Gap Stretches It

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Upward facing dog pose, anyone? Gap's (NYSE: GPS  ) snapping up Athleta, which offers apparel for many sports including the hot yoga segment, for about $150 million in cash.

Joining as the fifth brand featured on Gap’s e-commerce website, Athleta will join Gap, Banana Republic, Old Navy, and Piperlime. (Remember Piperlime?) Customers can purchase merchandise from any of the brands on the website, which is convenient if online shoppers are actually interested.

Granted, the fact that Gap can easily make strategic acquisitions during an economic downturn (a good time to do so) underlines one of its strengths, and that's its cash-laden balance sheet; at least its hands aren't tied due to onerous debt loads. It has $1.68 billion in cash and no long-term debt.

However, as much as Gap is touting its entry into the $31 billion "women's active apparel" growth segment, the yoga apparel aspect doesn't excite me. For example, I've long been bearish on lululemon athletica (Nasdaq: LULU  ) in part because there are plenty of rivals at all different price points.

There's VF's (NYSE: VFC  ) Lucy, as well as prAna, which Liz Claiborne (NYSE: LIZ  ) recently sold as it whittled down its brands. You can buy yoga apparel at a variety of retailers, including Target, J. Crew (NYSE: JCG  ) , and Urban Outfitters' (Nasdaq: URBN  ) Anthropologie concept, to name just a few.

And of course, heaven forbid consumers figure out you don't need expensive outfits to do yoga, kind of like you don't need to look like you're in the Tour de France to take a leisurely bike ride. With our current economic difficulties, I have a funny feeling that pricey accoutrements for sports activities are in serious danger of becoming so last decade. (Yeah, I'm not sold on Under Armour (NYSE: UA  ) , either.)

Other recent news on Gap includes how it's expanding into Mexico, Egypt, and Jordan through franchisees. While it can be a high-margin endeavor, retailers also lose some control over the brand. At any rate, we'll have to see if Gap can prove that some of these initiatives can make up for continued weakness in its business here in the States.  

I don't think the Athleta acquisition will hurt Gap, but I'm not convinced it'll really help it, either. One thing's for sure though: Gap's years of underperformance might imply that it sure does know yoga's "corpse pose." We'll have to see if these moves result in any reanimation of the company.

Here's some related Foolishness:

Gap is a Motley Fool Stock Advisor pick. Under Armour is a Motley Fool Hidden Gems selection. VF is a Motley Fool Income Investor pick. Under Armour is a Motley Fool Rule Breakers selection. The Fool owns shares of Under Armour. Try any of our Foolish newsletters today, free for 30 days.

Alyce Lomax owns shares of Urban Outfitters. The Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 734884, ~/Articles/ArticleHandler.aspx, 10/24/2016 10:32:10 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,232.00 86.29 0.48%
S&P 500 2,150.80 9.64 0.45%
NASD 5,305.34 47.93 0.91%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 10:16 AM
GPS $26.57 Up +0.16 +0.61%
Gap CAPS Rating: **
JCG.DL $0.00 Down +0.00 +0.00%
J. Crew Group, Inc… CAPS Rating: **
KATE $17.26 Down -0.12 -0.69%
Kate Spade and Com… CAPS Rating: ***
LULU $56.93 Down -0.07 -0.12%
Lululemon Athletic… CAPS Rating: ***
UA $38.28 Up +0.34 +0.88%
Under Armour (A Sh… CAPS Rating: ****
URBN $33.85 Up +0.27 +0.80%
Urban Outfitters CAPS Rating: ***
VFC $54.17 Down -0.51 -0.92%
VF CAPS Rating: *****