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Gap’s New Menswear Line Is a Direct Challenge to Lululemon

September 20, 2018

Gap Inc (GPS) is finally getting a horse in the men’s side of the athleisure race.

The retailer said on Thursday it would soon be launching a new brand called “Hill City” focused on performance activewear for men in what will be a big test of the apparel’s ability to quickly create and build up new brands at a time its namesake chain is withering.

Hill City, set to launch in mid-October as on online brand, will include 60 items. Gap Inc will showcase some of them at about 50 of its 155 Athleta stores to leverage that fast growing chain’s popularity to build awareness. (Shoppers will be able to buy Hill City products within Athleta stores only via a kiosk that will take online orders.) For now there are no plans for Hill City to operate its own stores.

Gap Inc saw an opening for Hill City in the market from the many inquiries it says it got from its Athleta customers looking for items for the men in their lives.

Athleta, which only sells women’s wear, is a bright spot for Gap Inc, whose namesake and Banana Republic brands have struggled in recent years. The Gap’s comparable sales have declined for 16 of the last 18 quarters. But Athleta has created a niche for itself by riding the athleisure craze with quality products at prices typically 20% lower than those of market leader Lululemon Athletica (LULU).

Last year, Gap Inc said it expected Athleta, which it bought in 2008, to hit the $1 billion sales milestone within a few years. And now it hopes that an assist from Athleta will help launch a new men’s brand more quickly.

Hill City’s initial offering will include men’s pants with a stretch waistband and a storage compartment inside the pocket. There is also a therma-light jacket made with a Japanese fabric that is warm and has insulation and lining and is reversible. Another stand-by will be running shorts with a light fabric.

Some two-thirds of the items well price for less than $100 and the average price will be $80 or so. San Francisco-based Hill City will start building awareness for its brand in its own backyard, holding events at the headquarters of tech giants like Twitter and Facebook for the staff at those companies.

“There is clothing with tech performance but it doesn’t look good, and fashion that doesn’t function. The opportunity we see is to bridge those two things,” Noah Palmer, the general manager of Hill City, tells Fortune in a showroom near Manhattan’s Union Square.

But others have seen that opportunity and seen it earlier. Lululemon Athletica (LULU) said last month that men’s items are now 22% of its sales but that is the result of years of efforts. Last quarter, sales of Lululemon’s men’s pants for instance rose 30%.

And there are many digital-first brands emerging not to mention giants like Target piling in to men’s athleisure wear, too. But Gap Inc, which last year clearly indicated it was shifting its focus from its mature and its declining brands toward its growing chains like Old Navy and Athleta, thinks it can use its manufacturing and supply chain firepower to speed up the incubation and launch of newer brands.

Noah Palmer, the Gap Inc executive overseeing the launch of men’s active wear brand Hill City.
Gap Inc

“As a startup, we would be worried about supply chain, human resources, legal matters, getting a line of credit, but we don’t need to because we are part of Gap Inc,” says Palmer, a one time professional soccer player who made his way up the company’s ranks at Old Navy and leads the 18-person team building Hill City.

Yet there are no guarantees. The last time Gap Inc launched a brand, Forth & Towne in 2005, aimed at older women, it shut it down only two years later. (That might explain the company’s caution in opening stores for Hill City just yet.)

So Hill City is something of a guinea pig for Gap Inc as it looks to diversify its portfolio and reduce its reliance on fading brands and build new ones. And the payoff could take years: Gap Inc bought Athleta 10 years ago this month and it yet hasn’t reach the $1 billion threshold, meaning it is still a small part of the $16 billion-a-year company. But that’s almost beside the point.

As Palmer put it, “it can create a blueprint and gives you a muscle you didn’t have before.”