta together represented nearly 65% of the company’s sales.

In sync with its fleet optimization efforts under the plan, the company plans to close about 100 Gap and Banana Republic stores globally, net of openings, in fiscal 2021, in line with its Power Plan 2023 strategy. With the closing of the underperforming Gap and Banana Republic stores, the company expects to realize $100 million of EBITDA savings on an annualized basis by the end of 2023.

Gap is gaining momentum across its digital business since the onset of the pandemic, driven by a shift in consumer preference toward online shopping. Despite store launches, the company continued to witness strength in its online business with digital sales increasing 65% in the second quarter of fiscal 2021 from the second-quarter fiscal 2019 tally. This upside accounts for 33% of its total sales in the reported quarter. Management projects the e-commerce business to contribute to 50% of sales by the end of 2023.

Such tailwinds have helped this currently Zacks Rank #2 (Buy) stock return 20.4% so far in the year, outperforming the industry’s 7.7% rally.

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