Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: The Stock Movers podcast, your roundup of companies making moves
Speaker 2: in the stock market, harnessing the power of Bloomberg Data.
Speaker 3: I'm Tim Steanebeck along with Carol Masser. Let's take a
Speaker 3: look at some stocks on the move. It's the cover
Speaker 3: of the July US edition of Bloomberg BusinessWeek. It's about
Speaker 3: the Gap CEO's battle to save the brand and the
Speaker 3: challenge that it is slammed into as a result of
Speaker 3: the President's tariffs. The iconic nineties retailer was on the
Speaker 3: precipice of death for years. Richard Dixon finally had momentum
Speaker 3: for a comeback. Then came Trump. Amanda Mole is the
Speaker 3: lead writer on the story. She joins us here in
Speaker 3: the Bloomberg Interactive Brokers Studio. A great deep dive on Gap.
Speaker 3: Congratulations on the cover story.
Speaker 4: Thank you.
Speaker 3: I want to start historical here and just remind everybody
Speaker 3: what Gap was and what sort of happened when it
Speaker 3: lost its way. Like I'm asking you to give us
Speaker 3: the entire story here, but think back to the.
Speaker 1: Nineties and fall into the Gap fell into a slump,
Speaker 1: Yes it did.
Speaker 3: But the nineties this was so I remember. I remember
Speaker 3: having my parents' friends coming and visiting us from Europe
Speaker 3: in a small town in California, and they wanted to
Speaker 3: go to The Gap absolutely when they got to the
Speaker 3: United States. Yeah, I believe it.
Speaker 4: Yeah, it's hard to explain to people who are too
Speaker 4: young to be aware of pop culture during the eighties
Speaker 4: and nineties, but The Gap was sort of like the
Speaker 4: king of American aesthetics for quite a while during the
Speaker 4: eighties and the nineties. It was a store that was
Speaker 4: so powerful and so so well trafficked that it commanded
Speaker 4: some of the same lease terms in malls is like
Speaker 4: anchor department stores that were much much larger it. You know,
Speaker 4: it was a company that that sort of married the
Speaker 4: sort of casualizing cool clothes of the era with this
Speaker 4: sort of like great fluency in pop culture. It's advertisements
Speaker 4: were these like incredible black and white portraits of you know,
Speaker 4: iconic celebrities and tastemakers, people like Spike Lee, Joan Didion,
Speaker 4: you know, by these fashion photographers who were some of
Speaker 4: the most celebrated minds in the business. It really, you know,
Speaker 4: cast a net in culture outside of the you know,
Speaker 4: forty dollars jeans and fifteen dollars t shirts. It clothed everybody.
Speaker 4: The one hundredth anniversary issue of Vogue featured supermodels on
Speaker 4: the cover wearing Gap jeans and button downs. It was
Speaker 4: truly an incredible force in, you know, creating the idea
Speaker 4: of how Americans dressed now.
Speaker 1: Until it wasn't until it wasn't like what brought it
Speaker 1: down too much competition like walk us through.
Speaker 4: Well, you know, over the past forty years, American retail
Speaker 4: has just changed a lot. Gap really thrived in an
Speaker 4: era when people went out to shop, when people went
Speaker 4: to malls. The rise of the Gap as a national
Speaker 4: retailer sort of sort of mirrors the rise of the
Speaker 4: suburban mall as the place that people thought about going
Speaker 4: to do their shopping for clothes is a cool place
Speaker 4: to go. And when malls started to decline, so to
Speaker 4: Gap for many of the same reasons. Gap had grown
Speaker 4: really really large at that point, and it had a
Speaker 4: lot of leases and a lot of sort of aging
Speaker 4: shopping centers across America. And then you get the one
Speaker 4: two punch of some regulatory changes in the mid two
Speaker 4: thousands that led in a lot of international fast fashion
Speaker 4: retailers Zara, h and M things like that. And then
Speaker 4: the Internet gave people in you know, virtually everywhere in
Speaker 4: America a much wider access to different types of clothing.
Speaker 4: So suddenly there was just a ton of cheap clothes everywhere.
Speaker 4: And the sort of gambit that Gap ran, which was
Speaker 4: you know, cool jeans and T shirts, people had caught
Speaker 4: onto it. People were imitating what they were doing, and
Speaker 4: so you combined that sort of like lease load in
Speaker 4: debt load that they had with all this new competition
Speaker 4: in these new retail channels, and they just fell off.
Speaker 3: We're going to get to Richard Dixon and the task
Speaker 3: that he has set out in the for him and
Speaker 3: the obstacles he has ahead of him. In a second.
Speaker 3: First though, Mickey Drexler a legendary name in the world
Speaker 3: of retail. What was his what was his role in
Speaker 3: where GAP is today?
