Latest Results Show New Athleta CEO Needs To Hit The Ground Running

Athleta’s new CEO needs to rediscover the power of she to revive its fortunes. (Photo by Emma McIntyre/Getty Images for Athleta)

Getty Images for Athleta

New Athleta CEO Maggie Gauger has hardly had a month in the top job at Gap Inc.’s athleisure brand but already the heat is on.

The third CEO hired to lead Athleta in the last two years, it was an undoubted coup for Athleta when it tapped the head of Nike’s women’s business in North America as its next CEO, bringing in both a seasoned professional and delivering a setback to Nike as it focuses on winning back more female shoppers.

But one thing Gauger knows is that she is unlikely to be given the benefit of time because while Gap Inc. has rediscovered its mojo, the once soaring Athleta is in danger of getting left in the locker room.

Gauger spent more than 20 years at Nike and replaced Chris Blakeslee, the former Alo Yoga executive who was hired to replace Mary Beth Laughton in 2023.

Under Blakeslee’s direction, Athleta targeted new customers and partnered with high-profile athletes such as swimmer Katie Ledecky and WNBA star Kate Martin but the strategy has not resonated with Athleta’s existing customer base. For four out of the past six quarters, the brand’s revenue and comparable sales fell.

And this week’s results highlighted the scale of the challenge as the company warned tariffs will hit its profits moving forward, upping the impact to be between $150 million and $175 million.

Its full-year operating margin is expected to be between 6.7% and 7%, down from 7.4% in the previous fiscal year, but beyond tariffs the apparel group that includes Old Navy, Athleta, Banana Republic and its namesake banner delivered mixed results in its fiscal second quarter.

Athleta Results Lag Parent

And it was Athleta that really set off alarm bells after the company reported net income for the three-month period that ended August 2 was $216 million, compared with $206 million a year prior, on sales up to $3.73 billion from $3.72 billion a year earlier.

While Gap, Banana Republic and Old Navy all saw comparable sales rise during the quarter, Athleta dragged down the company’s overall performance. The athleisure brand saw sales of $300 million, down 11% compared to last year. Comparable sales were down 9%.

“Clearly, Athleta is a powerful brand in the active space, being the number five brand in the space, but we’re disappointed in the quarter. We have moved away, if you will, from really distinctive performance roots,” CEO Richard Dickson said of the figures.

“We’ve paid a lot of attention, trying to court a new customer, and ultimately didn’t have enough offerings for our core customer. As we balance that out, we’ve been very transparent to say it’s a year of reset for us.”

Athleta’s core strength has always been its purpose-driven identity and Gauger’s first step will likely be to recalibrate for today’s market as a community and lifestyle brand that combines performance, activism, and sustainability that helps distinguish it from rivals such as Lululemon and Sweaty Betty.

Product innovation will also be central to any turnaround. Under previous leadership, Athleta had shifted more heavily toward performance products, but the execution did not resonate strongly with consumers. Gauger, drawing on her years at Nike, can leverage her expertise in consumer insight and product development to create collections that better meet the needs of active women.

Athleta Needs To Get Emotional

Gauger established a track record at Nike of cultivating emotional affinity through storytelling, community-building, and influencer engagement. Translating that playbook to Athleta could mean expanding partnerships with more relevant fitness leaders, hosting grassroots events, and amplifying narratives that empower women.

Gauger also needs to establish trust quickly, both internally and externally, because the leadership merry-go-round will inevitably lead customers and staff to wonder whether this is the just the latest knee jerk switch in direction before Gap Inc. switches once again. Gauger needs to walk and talk like she’s there for the long term.

Finally, she needs quick wins. The turnaround is taking longer than the market expected, and meaningful gains may not materialize immediately, so Gauger needs some achievable short- and mid-term benchmarks.

It may be a marathon not a sprint, but Athleta can’t afford to be lagging at the bell yet again. Leadership upheaval has inevitably confused the Athleta brand and after being a star while its parent floundered, two years into Dickson’s tenure the tables have turned.