Gap Thinks Athleta Can Be a $2 Billion Business by 2023

The real driver of growth for Gap (NYSE: GPS) has been its women's athleisure wear business Athleta. It was the only brand last quarter that reported an increase in net sales, and it's fast approaching the size of the ailing Banana Republic chain in global sales.

Although Athleta is still its smallest segment, Gap thinks it will double sales to $2 billion by 2023. It said at its investor day presentation on Thursday that the highly profitable business plans to open between 20 to 30 new stores.

Athleta store front

Image source: Gap.

Ready for the marathon

Athleta CEO Mary Beth Laughton delineated the brand's path to $2 billion in sales, driven by its heightened brand awareness among active women.

Citing data from the market researchers at Ipsos, Laughton said 53% of women who work out at least once a week and have made an activewear purchase in the past year are familiar with the Athleta brand.

Moreover, more of Athleta's customers shop the brand across channels, which is important because those who buy online are spending 3.5 times as much as those who shop its stores. Online sales represent over half of the business and continue to expand at double-digit rates.

Gap will be leaning hard into Athleta, but also Old Navy, even as it deemphasizes its Gap stores and those of Banana Republic. It plans to close about 30% of their locations by the end of the 2023 fiscal year.

That means that Old Navy, the biggest brand Gap has, and Athleta will account for about 70% of total sales, up from 55% today. But perhaps equally important for investors in the retailer's stock is Gap saying it plans to return to profitable growth by next year.

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