Speaker 4: Mickey like was Gap for twenty years. The Fishers, the
Speaker 4: family that founded GAP, hired him in nineteen eighty three
Speaker 4: after he had turned around and Taylor and he stayed
Speaker 4: at GAP for almost twenty years after that. He built
Speaker 4: the company into the sort of cultural engine that it
Speaker 4: was at its peak. He sort of understood that, like,
Speaker 4: in order to sell jeans and T shirts, you had
Speaker 4: the jeans and T shirts had to mean something. And
Speaker 4: he was great at making meaning out of sort of
Speaker 4: regular clothes. And he was great at, you know, organizing
Speaker 4: a company that really sort of kept its fingers on
Speaker 4: the pulse of like what people were interested in, interested
Speaker 4: in what felt cool, like what might motivate people to
Speaker 4: go out and buy something. And he for twenty years
Speaker 4: was sort of fantastically successful at that, but at the
Speaker 4: end it wasn't enough to save his job.
Speaker 1: Yeah, And I feel like then they kind of bounced
Speaker 1: around a lot, right, I think, like trying to figure
Speaker 1: out what they need to be in this very as
Speaker 1: you say, I think you played out really like I mean,
Speaker 1: let's be clear, retail has had a really tough time
Speaker 1: for a long time, and so the dust is settling.
Speaker 1: I mean, I even think about Levi's that has gone
Speaker 1: through a revival of sorts. I just bought a pair
Speaker 1: of Levi's. I haven't bought Levi's in such a long time.
Speaker 1: But for the gap, they went through a lot of
Speaker 1: bouncing around, and that also takes its tall.
Speaker 4: Yes, So in between Mickey Drexler and Richard Dixon, the
Speaker 4: current CEO. There were four CEOs.
Speaker 3: Who were that's over like about twenty three years.
Speaker 4: Yes, so they lasted it was actually almost almost exactly
Speaker 4: twenty years, so that they lasted all about like four
Speaker 4: or five years of piece on average.
Speaker 1: Just about getting settled in initiatives and then it's like
Speaker 1: gone right.
Speaker 4: And you know, the trouble that GAP has had with
Speaker 4: executives over the past twenty years mirrors a lot of
Speaker 4: the trouble that other sort of like great American companies
Speaker 4: have had in that period of time looking for people
Speaker 4: to bring in to like solve one problem while then
Speaker 4: accidentally making another problem worse. So you bring in someone
Speaker 4: to deal with the debt load and deal with margin,
Speaker 4: and then they do that, but creativity sort of plummets.
Speaker 4: Then you bring someone into to deal with like the
Speaker 4: sort of overabundance of leases and closed stores and streamline
Speaker 4: and they do that, but then the quality of the
Speaker 4: clothes also goes down because they're streamlining the you know,
Speaker 4: the the materials being used, right, So you are sort
Speaker 4: of playing whack a mole with all of these different problems,
Speaker 4: and when you are bringing on executives that are meant
Speaker 4: to deal with sort of like systemic issues or logistical
Speaker 4: issues or financial issues within a company. In a company
Speaker 4: that sells aesthetics, that sells ideas, that sells coolness, that
Speaker 4: can be really, really difficult in the long term unless
Speaker 4: you have like a sort of rare type of person
Speaker 4: and it's just hard to find that person.
Speaker 1: And you know, it's funny as they've gone along, I
Speaker 1: think about I don't know, when my daughter was young,
Speaker 1: our Gap Baby and Gap Kids, like it seemed super successful,
Speaker 1: like there are things that they've done that have done well,
Speaker 1: and then I don't know, like just I don't know
Speaker 1: whether it runs out of steam or momentum.
Speaker 2: I don't know.
Speaker 4: Yeah, No, Gap is a fascinating company because it's got
Speaker 4: a bunch of brands within it. It's got Gap, but
Speaker 4: then Old Navy, Banana Republic, Athleta Athleta, right, and then
Speaker 4: it's a bunch of those brands have sub brands too,
Speaker 4: So like Gap has Gap Kids, Banana Republic, tried Banana
Speaker 4: Republic Home. There used to be Piper, which was a
Speaker 4: Zappo's competitor. There was Intermix, which got bought and then
Speaker 4: sold to private equity. It was trying to get more
Speaker 4: into like the higher end fashion game. Like there's been
Speaker 4: all these sort of like side quests and boondoggles and
Speaker 4: sub brands and things that just didn't work.
Speaker 2: And.
Speaker 4: What has underwritten a lot of that for a long
Speaker 4: time is Old Navy. One of Nickey Drexler's big things
Speaker 4: that he did for the company was launch Old Navy
Speaker 4: in nineteen ninety four and in that time GAP's revenue
Speaker 4: has fallen by about half since its peak in two
Speaker 4: thousand and three ish. But Old Navy sells over eight
Speaker 4: billion dollars worth of clothes every year and has really
Speaker 4: like financed all these boon doggles.
