Sonia Syngal
Chief Executive Officer at GAP
Good afternoon, everyone and thank you for joining us. I would like to start by reflecting on where we are in executing our power plan strategy and then I'll address how we are set up to compete in 2022. Looking back on 2021, I'm proud of the progress we've made on our long-term strategy is to drive profitable growth, while navigating another year of volatility, we delivered record sales of $16.7 billion. This is a 21% revenue growth versus last year and up 2% versus 2019 inclusive of shedding an estimated $1.1 billion of unprofitable sales through store closures and divestitures. And we achieved a reported operating margin of 4.9% and adjusted operating margin of 5.5%, while absorbing approximately 2.4 points of estimated unexpected air costs as we navigated the supply chain disruptions in the second half.
Over the last two years, we have undertaken significant restructuring necessary to become a more nimble and focused company. With that, we've completed over 70% of our North American fleet rationalization with 250 store closures, transitioned our European business through capital efficient partnerships and divested smaller non-strategic brands; all while we leaned into a digital first mindset. This has resulted in reductions in fixed costs, in both ROD and store expenses.
Importantly, our four brands have healthy core businesses. With Old Navy crossing $9 billion in sales for the year, our revived and relevant Gap North America delivering percentage comp sales growth versus 2019. Banana Republic's new elevated brand positioning taking hold and that's led a demonstrating stand out comparable sales growth of 48% versus 2019, well on its way to $2 billion in revenue. Collectively, our brand improved AUR to last year through lower discount rates, driven by relevant product and marketing and enabled by the customer health, we saw in 2021.
I'm particularly pleased with the partnership we have launched such as Gap Home with Walmart and Yeezy Gap Simone Biles and Alicia Keys at Athleta, and next joint venture in Europe. We expect these partnerships to drive brand awareness, attract new customers to our brands, enable asset light category and market expansion, and ultimately grow our revenue. It's also important to note, that we have intentionally leaned into demand-generating investments in marketing and technology by redeploying much of the fixed cost reduction. These investments have driven brand health, customer acquisition and revenue growth, especially in our important $6.4 billion online business, which contributed 39% of sales in 2021 versus 25% in 2019.
In 2021, we grew our active customer file to $64 million and in Q4, our loyalty customers accounted for roughly 80% of our U.S. sales, setting us up to deepen customer relationships and drive long-term value. With customers returning to pre-COVID purchasing behaviors, we are pivoting to a more versatile fashion offering on trend product across the range of use occasions, while playing to our market leadership in Denim, Active and Kids and Baby. We saw these trends play out in the rise of Old Navy's classic workhorse staple, the pixie pants and Athleta's best-selling elation type, both now in flare leg shape. At Gap and Banana Republic, we're seeing return to fashion essentials with sales of Gap's modern khaki pants, climbing 33% over 2019 in January alone. And while Banana Republic's women's Blazers outperformed expectations, specifically a novelty in high emotion colors. And as kids return to in-person school and sports, we expect our Kids and Baby business with a market share of 9% to perform well.
In the face of a dynamic consumer landscape, our teams continue to drive deeper connections with our customers and the communities we are proud to serve. Throughout, our employees have navigated two years of pandemic related disruption with Ingenuity and an unwavering focus on doing what's right, all while advancing our ESG goals. I look forward to sharing our progress on that front, in next month's sustainability report. Today, we are a company positioned for balanced growth through our four purpose led brands that reach a wide range of customers across all ages, sizes, use occasions and price points, from value through to premium.
In 2021, we also faced headwinds with supply chain issues weighing heavily on our performance, especially in the back half. In the face of longer transit times from West Coast port delays and the sudden and prolonged closure of factories in Vietnam, we experienced 8 to 10 week delays in seasonal categories. In order to meet demand, we utilized significant airfreight to deliver as much of holiday product as we could. As a result, sales were muted and profits pressured. We studied the levers we have to more profitably improve on-time delivery in 2022 and I'd like to share a few of those strategies with you.
First, we accelerated booking deadlines for a portion of our spring 2022 product and booked summer even earlier. As we saw delays worsen, we accounted for elongated transit time and believed we have built in enough buffer for the current full delays. Second, we are diversifying port exposure. Beginning with our summer assortment, we are moving the vast majority of our product through Eastern and Southern ports, where delays are materially better than on the West Coast. Third, we are beginning to optimize manufacturing including approximate sourcing to enable flexibility and increased speed. Specifically, we are growing our Mexico and Central America sourcing in 2022. And fourth, we accelerated the adoption of digital product creation capabilities at Old Navy. In doing so, our teams are able to innovate more rapidly with suppliers and significantly reduced product design and development timeline.
