Gap's Athleta brand lands its first sponsored athlete: Olympic track champion Allyson Felix

Key Points
  • Gap's Athleta brand has its first-ever sponsored athlete.
  • It signs a multiyear partnership with Olympic track star Allyson Felix.
  • In May, Felix called out Nike, accusing it of wanting to pay her 70% after her pregancy.
Allyson Felix (center) and Brionna Thomas run in a women's 400m semifinal during the USATF Championships at Drake Stadium in Des Moines, July 26, 2019. Felix finished third in 51.45 to advance to the final in her first competition since giving birth to her daughter Camryn Ferguson on Nov. 28, 2018.
Kirby Lee | USA TODAY Sports | Reuters

Athleta, Gap's athletic-wear brand, has a new strategy to win more shoppers: sponsored athletes.

And not just any athlete. The apparel retailer on Wednesday announced its first multiyear sponsorship deal with a sports star — Olympic champion Allyson Felix. She's the most decorated female track and field star in U.S. history. Financial terms weren't disclosed.

Felix drew attention recently for her op-ed in The New York Times in which she accused Nike of wanting to pay her 70% less after her pregnancy.

"My disappointment is not just with Nike, but with how the sports apparel industry at large treats female athletes," she wrote in the Times in May.

Felix made the comments 10 days after two former Nike teammates, Olympian runners Alysia Montano and Kara Goucher, broke their silence on the issue. Nike responded by saying it would be adding "written terms" in new contracts to support athletes during pregnancy.

"I was definitely happy they did make changes to their policy because I think — I was inspired by Alysia speaking out, and Kara, and that was really what we wanted to happen," Felix said in an interview with CNBC about Nike's response. "And it was a problem that was happening across the sports apparel industry that we were seeing."

"It can be scary," she added about speaking up. "But I think we are seeing results."

A representative from Nike didn't immediately respond to CNBC's request for comment on this story.

Felix hasn't been under a contract for about a year and a half. Last week, she competed in her first race since she gave birth to her now-8-month-old daughter. As she stepped up to compete in a 400-meter run at the USA Track and Field Outdoor Championships in Des Moines, Iowa, she was decked out in Athleta's Lightning crop top and running shorts made from a new SuperSonic fabric. She finished sixth, enough to qualify for the 2020 Olympics in Tokyo.

For the first time, I felt like more than just an athlete.
Allyson Felix
Olympic track and field athlete

Athleta has said that as a brand it aims to "empower women and girls through sport," inspiring them to be active and confident in their daily lives. The messaging sets it apart from the more performance-driven Nike and Under Armour.

The brand has also tried to reach moms and daughters. It's been giving more real estate to its Athleta Girl line in stores, which is geared toward girls ages 6 to 14.

"To me, right when [Athleta] came out to LA to meet with me ... it was such an authentic fit," Felix said. "For the first time, I felt like more than just an athlete."

"I had been waiting for the perfect situation," she said. "And I felt like this was the perfect match."

A crowded field

The deal with Felix also shows Athleta is growing within the Gap family. The brand is on track to hit $1 billion in sales next year, and Felix could help make sure it achieves that milestone.

Gap doesn't disclose Athleta's exact sales each quarter, lumping them instead into "other" businesses. In the latest quarter, "other" sales rose to $287 million from $270 million a year ago. Athleta has about 165 locations in North America and expects to open 25 more this year, an acceleration from a prior annual pace of 15 to 20 store openings.

At the same time, Athleta is competing head on with Lululemon, Nike, Under Armour and Adidas. While Lululemon built its business around women's gear and more recently shifted its focus toward selling more to men, the three others have been trying to win more female fans. Nike is making more sports bras and yoga pants, Under Armour is reaching women by selling gear at Kohl's and Adidas has teamed up with Beyonce for new women's products.

The NPD Group has pegged the value of the women's active-wear market in the U.S. to be about $24 billion. That's 3% higher than a year ago, according to its Consumer Tracking Service. NPD Group analyst Matt Powell said active-wear continues to grow at a faster clip than fashion apparel for females.

Beyond playing a key role in Athleta's 2020 "Power of She" marketing campaign, Felix will work with Athleta's design team to help create more high-performance running gear and training sets. The brand will be her exclusive apparel provider, with the exception of shoes. (Athleta doesn't make shoes.)

Source: Athleta

When Felix's op-ed came out, "it resonated with us so deeply," said Sheila Shekar Pollak, Athleta's chief marketing officer. "We are 96% women at Athleta, many of us moms."

Athleta on Wednesday took out a full-page spread in the Times, with a photo of Felix, reading: "Allyson, welcome to our team."

'Flip this sponsorship model on its head'

"Our goal as a brand is to flip this sponsorship model on its head," Pollak added. "To have a partnership [with Felix] ... based on shared values."

What does that look like? Felix said Athleta, as a corporate sponsor, supports her in "many other aspects of her life," beyond participating in a sport. She said Athleta is helping her be "a better mother," with "little things" like allowing her daughter, Camryn, to travel with her for work.

Felix also gets to play a creative role. "I'm really excited about creating product together and where that's going to go," the runner said.

The stakes could grow even larger as Gap moves forward with its plans to spin off its fast-growing Old Navy brand into a separate publicly traded company. Old Navy has regularly accounted for more than 40% of the company's entire annual sales. When the split is finalized, Athleta will join Gap and Banana Republic in a new, yet-to-be named company.

Gap announced last week that brand president Nancy Green will become president and chief creative officer at Old Navy next month. It hasn't yet named a new president at Athleta, who will report directly to Peck.

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After the announcement in February, Gap shares jumped more than 20%. But the stock, which has a market value of about $7 billion, is still down nearly 25% since January.

On a call with analysts in May, CEO Art Peck said Athleta "continues to be one of North America's fastest growing athletic brands and is positioned to capture share."

"Customers connect with the fundamental ethos of the brand in a way that is difficult to duplicate or replace, and that connection is part of why we're so bullish on the Athleta opportunity moving forward," Peck said.

Gap doesn't break out how much it's been spending on the marketing behind Athleta or how that will evolve down the road. But a spokeswoman said, "We are continuing to grow our marketing investments to fuel our business growth."

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