Athleta Catalog a Fit for Gap

Sep 23, 2008 8:42 PM  By

Apparel retail giant Gap announced Monday it is acquiring women’s sports apparel cataloger Athleta for about $150 million in cash. Athleta’s CEO Joe Teno will become president of the brand, reporting to Toby Lenk, president of Gap’s direct division.

Founded in 1997, Athleta caters to the 25-to-55 age group and sells clothes for yoga, running, skiing, and surfing via its Website and catalog. The company has seen its sales more than triple in three years, from around $20 million to $75 million, according to Bruce Willard, founder/manager of Blue Highways Holdings – which held majority interest in the company.

Willard, who was the founder/CEO/ owner of The Territory Ahead, which he sold to Cornerstone Brands in 1999, also owned a owned a controlling interest in the Sundance Catalog, which was sold in 2004. “We got to a point after I invested and purchased [Athleta] three years ago that it was time to see what we can do” in terms of selling the company, he says.

“We were in a rare and enviable position of having a lot of choices,” Willard adds. Athleta had grown tremendously and became “nicely profitable,” as a catalog and Internet business, he notes, but “at some point, it makes sense for retail. And we wanted to find someone who can leverage retail sources, because that’s not been our interest or our experience.”

Enter Gap. Athleta will become the fifth brand in Gap’s online portfolio, which includes its namesake brand, Old Navy, Banana Republic and online shoe retailer Piperlime. Gap spokesperson Louise Callagy says the deal is a “strategic acquisition that creates new opportunities to expand customer reach and growth for both brands.”

Not that Gap is in any hurry to open Athleta stores, Callagy adds. “Our immediate focus is on integrating Athleta into our online division Gap Direct. Of course, we will consider other growth opportunities in the future.” Sales for Gap Direct in the past three years grew 52%, from $595 million to $903 million.

Athleta grew its house file nearly 62%–or by 77,000 names–in 2007. It plans to mail about 21 million catalogs this year, compared to 13 million in 2007.

“The fit is excellent,” says Lee Helman, managing director for investment firm Financo about the deal. “Athleta is well positioned to become a much larger business, and Gap’s wherewithal and resources can help accelerate the growth of Athleta both online and at retail.”

What’s more, Helman says, “Bruce Willard’s team has done an exceptional job merchandising the Athleta catalog, and has hit a nerve with women evidenced by the rapid growth of Athleta during an economic downturn, true testament to the strength of the Athleta brand and product.”