Gap bets on Athleta for 2023 growth strategy

By

Jennifer Braun

Published
Oct 23, 2020

Gap Inc. unveiled at a virtual investor meeting on Thursday that it expects to return to profitable growth next year, with plans to double the sales of its Athleta business to $2 billion over the next few years.

The retail giant behind Gap, Old Navy and Banana Republic, said it plans to open approximately 100 Athleta stores in the U.S,  as part of its 'Power Plan 2023' strategy. The group currently operates close to 200 locations. 
 
Mary Beth Laughton, president and CEO at Athleta said that currently Athleta’s stores are “highly profitable", while online represents more than 50 percent of the business and is expanding at a double-digit rate.

Athleta is currently Gap Inc.’s most profitable brand and the only one to record sales growth during the quarter ending August 1.

The company also announced plans to expand Old Navy sales to $10 billion by 2023, up from $8 billion at the end of 2019, which will allow Old Navy and Athleta revenue to account for about 70 percent of Gap Inc.’s sales by 2023, up from 55 percent in 2019. 

Still, to focus on Athleta, the company will shrink Gap and Banana Republic’s footprint by 30 percent, including the closure of some 350 Gap and Banana Republic stores. 

The news comes as the San Francisco-based Gap group announced earlier this week plans to exit the European market through its own brick-and-mortar stores, including in France, the UK, Italy and Ireland, for a total of 129 store closures. The planned closure of Gap stores is likely to take place in Q2 2021. To maintain a presence, the group will lean on a franchise partnership model, it said.

By 2023, operating cash flow is expected to reach at least 10 percent of sales and its margin for earnings, before interest and taxes, to be 10 percent or more.