Athleta is at a tipping point.
With competition heating up, Athleta, a division of Gap Inc., is accelerating store openings and product innovation, and raising its profile. Gap executives envision Athleta as going international, evolving into the corporation’s fourth global brand, along with Gap, Old Navy and Banana Republic.
On Wednesday, after 16 years in business, Athleta staged its first fashion show, with models in neon racer bras, striped and printed leggings, cropped hoodies and quilted tops somersaulting and break-dancing across the stage. In the race to capitalize on athletic apparel as fashion, Athleta checked the boxes on the right trends: bright colors, muted neutrals, prints and a little edge.
“We are in a time when fitness and fashion are converging,” Nancy Green, president and general manager of Athleta, told WWD. “Athleta is a brand a lot of people are just finding out about.”
She said the chain will end the year with 100 stores and that another 30 are slated to open next year. Gap bought Athleta six years ago for $150 million, when it had no stores and sold only via catalogues and online.
Activewear is far outpacing trends in apparel generally, rising 6.6 percent for the 12 months ended June 2014 to about $33.7 billion in the U.S. or 16.3 percent of total apparel turnover, according to The NPD Group. “Activewear is booming, with sales growth exceeding that of the apparel market as a whole, and it’s because consumers are wearing activewear not only to the gym, in the gym and from the gym…they are working out, going out and even hanging out in activewear,” said Marshal Cohen, chief industry analyst at NPD. In the 12 months ended June 2013, activewear sales were up 10 percent, and in the 12 months ended June 2012, they rose 8 percent, NPD said.
Given the strong trend, and Gap’s international presence, analysts believe it’s not a big stretch for Athleta to go international soon. A number of other athletic brands from around the world — including Canada’s Lululemon, U.K.’s Sweaty Betty and Australia’s Lorna Jane — have already made the leap. Lorna Jane entered California with its first U.S. store in 2012 and could be sold through an auction being staged by Credit Suisse. Urban Outfitters and Foot Locker are among the retailers said to be interested. Sweaty Betty began opening U.S. stores last year. Nike and Under Armour are also distributed internationally.
“Athleta could well be a global brand. Gap is already global, has an international skill set and the concept of female-oriented performance wear is already proven,” observed Craig Johnson, president of Customer Growth Partners. “We think the concept has great appeal internationally. They’ve got the formula more or less right — not everybody likes the upper price nature of Athleta, but the prices aren’t crazy and they are more or less in the same bracket at Lululemon.”
“I do think Athleta could become the next global brand for Gap,” added Rebecca Duval, vice president, equity analyst at BlueFin Research Partners. “Gap has powerhouse sourcing, can leverage to get better margins and execute global brand expansion.”
However, since Athleta lacks kids’ and men’s, it is probable it may not be on the same scale as Gap, Banana Republic or Old Navy.
“Athleta has focused over the last year on improving their performance wear and getting up to par in terms of fashion and competing with the Lulus of the world,” Duval said. “The product is really elevated in terms of fashion and performance.”
It’s a collection engineered for versatility, fashion and performance with such technical attributes as stretch, quick dry and wicking, and that formula for style and function, according to Green, is hard to achieve.
“Women are incredibly busy, and they are interested in health and wellness. They want to be comfortable and they don’t want to change their clothes five times a day,” said Green.
Asked about some current hot sellers, Green said Athleta’s City Pant collection, introduced last spring, is a big trend. The pants are soft and featherweight, with stretch and wicking and quick-dry characteristics, the kind of traits typically found in running shorts and boardshorts. “I wear them with blazers,” Green said.
Two other bestsellers are lightweight “dry down” jackets, which come in four silhouettes, and pants that have compression elements to improve the wearer’s shape.
“We’re not creating more products. We are creating products that are more versatile to appeal to women of all ages and who do all kinds of activities. Maybe she is a runner who is also taking a yoga class and then going out to lunch. She shouldn’t have to have a set of clothing in the closet for each activity,” Green said. “We want women to think differently. They still want new fashion with exciting ideas, but we don’t think this means they have to have all these different products for every moment in their lives. We are trying to help women simplify their lives.”
“It’s amazing how quickly we will get to 100 stores by the end of this year,” Glenn Murphy, Gap Inc. chairman and chief executive officer, said last month. “Athleta fits in all real estate — malls, street, strip center. Nike is the player we look at most and where the share will come for Athleta. It will be our fourth global brand.” For now, though, the expansion is domestic. “Athleta is currently focused on its U.S. business and we do not have a comment on international expansion at this time,” said a company official.