1 00:00:02,520 --> 00:00:08,000 Speaker 1: Bloomberg Audio Studios, podcasts, radio news, which. 2 00:00:07,960 --> 00:00:10,400 Speaker 2: I am here on site at the Golden SAX conference 3 00:00:10,640 --> 00:00:13,720 Speaker 2: with Richard Dixon, the CEO of GAP and encompassing GAP, 4 00:00:13,840 --> 00:00:16,720 Speaker 2: the namesake brand, as well as Old Navy Athleta and 5 00:00:16,760 --> 00:00:19,720 Speaker 2: of course Banana Republic, which you are decked out in today. 6 00:00:20,040 --> 00:00:22,200 Speaker 2: I want to start. It's great to see you, thank 7 00:00:22,200 --> 00:00:24,079 Speaker 2: you for being here. I want to start with the 8 00:00:24,120 --> 00:00:27,920 Speaker 2: announcement that you put out today about expanding the beauty 9 00:00:28,120 --> 00:00:33,199 Speaker 2: and accessory line in stores later this fall, maybe at 10 00:00:33,280 --> 00:00:34,159 Speaker 2: Old Navy first. 11 00:00:34,320 --> 00:00:37,960 Speaker 3: Why now, Well, I think one of the reasons why 12 00:00:38,000 --> 00:00:40,840 Speaker 3: now is also sort of a reflection of where we've been, 13 00:00:41,479 --> 00:00:44,480 Speaker 3: and as you know, we've been working really hard at 14 00:00:44,680 --> 00:00:46,720 Speaker 3: fixing fundamentals of our business. 15 00:00:46,920 --> 00:00:47,919 Speaker 1: Our core assets. 16 00:00:47,960 --> 00:00:51,199 Speaker 3: As you mentioned Old Navy, GAFF and m Republic Athleta. 17 00:00:51,320 --> 00:00:54,720 Speaker 3: These are iconic American brands, but ultimately brands that we've 18 00:00:54,760 --> 00:01:00,920 Speaker 3: been working to rebuild the core category apparel into consistent growth. 19 00:01:01,240 --> 00:01:03,160 Speaker 1: We've proven that at this point. 20 00:01:03,200 --> 00:01:06,480 Speaker 3: In fact, we reported our last earning six quarters of 21 00:01:06,560 --> 00:01:10,720 Speaker 3: comping the comm our three largest brands also comping, we're 22 00:01:10,760 --> 00:01:14,119 Speaker 3: growing our share, which means the consumers voting for us 23 00:01:14,120 --> 00:01:17,120 Speaker 3: from a financial perspective, We've stabilized, if you will, in 24 00:01:17,120 --> 00:01:18,479 Speaker 3: the middle of the P and L, and we're starting 25 00:01:18,520 --> 00:01:21,000 Speaker 3: to see growth cash balance really strong. 26 00:01:21,080 --> 00:01:21,800 Speaker 1: So we're at a. 27 00:01:21,800 --> 00:01:24,520 Speaker 3: Very good position now where we're sort of moving into 28 00:01:24,560 --> 00:01:27,720 Speaker 3: the next phase of our transformation strategy, which is about 29 00:01:27,760 --> 00:01:31,080 Speaker 3: building momentum and accelerating growth. And when we look at 30 00:01:31,080 --> 00:01:34,880 Speaker 3: our brand and portfolio, there are categories within our business 31 00:01:35,280 --> 00:01:39,200 Speaker 3: that are small businesses that could be much larger important businesses. 32 00:01:39,240 --> 00:01:43,920 Speaker 3: In those two our beauty and accessories, high margin, really 33 00:01:43,959 --> 00:01:48,920 Speaker 3: exciting categories. Customers resonate with those categories in our stores already, 34 00:01:48,960 --> 00:01:51,800 Speaker 3: and so we know we've got that relationship with consumers 35 00:01:51,800 --> 00:01:54,800 Speaker 3: that are looking for that product in our stores and 36 00:01:54,840 --> 00:01:57,080 Speaker 3: we can really dial that those up to be meaningful 37 00:01:57,080 --> 00:01:58,280 Speaker 3: businesses for our future. 