Gap expands athleisure brand Athleta into Canada in first move outside U.S.

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Gap Inc. is launching its Athleta brand in Canada on Tuesday, its first move outside the United States, competing with retailers including Vancouver-based Lululemon Athletica Inc. for a share in a growing market for athleisure clothing.

Athleta will begin with Canada-wide e-commerce, followed by two store openings this fall, at Park Royal Shopping Centre in West Vancouver in September, and Yorkdale Mall in Toronto in November. In the U.S., where Athleta has about 200 stores, online purchases account for more than half of the brand’s sales.

Athleisure brands remained strong as the COVID-19 pandemic cratered apparel sales in Canada. With so many people urged to stay at home, demand surged for comfortable clothes such as leggings and sweats. In the 12 months up to June of this year, women’s apparel sales fell by 12 per cent compared to the prepandemic period ended in June, 2019. Meanwhile, athleisure sales grew by 23 per cent.

Big brands have also recently been investing in the activewear space. Denim maker Levi’s announced earlier this month that it will buy the Beyond Yoga brand for an undisclosed sum, citing the need to diversify its business. Also this month, Wolverine Worldwide Inc., which owns footwear brands such as Saucony, Merrell and Keds, announced it would buy activewear brand Sweaty Betty for US$410-million. Gap acquired Athleta in 2008 for US$150-million. The brand sells workout and yoga clothing, loungewear, sleepwear and some outerwear. It also began offering a wider range of sizes in January, up to Size 26 for 70 per cent of Athleta’s products. The retailer has had positive feedback as it has introduced mannequins in its U.S. stores reflecting a variety of body shapes and sizes, Athleta’s chief brand officer Kyle Andrew said.

“We know you can buy athletic wear in lots of different places and at lots of different price points. We have to be super clear with [the customer] on why she should be interested in us,” Ms. Andrew said. “It’s women-run, it’s designed by women. ... It’s just a slightly different perspective than other companies that service men, that are run by men.”

Last week, Gap raised its sales and profit forecasts for this year, as its second-quarter earnings beat estimates, driven by increasing sales at Old Navy and Athleta – the two brands on which the retailer is now focusing as part of a wider turnaround plan. San Francisco-based Gap is betting on expanding Athleta, with a goal of reaching US$2-billion in net sales by 2023. It also aims to increase sales at its most profitable brand, Old Navy, to US$10-billion by 2023, and to close about 30 per cent of its underperforming Gap and Banana Republic stores.

More bricks-and-mortar expansion is on the horizon for Athleta in Canada: Gap plans to open 20 to 30 new stores in North America each year. The company also plans to develop products in the future exclusively for the Canadian market, such as a broader outerwear offering.

“We’re committed to growing our Canadian business and are continuing to explore additional locations in the country and hope to share more news on our additional brick-and-mortar plans soon,” Athleta chief executive officer Mary Beth Laughton said.

The $2.7-billion women’s athleisure market in Canada is still quite fragmented, with the two top retailers, Lululemon and Amazon, together holding about 30-per-cent market share and the rest in the hands of a number of smaller brands, according to research firm the NPD Group. Athleta will be looking to grab some of that share.

The category is also evolving. “We saw silhouettes being more fashion-driven. It’s not just about a black legging any more. That accelerated as we went through COVID, and also continues,” said Tamara Szames, Canadian retail industry adviser with NPD. For example, Athleta sells what it calls “performance lifestyle” clothes such as jackets, blazers and dresses. Lululemon has similarly expanded its assortment, and has reported success with items such as its On the Move pants. As other clothing sales contract, athleisure brands are taking a bigger piece of the pie, Ms. Szames added.

“What that means is this will become the dominant [apparel] market going forward.”

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