For our fall 2022 season, Old Navy led the way in creating its assortment with a 75% year-over-year reduction in total development samples and a 40% reduction in total development time versus fall 2021. We will continue to build on this both at Old Navy and across our brands. While Q1 will have moderate product delays that necessitated air freight as a result of the aforementioned actions our summer and go forward deliveries are expected to be more on time and require only modest more normalized air. By the end of the first half, we expect the transitory air costs will have mostly flowed through the P&L.
Looking forward, Katrina will share more on our outlook for the year and what we're seeing in the first quarter, as we are keenly watching the dynamics of the macro environment. Let me speak to our strategies for 2022 across our portfolio. Old Navy is expecting tougher first half compares as we look to anniversary the brand's disproportionate benefit from last year's stimulus and the fact that the consumer has quickly pivoted to fashion such as dresses and tops which are underrepresented in Old Navy's women's product mix. Teams have chased into more versatile categories of better balance showing up in Q2. I remain confident in the overall health of Old Navy and in its position of the value brand, offering the democracy of style for the whole family at jaw dropping prices.
Gap is building on its momentum, fueled by great products and strong pricing authority. On the base of a healthier core and rightsized fleet, the brand is leaning into its Gap Home, Yeezy Gap and now Yeezy Gap Gap engineered by Balenciaga partnerships to further extend its reach and relevance around the globe. Now that Gap has landed these big partnerships, the year ahead will be about scaling them to drive sales. The brand is commencing the year with new channels for growth adding 125 points of distribution in 2022 to partnerships, licensing and franchise.
Banana Republic's new premium positioning now claiming a stake in the accessible luxury space is enabling significantly higher AURs basket size and price authority. The rebrand is giving us confidence that we can capture resilient premium customers while attracting new ones by entering adjacent categories like BR Baby, which was announced earlier this week.
And Athleta is on track to hit $2 billion in sales by 2023, led by its digital dominance including growth in the wellness space now six months into the launch of AthletaWell. The brand's world-class partnerships and inspiring marketing are helping reach new customers. Take for example its announcement of its Simone Biles partnership last summer supported by TV, which generated a significant pickup in traffic in-stores and online from that investment. This helped drive a 5 point increase in brand awareness for Athleta in fiscal year '21, Q3 alone. And for the full year of '21 Athleta grew its customer file in the double-digits, with nearly half new customers driven by marketing investments. After significant investments in marketing and technology, while we restructured we are focused on extracting maximum value in 2022 from those investments, as well as optimizing the core. Specifically, we're looking at three key areas.
First, growing our loyalty program and using first party data to better monetize our customer relationships. We are rigorously focused on increasing the lifetime value of our over 50 million loyalty members, particularly growing our team members who spend on average more than 2 times that of our core level members in Q4. We will do this through greater personalization at scale, enabled by the rich first-party data we acquired from marketing investments we made last year, coupled with the customer insights we've gained from our fully integrated loyalty program. This is particularly important with the changes happening across the media landscape and in customers' media consumption habits.
Second, end-to-end supply chain transformation where we are improving processes to drive efficiency and eliminate waste. This includes digital product creation that trim time from the development cycle and saves on overhead and sample costs, optimize shipping logic that reduces split shipments and implementing automated return in our distribution centers that get product back to inventory and under an hour. We are working on derisking our supply chain by rebalancing our sourcing to rely less on single countries of origin and building deeper relationships with near shore vendors.
And third, we're building inventory management capabilities, in addition to balancing category mix, which we believe will improve our ability to hold on to average unit retail, even in the face of potentially higher promotional environment. New digital tools are unlocking inventory allocation accuracy, using predictive analytics and data to better forecast and making us more agile and precise about where we place product across our 2,800 company operated stores and creating assortments by location to meet customer demand, in turn, reducing markdowns and helping maintain AUR. From a category mix perspective, we're leaning into higher AUR products such as Banana Republic's new silk, leather, cashmere and suede style. And at Old Navy, fashion essentials like dresses, pants and woven tops.
As I look ahead to an environment where style, price and quality are top of mind for consumers, we're leaning into the power of our portfolio. Versatility and our ability to offer a range from value to premium, particularly as some customers tightened budgets, while other seek out luxury statement pieces is our competitive advantage. The 2022 outlook we provided today represents a continued step forward of our strategy, with profitable sales growth and a path to get through Q1 disruption and deliver on our priorities for the year.
While we are entering the year focused on executing against our strategy, building on our progress, and with the firm grasps on the levers we have to compete, I would be remiss to not acknowledge the fluidity of the macro challenges impacting the speed with which we can unlock value in the portfolio. As always, we remain balanced taking a comprehensive view of all strategic options that account for and address the evolving macro environment and ultimately deliver the best outcomes for our customers, our employees and our shareholders.
With that, I'll hand it to Katrina.
