[caption id="attachment_88437" align="alignnone" width="541"] Petaluma-based Athleta opened a pilot physical store here in Mill Valley in spring 2010. The company had 65 stores by the end of January 2014. (image courtesy of Gap)[/caption]
PETALUMA -- The number of Athleta brick-and-mortar women's activewear stores increased 85 percent in fiscal 2013 and drove store growth in North America for parent company Gap Inc. (NYSE: GPS), prompting the company on Thursday to call it a "breakout year" for the Petaluma-based brand.
"But by every metric we look at, whether that's comp, traffic, penetration in key markets, what the brand stands for, the new customer acquisitions, it was really a breakout year for Athleta," Chairman and Chief Executive Officer Glenn Murphy told investment analysts on a conference call about Gap's fourth-quarter and year-end results. "That's something to celebrate in a business that has six brands -- three that are iconic. It looks like Athleta is on its path to becoming the fourth iconic brand within Gap Inc.'s portfolio."
Those three "iconic" brands are Gap, Old Navy and Banana Republic, which accounted for nearly $15.5 billion of $16.15 billion in companywide net sales in the 52 weeks ended Feb. 1.
The other brands are Piperlime, Athleta and Intermix, whose combined net sales were $672 million last fiscal year, soaring 70.1 percent from the previous fiscal year. The company declined to break out Athleta's sales further or say how many employees currently are in Petaluma.
Comparable-store sales increased 2 percent last fiscal year companywide, with those for Gap up 3 percent, Old Navy up 2 percent but Banana Republic down 1 percent.
Athleta opened 30 stores in fiscal 2013, ending the year with 65 stores in 25 states and the District of Columbia. Gap Inc. had 3,539 stores in 48 countries at fiscal year-end, 3,164 of which were company-operated.
Founded in 1998, Athleta was primarily a catalog and then e-commerce retailer until opening a pilot store in Mill Valley nearly four years ago. Gap acquired Petaluma-based Athleta in 2008 for $150 million.
In 2011, the division doubled the size of its Petaluma base of operations. At that time, the expectation of store openings was 50 by the end of last year. Athleta is set to open about 30 more stores this year, bringing its total store count close to 100, according to Mr. Murphy.
Athleta's transition from successful online and mail-order retailer to brick-and-mortar retailer is something Gap is working diligently to do in reverse companywide, according to Mr. Murphy. The company is blending online and on-site retail with website options to see what's available in a given store and to order items to pick up there.
Yet the financial performance for Athleta in fiscal 2013 amid such a large brick-and-mortar expansion surprised Gap officials, according to Mr. Murphy.
"And the reason behind that is when you take a fleet from 35 to 65, even though our strategy is to not have a level of cannibalization in our online business, we've been pleased about how strong their online business continues to be with Athleta as we add the physical presence to that brand," he told analysts.
[caption id="attachment_88602" align="alignleft" width="235"] Nancy Green[/caption]
New leadership for the brand and the matching of products with trends in women's clothing have been key to that success, he added.
The change at Athleta he was referring to is the appointment of Nancy Green as general manager in May, according to a spokeswoman. She has more than 25 years of retail experience. Most recently, she was executive adviser for Gap's emerging business in China. Before that, she was executive vice president and chief creative officer of Old Navy, jointly in charge of the brand for 2012.
The operational efficiency of an "seamless inventory" system that allows warehouse shipments to seamlessly go to a shopper's home or to the closest store is something Gap wants to adapt from Athleta and a recent expansion into China, according to Mr. Murphy. That approach to inventory is expected to roll out companywide in late next year, he said.
Gap Inc. reported after the stock market closed Thursday that net income in fiscal 2013 was $1.28 billion, or $2.74 a diluted share, up from $1.14 billion, or $2.33 per share, in the 53-week prior fiscal year.
The share price of Gap rose 9 cents, or by one-fifth of a percentage point, to $43.77 at the close of trading Friday.
