Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg's Lisa Bromwitz joins
Speaker 1: us now and she is sitting down with the CEO
Speaker 1: of the Gap.
Speaker 2: Lisa, thank you so much.
Speaker 1: Matt.
Speaker 2: Yeah, we do have Richard Dixon, who is the CEO,
Speaker 2: the not so new chief executive officer of GAP Incorporated
Speaker 2: since twenty twenty three. Great to see you, Richard, Thank
Speaker 2: you for being with us. I want to start you
Speaker 2: definitely were one of the winners this retail season, with
Speaker 2: beats across the board, increasing your full year forecast. I'm
Speaker 2: wondering how much the key to success this season in
Speaker 2: retail is catering to wealthier investors who can spend more
Speaker 2: at a higher price point.
Speaker 1: Well, first off, thank you. It's clear our strategy is
Speaker 1: working and it is showing up in the momentum, and
Speaker 1: we're seeing that in the results. We've had consistent strength
Speaker 1: from our consumer behavior that we're winning actually with all
Speaker 1: income cohorts. When you look at the overall sales comp
Speaker 1: up five percent. That's the seventh consecutive quarter of positive
Speaker 1: comps for US. Our leading brand, Old Navy, the largest brand,
Speaker 1: delivered an outstanding quarter. We were up six percent gap
Speaker 1: up seven percent, be nan A Republic up four percent,
Speaker 1: gross margin exceeding expectations. So from an overall perspective, what
Speaker 1: we see and are approving is consistency in the context
Speaker 1: of our strategy and our playbook. As we look at consumers,
Speaker 1: we do see the consistency and strength with our customer
Speaker 1: behavior and we've been winning with all income cohorts. As
Speaker 1: you could see from the differentiation in our portfolio, we
Speaker 1: saw equal growth across low, middle, and high and while
Speaker 1: we're seeing external data points to macro pressure, particularly in
Speaker 1: the lower income consumer, our customers are finding our price,
Speaker 1: our value, our style, breaking through the competition, and ultimately
Speaker 1: we're very excited to be winning in the marketplace, giving
Speaker 1: us a lot of confidence as we head into the
Speaker 1: holiday season.
Speaker 2: Yeah, talking about the holiday season, how robust you expected
Speaker 2: to be, how is it coming along, and how much
Speaker 2: our consumer's resilient even in the face of price increases.
Speaker 1: Look, holidays come every year. We're off to a great start.
Speaker 1: We have great activations that are planned this holiday. In particular,
Speaker 1: I'm very excited about certain categories denim, sleep where fleece.
Speaker 1: These look really strong. Our value proposition, our marketing executions.
Speaker 1: Hopefully you've seen some of the creative when you go
Speaker 1: online to our sites. We're well positioned to serve our
Speaker 1: customers wherever and however they choose to shop. We just,
Speaker 1: for example, Old Navy did a partnership with door Dash,
Speaker 1: which provides convenience for tens of millions of users. Our
Speaker 1: stores are ready, our teams are fired up, and we're
Speaker 1: looking to a strong finish to the year.
Speaker 2: So Richard, I expect you actually coming on and dancing
Speaker 2: to milkshake in the background because I hear you talking
Speaker 2: about some of the cultural relevance and I wonder how
Speaker 2: much the battle for cultural relevance has been front and
Speaker 2: center for you about that viral ad. How much are
Speaker 2: you looking to new partnerships and new types of advertising
Speaker 2: as a way to really drive gap strategy.
Speaker 1: Cultural relevance is a very important part of our playbook,
Speaker 1: and we talk about relevance with revenue. You can have
Speaker 1: relevance but not revenue, and so the key to success
Speaker 1: is when you have relevance that drives revenue. And collaborations
Speaker 1: do help brand relevance. Now, it has to be the
Speaker 1: right collaboration and a win win methodology, but it does
Speaker 1: do a really good job broadening its consumer base when
Speaker 1: it's done well and continue the drum beat between bigger
Speaker 1: and larger releases. So to stay in the cultural conversation,
Speaker 1: Gap brand has launched over thirteen collaborations that continue to
Speaker 1: just drive excitement and surprise. But what I will say
Speaker 1: is that these are very precise and as I said,
Speaker 1: it need to be win win and authentic to the customer.
Speaker 1: They do attract different audiences. In the Cat's eye case,
Speaker 1: we did an extraordinary job continuing to introduce and discover
Speaker 1: Gap to gen Z, which has been a really exciting
Speaker 1: segment for us. We got eight billion impressions five hundred
Speaker 1: million views for the Better in Denim campaign. It was
Speaker 1: literally a global takeover and it's become one of the
Speaker 1: brand's most successful campaigns to date. We drove credible traffic
Speaker 1: and of course double digit growth in Denham.
Speaker 2: I have to ask for sure was this a direct
Speaker 2: response to American Eagle's Sydney Sweetead.
Speaker 1: Look. I think the fashion industry is proving creativity and competitively.
Speaker 1: We love the fact that there's lots of different conversations
Speaker 1: around fashion and particularly denim. We are front and center
Speaker 1: with our strategies. We did a better in Denim campaign
Speaker 1: that was specific to gap, expressing our originality and to
Speaker 1: some extent, sometimes it's convenience and sometimes it's ironic. But
Speaker 1: I think in the context of the denim dialogue, we
Speaker 1: certainly had our fair share of goodwill.
Speaker 2: The denim wars continue, Richard, we just have just a
Speaker 2: bet a minute left. I'm curious going forward how much
Speaker 2: you are seeing sort of that teriff related impact on pricing,
Speaker 2: how much has already been factored in, and how much
Speaker 2: going forward you expect to still have to pass through.
Speaker 1: Well, I would first call out our team. We have
Speaker 1: done a great job with our mitigation plans, which we've
Speaker 1: shared many times. It's been focused and thoughtful, making adjustments
Speaker 1: to sourcing, manufacturing, our assortments, and many other actions, and
Speaker 1: all of those actions were designed for the reaction of
Speaker 1: our consumer to continue to have our value, quality, and
Speaker 1: style portrade, which is most important. The third quarter tariff
Speaker 1: impact was one hundred and ninety basis points, but that
Speaker 1: was in line with our expectations, and despite this, we
Speaker 1: actually exceeded our gross margin outlook, which was driven by
Speaker 1: top line momentum, less discounting, better regular price sell through.
Speaker 1: So we're going to continue to pursue our mitigation plans,
Speaker 1: but we remain focused most importantly style, quality and value
Speaker 1: for our consumer.
Speaker 2: Richard Dixon. Wonderful to catch up with you, thanks so
Speaker 2: much on the quarter. Wonderful to get your perspective that
Speaker 2: was GAP CEO, Richard Dixon,