WEBVTT - Gap CEO Richard Dickson Talks Turn Around, Earnings

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Bloomberg's Lisa Bromwitz joins

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<v Speaker 1>us now and she is sitting down with the CEO

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<v Speaker 1>of the Gap.

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<v Speaker 2>Lisa, thank you so much.

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<v Speaker 1>Matt.

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<v Speaker 2>Yeah, we do have Richard Dixon, who is the CEO,

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<v Speaker 2>the not so new chief executive officer of GAP Incorporated

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<v Speaker 2>since twenty twenty three. Great to see you, Richard, Thank

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<v Speaker 2>you for being with us. I want to start you

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<v Speaker 2>definitely were one of the winners this retail season, with

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<v Speaker 2>beats across the board, increasing your full year forecast. I'm

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<v Speaker 2>wondering how much the key to success this season in

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<v Speaker 2>retail is catering to wealthier investors who can spend more

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<v Speaker 2>at a higher price point.

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<v Speaker 1>Well, first off, thank you. It's clear our strategy is

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<v Speaker 1>working and it is showing up in the momentum, and

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<v Speaker 1>we're seeing that in the results. We've had consistent strength

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<v Speaker 1>from our consumer behavior that we're winning actually with all

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<v Speaker 1>income cohorts. When you look at the overall sales comp

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<v Speaker 1>up five percent. That's the seventh consecutive quarter of positive

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<v Speaker 1>comps for US. Our leading brand, Old Navy, the largest brand,

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<v Speaker 1>delivered an outstanding quarter. We were up six percent gap

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<v Speaker 1>up seven percent, be nan A Republic up four percent,

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<v Speaker 1>gross margin exceeding expectations. So from an overall perspective, what

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<v Speaker 1>we see and are approving is consistency in the context

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<v Speaker 1>of our strategy and our playbook. As we look at consumers,

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<v Speaker 1>we do see the consistency and strength with our customer

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<v Speaker 1>behavior and we've been winning with all income cohorts. As

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<v Speaker 1>you could see from the differentiation in our portfolio, we

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<v Speaker 1>saw equal growth across low, middle, and high and while

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<v Speaker 1>we're seeing external data points to macro pressure, particularly in

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<v Speaker 1>the lower income consumer, our customers are finding our price,

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<v Speaker 1>our value, our style, breaking through the competition, and ultimately

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<v Speaker 1>we're very excited to be winning in the marketplace, giving

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<v Speaker 1>us a lot of confidence as we head into the

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<v Speaker 1>holiday season.

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<v Speaker 2>Yeah, talking about the holiday season, how robust you expected

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<v Speaker 2>to be, how is it coming along, and how much

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<v Speaker 2>our consumer's resilient even in the face of price increases.

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<v Speaker 1>Look, holidays come every year. We're off to a great start.

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<v Speaker 1>We have great activations that are planned this holiday. In particular,

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<v Speaker 1>I'm very excited about certain categories denim, sleep where fleece.

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<v Speaker 1>These look really strong. Our value proposition, our marketing executions.

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<v Speaker 1>Hopefully you've seen some of the creative when you go

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<v Speaker 1>online to our sites. We're well positioned to serve our

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<v Speaker 1>customers wherever and however they choose to shop. We just,

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<v Speaker 1>for example, Old Navy did a partnership with door Dash,

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<v Speaker 1>which provides convenience for tens of millions of users. Our

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<v Speaker 1>stores are ready, our teams are fired up, and we're

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<v Speaker 1>looking to a strong finish to the year.

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<v Speaker 2>So Richard, I expect you actually coming on and dancing

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<v Speaker 2>to milkshake in the background because I hear you talking

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<v Speaker 2>about some of the cultural relevance and I wonder how

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<v Speaker 2>much the battle for cultural relevance has been front and

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<v Speaker 2>center for you about that viral ad. How much are

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<v Speaker 2>you looking to new partnerships and new types of advertising

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<v Speaker 2>as a way to really drive gap strategy.

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<v Speaker 1>Cultural relevance is a very important part of our playbook,

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<v Speaker 1>and we talk about relevance with revenue. You can have

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<v Speaker 1>relevance but not revenue, and so the key to success

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<v Speaker 1>is when you have relevance that drives revenue. And collaborations

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<v Speaker 1>do help brand relevance. Now, it has to be the

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<v Speaker 1>right collaboration and a win win methodology, but it does

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<v Speaker 1>do a really good job broadening its consumer base when

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<v Speaker 1>it's done well and continue the drum beat between bigger

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<v Speaker 1>and larger releases. So to stay in the cultural conversation,

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<v Speaker 1>Gap brand has launched over thirteen collaborations that continue to

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<v Speaker 1>just drive excitement and surprise. But what I will say

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<v Speaker 1>is that these are very precise and as I said,

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<v Speaker 1>it need to be win win and authentic to the customer.

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<v Speaker 1>They do attract different audiences. In the Cat's eye case,

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<v Speaker 1>we did an extraordinary job continuing to introduce and discover

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<v Speaker 1>Gap to gen Z, which has been a really exciting

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<v Speaker 1>segment for us. We got eight billion impressions five hundred

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<v Speaker 1>million views for the Better in Denim campaign. It was

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<v Speaker 1>literally a global takeover and it's become one of the

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<v Speaker 1>brand's most successful campaigns to date. We drove credible traffic

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<v Speaker 1>and of course double digit growth in Denham.

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<v Speaker 2>I have to ask for sure was this a direct

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<v Speaker 2>response to American Eagle's Sydney Sweetead.

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<v Speaker 1>Look. I think the fashion industry is proving creativity and competitively.

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<v Speaker 1>We love the fact that there's lots of different conversations

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<v Speaker 1>around fashion and particularly denim. We are front and center

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<v Speaker 1>with our strategies. We did a better in Denim campaign

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<v Speaker 1>that was specific to gap, expressing our originality and to

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<v Speaker 1>some extent, sometimes it's convenience and sometimes it's ironic. But

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<v Speaker 1>I think in the context of the denim dialogue, we

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<v Speaker 1>certainly had our fair share of goodwill.

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<v Speaker 2>The denim wars continue, Richard, we just have just a

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<v Speaker 2>bet a minute left. I'm curious going forward how much

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<v Speaker 2>you are seeing sort of that teriff related impact on pricing,

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<v Speaker 2>how much has already been factored in, and how much

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<v Speaker 2>going forward you expect to still have to pass through.

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<v Speaker 1>Well, I would first call out our team. We have

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<v Speaker 1>done a great job with our mitigation plans, which we've

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<v Speaker 1>shared many times. It's been focused and thoughtful, making adjustments

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<v Speaker 1>to sourcing, manufacturing, our assortments, and many other actions, and

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<v Speaker 1>all of those actions were designed for the reaction of

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<v Speaker 1>our consumer to continue to have our value, quality, and

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<v Speaker 1>style portrade, which is most important. The third quarter tariff

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<v Speaker 1>impact was one hundred and ninety basis points, but that

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<v Speaker 1>was in line with our expectations, and despite this, we

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<v Speaker 1>actually exceeded our gross margin outlook, which was driven by

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<v Speaker 1>top line momentum, less discounting, better regular price sell through.

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<v Speaker 1>So we're going to continue to pursue our mitigation plans,

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<v Speaker 1>but we remain focused most importantly style, quality and value

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<v Speaker 1>for our consumer.

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<v Speaker 2>Richard Dixon. Wonderful to catch up with you, thanks so

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<v Speaker 2>much on the quarter. Wonderful to get your perspective that

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<v Speaker 2>was GAP CEO, Richard Dixon,