1
00:00:02,520 --> 00:00:10,000
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg's Lisa Bromwitz joins

2
00:00:10,039 --> 00:00:12,039
Speaker 1: us now and she is sitting down with the CEO

3
00:00:12,240 --> 00:00:12,560
Speaker 1: of the Gap.

4
00:00:12,680 --> 00:00:13,880
Speaker 2: Lisa, thank you so much.

5
00:00:13,920 --> 00:00:14,120
Speaker 1: Matt.

6
00:00:14,200 --> 00:00:16,439
Speaker 2: Yeah, we do have Richard Dixon, who is the CEO,

7
00:00:16,520 --> 00:00:20,000
Speaker 2: the not so new chief executive officer of GAP Incorporated

8
00:00:20,040 --> 00:00:22,040
Speaker 2: since twenty twenty three. Great to see you, Richard, Thank

9
00:00:22,040 --> 00:00:24,040
Speaker 2: you for being with us. I want to start you

10
00:00:24,560 --> 00:00:27,000
Speaker 2: definitely were one of the winners this retail season, with

11
00:00:27,040 --> 00:00:30,560
Speaker 2: beats across the board, increasing your full year forecast. I'm

12
00:00:30,600 --> 00:00:32,919
Speaker 2: wondering how much the key to success this season in

13
00:00:32,960 --> 00:00:36,320
Speaker 2: retail is catering to wealthier investors who can spend more

14
00:00:36,520 --> 00:00:37,720
Speaker 2: at a higher price point.

15
00:00:38,280 --> 00:00:41,320
Speaker 1: Well, first off, thank you. It's clear our strategy is

16
00:00:41,360 --> 00:00:44,000
Speaker 1: working and it is showing up in the momentum, and

17
00:00:44,040 --> 00:00:47,360
Speaker 1: we're seeing that in the results. We've had consistent strength

18
00:00:48,080 --> 00:00:52,240
Speaker 1: from our consumer behavior that we're winning actually with all

19
00:00:52,400 --> 00:00:55,760
Speaker 1: income cohorts. When you look at the overall sales comp

20
00:00:55,880 --> 00:00:59,160
Speaker 1: up five percent. That's the seventh consecutive quarter of positive

21
00:00:59,200 --> 00:01:02,360
Speaker 1: comps for US. Our leading brand, Old Navy, the largest brand,

22
00:01:02,360 --> 00:01:06,240
Speaker 1: delivered an outstanding quarter. We were up six percent gap

23
00:01:06,360 --> 00:01:09,040
Speaker 1: up seven percent, be nan A Republic up four percent,

24
00:01:09,440 --> 00:01:13,840
Speaker 1: gross margin exceeding expectations. So from an overall perspective, what

25
00:01:13,920 --> 00:01:17,240
Speaker 1: we see and are approving is consistency in the context

26
00:01:17,240 --> 00:01:21,080
Speaker 1: of our strategy and our playbook. As we look at consumers,

27
00:01:21,959 --> 00:01:26,000
Speaker 1: we do see the consistency and strength with our customer

28
00:01:26,040 --> 00:01:29,560
Speaker 1: behavior and we've been winning with all income cohorts. As

29
00:01:29,560 --> 00:01:32,760
Speaker 1: you could see from the differentiation in our portfolio, we

30
00:01:32,800 --> 00:01:38,160
Speaker 1: saw equal growth across low, middle, and high and while

31
00:01:38,200 --> 00:01:42,440
Speaker 1: we're seeing external data points to macro pressure, particularly in

32
00:01:42,520 --> 00:01:46,959
Speaker 1: the lower income consumer, our customers are finding our price,

33
00:01:47,319 --> 00:01:51,640
Speaker 1: our value, our style, breaking through the competition, and ultimately

34
00:01:51,680 --> 00:01:55,000
Speaker 1: we're very excited to be winning in the marketplace, giving

35
00:01:55,080 --> 00:01:56,640
Speaker 1: us a lot of confidence as we head into the

36
00:01:56,640 --> 00:01:57,280
Speaker 1: holiday season.

