Is Athleta’s Canadian expansion a stretch for the Gap-owned chain?

Discussion
Photo: Getty Images/krblokhin
Apr 21, 2021
George Anderson

Gap Inc.’s Athleta business is on a roll. The women and girl’s athleisure clothing chain, which is coming off a successful 2020 in which it passed $1 billion in annual sales, will open in the Canadian market for the first time later this year. The move will mark Athleta’s initial foray outside the U.S.

Athleta is looking to add 20 to 30 stores a year across North America over the next three years as it grows its locations to over 300. Its parent company announced last year that it would expand the chain’s footprint and that of Old Navy while closing 30 percent of the locations operating under its namesake banner as well as Banana Republic. Athleta, which was originally founded as a pure play e-tailer before Gap acquired it in 2008, opened its first stores in 2011. It currently contributes eight percent of the Gap’s total revenues.

The retailer’s initial approach to building its customer base was to follow the lululemon playbook. Athleta opened stores in close proximity to those operated by its yoga-inspired clothing chain rival. It also engaged in me-too activities such as offering space for classes in its stores and giving its merchandise to local yoga instructors to promote, while doing so at lower prices. With its move north of the U.S. border, Athleta appears to be following lululemon, which is based in Canada.

“International expansion is a key component of our growth strategy to reach two billion dollars in net sales by 2023, and we are very proud to introduce Athleta to customers in Canada,” said Mary Beth Laughton, president and CEO, Athleta, in a statement. “As a purpose-driven brand, we are excited to expand our community of empowered and confident women and girls to Canada and bring them a differentiated and inclusive offering in the performance lifestyle category.”

Athleta is looking to build on its digital heritage as it moves into this new market. A Canadian-specific website will take online orders, fulfilled in the country via a distribution center in Ontario. The retailer pointed out that online sales, as in the U.S., have risen dramatically in Canada in recent years and accelerated as the novel coronavirus pandemic hit. Athleta’s e-commerce sales were up in double digits last year in the U.S., with 60 percent of the chain’s total generated online.

DISCUSSION QUESTIONS: Will Athleta’s business model in the U.S. translate to the Canadian market? Do you see the chain’s comp sales growth continuing at near its current pace once life in the U.S. and Canada return to some semblance of pre-pandemic normalcy?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Can they make it in Canada? Of course, with a deep understanding of the Canadian shopper and Canadian market."
"I live up here in Canada. We’re somewhat starved for good retail concepts (then again, so is most of the world)."
"With Athleta being a U.S. company, and Lululemon being Canadian, this could be more challenging than Athleta anticipates."

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19 Comments on "Is Athleta’s Canadian expansion a stretch for the Gap-owned chain?"


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Mark Ryski
BrainTrust

Since Lululemon is based in Canada with a very strong following and history, I think Athleta has its work cut out for itself. Athleta has done very well, and I expect that they will continue to do so as the category continues to grow, however, I’m less convinced that expanding into Canada will have a significant impact. Remember what happened to Target when they came to Canada — it was a bust, and Canadians were crying for Target.

David Weinand
BrainTrust

While the athleisure wave is still in full force, I wouldn’t expect it to stay on pace with 2020. As the world opens back up, money will be spent on other types of clothes that are more work and “going-out” appropriate. However I don’t see any reason why the brand won’t get good traction in Canada. It is a lower price point than Lululemon (though, not by much) and does have high-quality offerings so it will be a good alternative to its rival.

Neil Saunders
BrainTrust

Athleta remains a relatively small business for Gap and there is certainly room for expansion in the U.S., Canada and possibly beyond. However the athleisure market is becoming increasingly crowded and will almost certainly see a slowdown in growth as we emerge from the pandemic. Against this backdrop, Athleta will need to continue to differentiate and will have to work increasingly hard to attract and retain customers. To date, it has not done a bad job at both of those things, so it has a fair chance at success.

Lee Peterson
BrainTrust

American retailers always make a big deal out of going to Canada. Dude, there’s only 30 million people up there TOTAL. A couple of stores in Toronto, Montreal and Vancouver and get out of Dodge, why not? But don’t count on “Canadian Expansion” for a big revenue boost — ever.

Venky Ramesh
BrainTrust

Geat point Lee. California has more population than all the provinces of Canada put together.

Kevin Graff
BrainTrust

That’s true, Venky. But we’re very nice up here. 🙂

Kevin Graff
BrainTrust

Hey Lee — do you think we live in igloos, too? There’s actually about 38 million of us (we’ve been busy making babies and welcoming immigrants). And there are a number of other large markets as well outside of the three you mention. Heck, we have seven NHL teams so we must have at least that many metropolitan areas. We already have a bit of an inferiority complex, so I needed to set the record straight.

Lee Peterson
BrainTrust

Hey Kevin, nothing personal, just business. I recall Express, Victoria’s Secret, Target and other retailers hyping their Canadian expansion only to close up later or pfft, no more news. Remember? And you have 7 NHL teams because Canadians (and maybe Swedes) are the best in the world at hockey, hands down, so comping that to Canuck retail is a bit of a stretch. But tell you what, as a life long ‘Hawks fan, I’ll remember the 38 number, thx.