38 00:01:58,400 --> 00:02:00,520 Speaker 2: The impulse purchases as you get to the as you 39 00:02:00,520 --> 00:02:02,680 Speaker 2: get to the counter. If you talk about the turnaround 40 00:02:02,760 --> 00:02:05,080 Speaker 2: plan and you have had two years and there has 41 00:02:05,120 --> 00:02:08,720 Speaker 2: been meaningful growth in a number of the brands, I'm 42 00:02:08,760 --> 00:02:11,000 Speaker 2: just wondering. You've talked about the terraff related hit to 43 00:02:11,080 --> 00:02:14,120 Speaker 2: profits being up to one hundred and seventy five million dollars. 44 00:02:14,120 --> 00:02:16,240 Speaker 2: How much does that set that turnaround plan back. 45 00:02:16,800 --> 00:02:19,480 Speaker 3: Look, I think in any business, you're always dealing with 46 00:02:19,520 --> 00:02:21,800 Speaker 3: things that are not necessarily in your control. And I 47 00:02:21,840 --> 00:02:24,600 Speaker 3: think the reflection of a healthy company and a healthy 48 00:02:24,639 --> 00:02:28,560 Speaker 3: culture is how resilient that culture is, how they remain 49 00:02:28,720 --> 00:02:32,200 Speaker 3: agile and flexible to deal with circumstances that come our way, 50 00:02:32,480 --> 00:02:35,280 Speaker 3: and tariffs is one of those circumstances. It certainly is 51 00:02:35,320 --> 00:02:39,120 Speaker 3: a headwind, but we've done a really good job mitigating 52 00:02:39,200 --> 00:02:41,040 Speaker 3: as much as we can at this juncture. 53 00:02:41,680 --> 00:02:42,919 Speaker 1: We did also. 54 00:02:42,760 --> 00:02:46,040 Speaker 3: Commit in twenty twenty six to see no further degradation 55 00:02:46,240 --> 00:02:47,120 Speaker 3: in the context of. 56 00:02:47,080 --> 00:02:48,440 Speaker 1: The impact of tariffs. 57 00:02:49,040 --> 00:02:53,200 Speaker 3: We have our mitigation strategies that we've shared, working with 58 00:02:53,280 --> 00:02:59,200 Speaker 3: our suppliers, diversifying our manufacturing footprint, ultimately challenging our own 59 00:02:59,280 --> 00:03:03,480 Speaker 3: choices of investments, not compromising our long term integrity, but 60 00:03:03,840 --> 00:03:06,760 Speaker 3: being choiceful about when we invest in, how much we invest, 61 00:03:07,160 --> 00:03:09,520 Speaker 3: and making sure at the end of the day that 62 00:03:09,639 --> 00:03:12,680 Speaker 3: while there are price increases that are part of our 63 00:03:12,720 --> 00:03:16,280 Speaker 3: pricing strategy every year, that we don't lose the value 64 00:03:16,320 --> 00:03:20,080 Speaker 3: proposition to the consumer that we've been really re igniting 65 00:03:20,240 --> 00:03:21,680 Speaker 3: across our portfolio in. 66 00:03:21,680 --> 00:03:24,919 Speaker 2: Order to maintain margin. How much you're looking at efficiencies 67 00:03:25,160 --> 00:03:28,520 Speaker 2: read either cutting back on staffing, not hiring, or even 68 00:03:29,160 --> 00:03:33,960 Speaker 2: looking at using technology to increase the output with fewer people. 69 00:03:34,160 --> 00:03:34,480 Speaker 1: Yeah. 70 00:03:34,560 --> 00:03:38,720 Speaker 3: Well, look, there's a lot of componentry that goes into margin. 71 00:03:39,360 --> 00:03:40,559 Speaker 1: What you could see. 72 00:03:40,360 --> 00:03:43,360 Speaker 3: In the context of our transformation and arguably even longer 73 00:03:43,400 --> 00:03:46,200 Speaker 3: than that, our history. We're operating right now at gross 74 00:03:46,200 --> 00:03:49,480 Speaker 3: margin highs. I mean, we've had a credible expansion of 75 00:03:49,480 --> 00:03:50,320 Speaker 3: our gross margin. 76 00:03:50,640 --> 00:03:53,920 Speaker 1: Now we've done that through real savings and efficiencies. 77 00:03:54,120 --> 00:03:57,800 Speaker 3: We've done it through better assortment planning, cutting our inventory, 78 00:03:57,920 --> 00:04:02,560 Speaker 3: pulling back on unprofitable doors, through that merchandising edit, and 79 00:04:02,640 --> 00:04:06,160 Speaker 3: better storytelling using our playbook as a form of execution. 