37
00:01:57,360 --> 00:02:00,520
Speaker 2: Yeah, talking about the holiday season, how robust you expected

38
00:02:00,520 --> 00:02:02,360
Speaker 2: to be, how is it coming along, and how much

39
00:02:02,680 --> 00:02:05,920
Speaker 2: our consumer's resilient even in the face of price increases.

40
00:02:07,240 --> 00:02:10,639
Speaker 1: Look, holidays come every year. We're off to a great start.

41
00:02:11,080 --> 00:02:15,600
Speaker 1: We have great activations that are planned this holiday. In particular,

42
00:02:15,720 --> 00:02:20,120
Speaker 1: I'm very excited about certain categories denim, sleep where fleece.

43
00:02:20,240 --> 00:02:25,240
Speaker 1: These look really strong. Our value proposition, our marketing executions.

44
00:02:25,440 --> 00:02:28,000
Speaker 1: Hopefully you've seen some of the creative when you go

45
00:02:28,040 --> 00:02:31,400
Speaker 1: online to our sites. We're well positioned to serve our

46
00:02:31,440 --> 00:02:35,240
Speaker 1: customers wherever and however they choose to shop. We just,

47
00:02:35,480 --> 00:02:38,440
Speaker 1: for example, Old Navy did a partnership with door Dash,

48
00:02:38,639 --> 00:02:42,400
Speaker 1: which provides convenience for tens of millions of users. Our

49
00:02:42,400 --> 00:02:44,840
Speaker 1: stores are ready, our teams are fired up, and we're

50
00:02:44,880 --> 00:02:47,160
Speaker 1: looking to a strong finish to the year.

51
00:02:47,240 --> 00:02:49,480
Speaker 2: So Richard, I expect you actually coming on and dancing

52
00:02:49,520 --> 00:02:52,400
Speaker 2: to milkshake in the background because I hear you talking

53
00:02:52,400 --> 00:02:54,600
Speaker 2: about some of the cultural relevance and I wonder how

54
00:02:54,680 --> 00:02:57,520
Speaker 2: much the battle for cultural relevance has been front and

55
00:02:57,560 --> 00:03:00,960
Speaker 2: center for you about that viral ad. How much are

56
00:03:01,000 --> 00:03:05,560
Speaker 2: you looking to new partnerships and new types of advertising

57
00:03:05,639 --> 00:03:07,520
Speaker 2: as a way to really drive gap strategy.

58
00:03:08,760 --> 00:03:12,160
Speaker 1: Cultural relevance is a very important part of our playbook,

59
00:03:12,160 --> 00:03:15,320
Speaker 1: and we talk about relevance with revenue. You can have

60
00:03:15,440 --> 00:03:18,440
Speaker 1: relevance but not revenue, and so the key to success

61
00:03:18,520 --> 00:03:22,840
Speaker 1: is when you have relevance that drives revenue. And collaborations

62
00:03:23,320 --> 00:03:26,160
Speaker 1: do help brand relevance. Now, it has to be the

63
00:03:26,240 --> 00:03:29,400
Speaker 1: right collaboration and a win win methodology, but it does

64
00:03:29,480 --> 00:03:33,120
Speaker 1: do a really good job broadening its consumer base when

65
00:03:33,120 --> 00:03:37,560
Speaker 1: it's done well and continue the drum beat between bigger

66
00:03:37,560 --> 00:03:41,160
Speaker 1: and larger releases. So to stay in the cultural conversation,

67
00:03:42,000 --> 00:03:46,760
Speaker 1: Gap brand has launched over thirteen collaborations that continue to

68
00:03:46,840 --> 00:03:49,960
Speaker 1: just drive excitement and surprise. But what I will say

69
00:03:50,000 --> 00:03:53,240
Speaker 1: is that these are very precise and as I said,

70
00:03:53,280 --> 00:03:56,400
Speaker 1: it need to be win win and authentic to the customer.