DeAnn Campbell
BrainTrust

Interesting topic. On the one hand, Canadians are well versed in the strategy of opening near a rival – Second Cup coffee has been using this strategy to sit near Starbucks for decades. But in the case of Second Cup it offers Canadians a home grown option instead of the American option – and Canadians are very much into supporting their own. Plus its darn good coffee. With Athleta being a U.S. company, and Lululemon being Canadian, this could be more challenging than Athleta anticipates. But with lower prices than Lululemon, if executed well – and more importantly if they include some Canadian content – they could succeed.

Gene Detroyer
BrainTrust

Now hear this! Canada is not the U.S. Even a top retailer like Target, HQed less than 300 miles from the Canadian border, failed miserably. It is a great case study that I use in class.

Why did Target fail? They copied and pasted their U.S. business into the Canadian market. They didn’t realize that the culture, product preferences, shopping habits, and more, were different for Canadians.

Can they make it in Canada? Of course, with a deep understanding of the Canadian shopper and Canadian market.

Ian Percy
BrainTrust

Thank you Gene! I was annoyed by the condescending remarks from our colleagues above. That attitude is why companies like Target failed miserably in Canada. First, the population is actually 38,005,113.

My only suggestion is that Athleta hire Canadians in senior executives roles and especially for marketing.

Gene Detroyer
BrainTrust

Exactly. Target did hire Canadians, but sent in their own team to ignore the recommendations. The Target team thought they knew better.

Lisa Goller
BrainTrust

In Canada, we have a huge gap left by the closure of Justice’s physical and online stores. (Now where do my tween daughter and I giggle and bond during shopping sprees? Rhymes with SchmAmazon.)

Lululemon remains in-demand yet premium pricing tends to attract more upscale consumers.

That’s why Athleta’s business model may translate well in Canada. The chain offers a Lulu-inspired affordable line to attract a community of active ladies of all ages.

Maintaining a torrid sales pace will be an issue in this apparel category. After a year of casual comfort, many consumers will welcome a shift to fancier fashions.

Yogesh Kulkarni
BrainTrust

The overall athleisure market was growing well before the pandemic and continues to grow through it as well. We just heard that even Target’s one-year-old athleisure brand hit a billion dollars in sales. So what’s wrong with following the Lululemon playbook? There is enough growth opportunity for everyone. In fact, Lululemon’s price point does leave the value market open to value competitors. Canada or not, there is tremendous expansion potential for Athleta.

Venky Ramesh
BrainTrust

I believe it’s the right move for Athleta to expand in Canada. The U.S. population is getting vaccinated quickly, which will result in a slowdown in athleisure sales in the country. On the other hand, the progress of vaccination has been much slower in Canada due to difficulties in procuring vaccine doses and a lack of vaccine manufacturing facilities. Canadians are expected to work from home much longer, and that would be a perfect opportunity for Athleta to introduce competition to Lululemon.

Jeff Sward
BrainTrust

Athleta has done a good job on several fronts. They have built on the yoga base established by Lululemon but at the same time they have been able to differentiate themselves with a broader lifestyle range of product. I walk into Lululemon and I see very straightforward, hardcore yoga. I walk into Athleta and I see an athleisure lifestyle built around yoga, but with a broader range of wearing moments. So if that athleisure lifestyle resonates with the Canadian consumer, Athleta will do well in Canada. It’s not so much about the size of the numbers as it is a lesson in adapting to a new market.

Mohamed Amer
BrainTrust

I hope the Canadian expansion is not the key driver for Athleta’s plan to double net sales by 2023. For one, the market is relatively small, and they would go head-to-head with Lululemon on their turf. While international expansion should always be considered, the immediate U.S. market is far from being saturated and leverages existing systems and infrastructure. The more significant and less costly opportunity remains south of the border, the Canadian border.

Kevin Graff
BrainTrust

I live up here in Canada. We’re somewhat starved for good retail concepts (then again, so is most of the world). There’s lots of room for Athleta, and pretty much any other other great retail concept. At last look, the average sales per square foot in our malls runs around $750 per foot, whereas in the U.S. it runs around $450. These numbers may be off a bit, but it shows that there is significantly less competition up here. While Canada may not represent a massive growth opportunity for them, they should find success.

Craig Sundstrom
Guest

I suspect this is really more a question of “how strong is the brand?” — the GAP in general, Athleta in particular — than a question about operating in Canada. I don’t have a well-researched answer to that, but my intuition tells me it’s much like the ordering of the question today: i.e. distinctly after Lululemon.

Back to Canada, retailers that have fumbled seem to have made one of two (extreme) assumptions: either assuming NOTHING is different, or assuming EVERYTHING is different; those that have succeeded made an effort to learn the market — or markets, since Canada isn’t a monolith (a third bad assumption) — without preconceptions.

wpDiscuz
Braintrust
"Can they make it in Canada? Of course, with a deep understanding of the Canadian shopper and Canadian market."
"I live up here in Canada. We’re somewhat starved for good retail concepts (then again, so is most of the world)."
"With Athleta being a U.S. company, and Lululemon being Canadian, this could be more challenging than Athleta anticipates."

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