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Gap Bets on Athleta Again: Is the Brand Still in Shape to Compete?
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Key Takeaways
Athleta posted an 8% drop in comp sales and 6% net sales decline in Q1 2025 despite Gap's strong results.
GAP is investing in design talent and product strategy to realign Athleta with its loyal customer base.
Athleta aims to revive growth by blending style, performance and purpose through sharper brand execution.
Gap Inc. (GAP - Free Report) is doubling down on its Athleta brand, betting that the once high-flying activewear brand can rebound with the right strategic reset. While the company’s flagship brands, Gap and Old Navy, continued their strong momentum in first-quarter 2025, Athleta stood out for the wrong reasons, with comparable sales down 8% and net sales slipping 6%. Despite efforts to attract new customers, the brand struggled to deliver products that resonated with its loyal base, revealing an identity crisis due to too much reliance on trend-focused offerings.
This performance underscores a stark contrast within Gap’s portfolio, where most brands are benefiting from a focused reinvigoration playbook. Athleta, however, remains in transition. The brand is actively investing in design talent and reassessing its product mix to find the right blend of performance, style and purpose. Though early signs of profitability improvements have emerged, Athleta’s top-line struggles show that realigning customer expectations and product relevance will take time.
Reviving Athleta also means reestablishing its authority in a market where consumer expectations have evolved. As wellness and performance wear become increasingly fused with everyday fashion, Athleta must go beyond function and trend. It must deliver meaningful differentiation. The brand's focus on inclusivity, sustainability and empowerment is a strong base, but it has to turn that mission into product innovation and marketing that truly connects with people.
Looking ahead, Athleta's path to regaining competitiveness hinges on a disciplined reset and sharper execution. The brand will need to leverage its "Power of She" platform to reengage its core demographic while expanding relevance among new customers.
GAP’s Competitors
Gap faces intense competition from major players, including Abercrombie & Fitch Co. (ANF - Free Report) , American Eagle Outfitters, Inc. (AEO - Free Report) and Urban Outfitters, Inc. (URBN - Free Report) .
Abercrombie continues to execute its strategic roadmap with precision, driven by brand repositioning, customer-centric innovation, global market expansion and an accelerated push into digital. The company has been sharply focused on managing inventory with discipline, enhancing margins and reinforcing brand loyalty through a seamless omnichannel approach. ANF's Hollister brand continues to outperform expectations, reporting a stellar 22% net sales growth, driven by strong category performance and cultural alignment with its core teen customer.
American Eagle continues to see strong momentum in its Aerie brand, driven by expanding brand awareness and successful category extensions. OFFL/NE Activewear remains a key growth engine, with strength in leggings, sports bras, fleece and shorts. Aerie’s sleepwear and intimate lines are also gaining traction, with plans to evolve sleep into a year-round franchise and refresh core offerings with new base layers. American Eagle is enhancing appeal through seasonal drops, performance styles and elevated collections like Real Me and SMOOTHEZ.
Urban Outfitters is showing signs of recovery, with improved performance in both Europe and North America. Enhanced product assortments, strong collaborations and engaging marketing efforts have driven better full-price sales and reduced markdowns, boosting profitability. Initiatives like “On Rotation” and increased social media activity have helped reconnect with younger shoppers. Urban Outfitters is positioned for continued growth and profitability improvement in the coming quarters.
GAP’s Price Performance, Valuation & Estimates
Shares of Gap have lost 7.7% year to date compared with the industry’s decline of 14.8%.
Image Source: Zacks Investment Research
From a valuation standpoint, GAP trades at a forward price-to-earnings ratio of 9.61X compared with the industry’s average of 17.59X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for GAP’s fiscal 2025 and fiscal 2026 EPS indicates year-over-year growth of 0.5% and 6.3%, respectively. The company’s EPS estimate for both fiscal years has gone south in the past 30 days.
Image Source: Zacks Investment Research
GAP stock currently carries a Zacks Rank #4 (Sell).
Image: Bigstock
Gap Bets on Athleta Again: Is the Brand Still in Shape to Compete?
Key Takeaways
Gap Inc. (GAP - Free Report) is doubling down on its Athleta brand, betting that the once high-flying activewear brand can rebound with the right strategic reset. While the company’s flagship brands, Gap and Old Navy, continued their strong momentum in first-quarter 2025, Athleta stood out for the wrong reasons, with comparable sales down 8% and net sales slipping 6%. Despite efforts to attract new customers, the brand struggled to deliver products that resonated with its loyal base, revealing an identity crisis due to too much reliance on trend-focused offerings.
This performance underscores a stark contrast within Gap’s portfolio, where most brands are benefiting from a focused reinvigoration playbook. Athleta, however, remains in transition. The brand is actively investing in design talent and reassessing its product mix to find the right blend of performance, style and purpose. Though early signs of profitability improvements have emerged, Athleta’s top-line struggles show that realigning customer expectations and product relevance will take time.
Reviving Athleta also means reestablishing its authority in a market where consumer expectations have evolved. As wellness and performance wear become increasingly fused with everyday fashion, Athleta must go beyond function and trend. It must deliver meaningful differentiation. The brand's focus on inclusivity, sustainability and empowerment is a strong base, but it has to turn that mission into product innovation and marketing that truly connects with people.
Looking ahead, Athleta's path to regaining competitiveness hinges on a disciplined reset and sharper execution. The brand will need to leverage its "Power of She" platform to reengage its core demographic while expanding relevance among new customers.
GAP’s Competitors
Gap faces intense competition from major players, including Abercrombie & Fitch Co. (ANF - Free Report) , American Eagle Outfitters, Inc. (AEO - Free Report) and Urban Outfitters, Inc. (URBN - Free Report) .
Abercrombie continues to execute its strategic roadmap with precision, driven by brand repositioning, customer-centric innovation, global market expansion and an accelerated push into digital. The company has been sharply focused on managing inventory with discipline, enhancing margins and reinforcing brand loyalty through a seamless omnichannel approach. ANF's Hollister brand continues to outperform expectations, reporting a stellar 22% net sales growth, driven by strong category performance and cultural alignment with its core teen customer.
American Eagle continues to see strong momentum in its Aerie brand, driven by expanding brand awareness and successful category extensions. OFFL/NE Activewear remains a key growth engine, with strength in leggings, sports bras, fleece and shorts. Aerie’s sleepwear and intimate lines are also gaining traction, with plans to evolve sleep into a year-round franchise and refresh core offerings with new base layers. American Eagle is enhancing appeal through seasonal drops, performance styles and elevated collections like Real Me and SMOOTHEZ.
Urban Outfitters is showing signs of recovery, with improved performance in both Europe and North America. Enhanced product assortments, strong collaborations and engaging marketing efforts have driven better full-price sales and reduced markdowns, boosting profitability. Initiatives like “On Rotation” and increased social media activity have helped reconnect with younger shoppers. Urban Outfitters is positioned for continued growth and profitability improvement in the coming quarters.
GAP’s Price Performance, Valuation & Estimates
Shares of Gap have lost 7.7% year to date compared with the industry’s decline of 14.8%.
Image Source: Zacks Investment Research
From a valuation standpoint, GAP trades at a forward price-to-earnings ratio of 9.61X compared with the industry’s average of 17.59X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for GAP’s fiscal 2025 and fiscal 2026 EPS indicates year-over-year growth of 0.5% and 6.3%, respectively. The company’s EPS estimate for both fiscal years has gone south in the past 30 days.
Image Source: Zacks Investment Research
GAP stock currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.