71
00:03:56,800 --> 00:03:59,920
Speaker 1: They do attract different audiences. In the Cat's eye case,

72
00:04:00,480 --> 00:04:05,440
Speaker 1: we did an extraordinary job continuing to introduce and discover

73
00:04:05,600 --> 00:04:09,160
Speaker 1: Gap to gen Z, which has been a really exciting

74
00:04:09,560 --> 00:04:13,520
Speaker 1: segment for us. We got eight billion impressions five hundred

75
00:04:13,560 --> 00:04:16,839
Speaker 1: million views for the Better in Denim campaign. It was

76
00:04:16,920 --> 00:04:19,680
Speaker 1: literally a global takeover and it's become one of the

77
00:04:19,720 --> 00:04:24,200
Speaker 1: brand's most successful campaigns to date. We drove credible traffic

78
00:04:24,240 --> 00:04:26,800
Speaker 1: and of course double digit growth in Denham.

79
00:04:26,960 --> 00:04:29,240
Speaker 2: I have to ask for sure was this a direct

80
00:04:29,240 --> 00:04:32,480
Speaker 2: response to American Eagle's Sydney Sweetead.

81
00:04:33,640 --> 00:04:38,520
Speaker 1: Look. I think the fashion industry is proving creativity and competitively.

82
00:04:38,640 --> 00:04:41,680
Speaker 1: We love the fact that there's lots of different conversations

83
00:04:41,720 --> 00:04:45,679
Speaker 1: around fashion and particularly denim. We are front and center

84
00:04:45,760 --> 00:04:48,760
Speaker 1: with our strategies. We did a better in Denim campaign

85
00:04:48,760 --> 00:04:54,400
Speaker 1: that was specific to gap, expressing our originality and to

86
00:04:54,440 --> 00:04:58,400
Speaker 1: some extent, sometimes it's convenience and sometimes it's ironic. But

87
00:04:58,960 --> 00:05:01,400
Speaker 1: I think in the context of the denim dialogue, we

88
00:05:01,520 --> 00:05:03,920
Speaker 1: certainly had our fair share of goodwill.

89
00:05:04,240 --> 00:05:06,680
Speaker 2: The denim wars continue, Richard, we just have just a

90
00:05:06,680 --> 00:05:09,480
Speaker 2: bet a minute left. I'm curious going forward how much

91
00:05:09,520 --> 00:05:12,520
Speaker 2: you are seeing sort of that teriff related impact on pricing,

92
00:05:12,600 --> 00:05:14,560
Speaker 2: how much has already been factored in, and how much

93
00:05:14,600 --> 00:05:17,440
Speaker 2: going forward you expect to still have to pass through.

94
00:05:18,839 --> 00:05:21,520
Speaker 1: Well, I would first call out our team. We have

95
00:05:21,600 --> 00:05:24,920
Speaker 1: done a great job with our mitigation plans, which we've

96
00:05:24,960 --> 00:05:29,040
Speaker 1: shared many times. It's been focused and thoughtful, making adjustments

97
00:05:29,080 --> 00:05:34,159
Speaker 1: to sourcing, manufacturing, our assortments, and many other actions, and

98
00:05:34,320 --> 00:05:37,680
Speaker 1: all of those actions were designed for the reaction of

99
00:05:37,720 --> 00:05:41,480
Speaker 1: our consumer to continue to have our value, quality, and

100
00:05:41,560 --> 00:05:45,719
Speaker 1: style portrade, which is most important. The third quarter tariff

101
00:05:45,760 --> 00:05:48,000
Speaker 1: impact was one hundred and ninety basis points, but that

102
00:05:48,120 --> 00:05:51,159
Speaker 1: was in line with our expectations, and despite this, we

103
00:05:51,240 --> 00:05:54,640
Speaker 1: actually exceeded our gross margin outlook, which was driven by

104
00:05:54,720 --> 00:05:58,800
Speaker 1: top line momentum, less discounting, better regular price sell through.

105
00:05:58,839 --> 00:06:01,599
Speaker 1: So we're going to continue to pursue our mitigation plans,

106
00:06:01,640 --> 00:06:06,279
Speaker 1: but we remain focused most importantly style, quality and value

107
00:06:06,279 --> 00:06:06,919
Speaker 1: for our consumer.

108
00:06:07,200 --> 00:06:09,200
Speaker 2: Richard Dixon. Wonderful to catch up with you, thanks so

109
00:06:09,279 --> 00:06:13,599
Speaker 2: much on the quarter. Wonderful to get your perspective that

110
00:06:13,800 --> 00:06:15,600
Speaker 2: was GAP CEO, Richard Dixon,