Speaker 1: Can I tell you so many times I'll be like,
Speaker 1: that's really great Old Navy, Like it's just like fashion forward,
Speaker 1: even like it's pretty impressive.
Speaker 3: So let's fast forward to today, because you've got a
Speaker 3: lot of time with Richard Dixon and some really interesting
Speaker 3: commentary about like what he did when he first got
Speaker 3: to the role in terms of taking the executives shopping,
Speaker 3: hearing about their like relentless positivity and meetings that he
Speaker 3: didn't necessarily see as realistic. What is his path forward
Speaker 3: in the face of tariffs, which you write the piece,
Speaker 3: this company's actually pretty well positioned to deal with right,
Speaker 3: So on the face right.
Speaker 4: A lot of what Dixon did when he got there
Speaker 4: was sort of changed the attitude of the company, I think,
Speaker 4: because it's something that's interesting always as someone who sits
Speaker 4: like outside of these companies and is trying to figure
Speaker 4: out what's going on that Like when you have a
Speaker 4: company that's been like sort of beleaguered for a long time,
Speaker 4: it's I always wonder, like, what do they think about
Speaker 4: what everybody says about them externally? And something that Dixon
Speaker 4: told us about. Lily Meyer was my co reporter on
Speaker 4: the piece. She he was like, you know, he had
Speaker 4: this town hall when he first got there where he
Speaker 4: you know, had a slide presentation put together of all
Speaker 4: the negative headlines about the company and got up in
Speaker 4: front of the company and was like, everybody knows what
Speaker 4: we should be doing except us, and it's hard to
Speaker 4: say that they're wrong. It was sort of like, you know,
Speaker 4: this like huge legacy company had become like a little
Speaker 4: bit more abund a little bit complacent, and just sort
Speaker 4: of figuring out a way out of that psychologically, I
Speaker 4: think has been a big part of his tenure so far,
Speaker 4: and when you combine that with the sort of like
Speaker 4: long un sexy work that has been going on, you know,
Speaker 4: under him, but also before him, of cleaning up the
Speaker 4: company's debt, of cleaning up the discounting situation, because a
Speaker 4: big issue for Gap has been that they've trained their
Speaker 4: customers to expect everything to be fifty percent off all
Speaker 4: the time. And it's really hard to grow a business.
Speaker 1: So true, it's so true, like you get used to
Speaker 1: it and no, no, and then exactly you know it
Speaker 1: and you know it's coming. I thought you were going
Speaker 1: to say the barrel gene save the company.
Speaker 4: Well, they I think are indicative of something that might
Speaker 4: save the company. I would say, which is the capacity
Speaker 4: now for Gap? Because it's cleaned up its logistics, it's
Speaker 4: clean up its supply chain a little bit to see
Speaker 4: a trend coming, to have a product ready to go
Speaker 4: and then have the technological and data capability to like
Speaker 4: put it into stores like at the right moment in
Speaker 4: order to like sell a bunch of it and not
Speaker 4: have to discount it and not have to send it
Speaker 4: to outlet and not have to you.
Speaker 1: Know, doesn't end up at Tjmax.
Speaker 3: Sorry.
Speaker 4: Yeah, So far not for these so far not for
Speaker 4: these genes. And it's it's interesting because it's a barrel.
Speaker 4: Genes are sort of these like like curved outward like
Speaker 4: sort of cartoon cowboy leg jeans that are a little
Speaker 4: bit silly and like very trendy and very young, and
Speaker 4: it's the type of thing that for twenty years GAP
Speaker 4: has not been able to do because they either bet
Speaker 4: on the wrong thing or it's too earlier, it's too late.
Speaker 4: But the success that they've had with these genes, which
Speaker 4: aren't cheap and they don't discount all of the popular
Speaker 4: colors regularly, is indicative that they figured out the data
Speaker 4: and logistics capabilities to be able to like compete in
Speaker 4: this realm, which is big for them.
Speaker 1: I think, yeah, I mean, but it's certainly fashion forward.
Speaker 1: I've tried them on. They're just not quite for me.
Speaker 1: I don't know. Have you tried them on?
Speaker 3: I don't even know what you're talking about.
Speaker 1: Have you tried them on?
Speaker 4: I bought a paarawise did. Yeah, if you get them
Speaker 4: in the right the right like weight of Denham, they
Speaker 4: like they look more slouchy than Curby went on.
Speaker 1: Okay, because otherwise you feel like you're like, okay, Corral.
Speaker 4: Yes, it's a little it's a little cartoon cowboy, all.
Speaker 1: Right, Amnimal, you are amazing. She is seen a reporter
Speaker 1: for Bloomberg BusinessWeek. Her story it is the cover story
Speaker 1: of the upcoming new issue of Bloomberg Business Week, about
Speaker 1: Gap CEO's battle to save the brand slamming into Trump's terrors.
Speaker 1: Because yeah, that is certainly an aspect of this story
Speaker 1: as well in a big way.
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