80 00:04:06,640 --> 00:04:09,560 Speaker 3: We've created more demand and more interest in our brands 81 00:04:09,600 --> 00:04:14,280 Speaker 3: and are driving more full price selling, less discounting, and 82 00:04:14,320 --> 00:04:17,479 Speaker 3: more resonance. And so those are the most important healthy 83 00:04:17,520 --> 00:04:20,880 Speaker 3: components of building back our margin. And I think as 84 00:04:20,880 --> 00:04:23,160 Speaker 3: you look at our margin expansion over the last couple 85 00:04:23,200 --> 00:04:26,479 Speaker 3: of years, we believe that we're sort of at a 86 00:04:26,520 --> 00:04:29,720 Speaker 3: historical high in reference point, but that there's more opportunity 87 00:04:29,720 --> 00:04:32,000 Speaker 3: for us as we get more efficient and as our 88 00:04:32,000 --> 00:04:33,960 Speaker 3: brands get more relevant in the marketplace. 89 00:04:34,040 --> 00:04:36,159 Speaker 2: You keep talking about relevancy which goes to the core 90 00:04:36,200 --> 00:04:40,359 Speaker 2: of your cultural relevancy and bringing cultural relevancy back to 91 00:04:40,400 --> 00:04:44,280 Speaker 2: the gaping brands. Is it more difficult to bring relevancy 92 00:04:44,839 --> 00:04:49,520 Speaker 2: or adapt to current fashions without, say Asia as the 93 00:04:49,560 --> 00:04:54,080 Speaker 2: reliable supply or the manufacturer avctor rejigger supply chains the 94 00:04:54,120 --> 00:04:57,279 Speaker 2: same time as remaining relevant and current. 95 00:04:57,560 --> 00:05:01,680 Speaker 3: Yeah, Look, it is all a challenge and retail, as 96 00:05:01,680 --> 00:05:04,919 Speaker 3: we've talked about, is as a challenging business. It is 97 00:05:05,000 --> 00:05:07,320 Speaker 3: about the detail, but at the end of the day, 98 00:05:07,560 --> 00:05:08,719 Speaker 3: it's about the consumer. 99 00:05:09,240 --> 00:05:11,840 Speaker 1: And as long as you focus on the consumers. 100 00:05:11,400 --> 00:05:16,880 Speaker 3: Wants, needs, driving narratives that connect with consumers and product 101 00:05:16,920 --> 00:05:20,480 Speaker 3: that ultimately appeals to consumers, you can create a winning 102 00:05:20,560 --> 00:05:24,839 Speaker 3: business in any complex industry. And fortunately, again our team 103 00:05:25,040 --> 00:05:27,920 Speaker 3: and talent, particularly in the supply chain, our merchandising teams, 104 00:05:27,960 --> 00:05:32,240 Speaker 3: created teams. They're driving this playbook with agility and conviction, 105 00:05:32,440 --> 00:05:34,760 Speaker 3: and we're winning in a marketplace that's clearly challenged. 106 00:05:34,800 --> 00:05:36,320 Speaker 2: And we have seen the growth in a number of 107 00:05:36,360 --> 00:05:39,120 Speaker 2: the gap brands today. We also saw American Eagle come 108 00:05:39,160 --> 00:05:42,039 Speaker 2: out with better than expected earnings. Their shares rows the 109 00:05:42,040 --> 00:05:45,919 Speaker 2: most ever after the Sydney Sweety advertising campaign highly controversial 110 00:05:45,960 --> 00:05:46,880 Speaker 2: also highly. 111 00:05:46,640 --> 00:05:47,640 Speaker 1: Profitable for them. 112 00:05:48,279 --> 00:05:50,440 Speaker 2: Does that make you think about edge or campaigning or 113 00:05:50,640 --> 00:05:53,680 Speaker 2: edgeer types of advertising that could gain momentum and a 114 00:05:53,720 --> 00:05:54,599 Speaker 2: sort of viral sense. 115 00:05:55,400 --> 00:05:57,480 Speaker 3: Look, I think how I think about it is we 116 00:05:57,920 --> 00:06:00,920 Speaker 3: execute against our playbook and our playbok. It's no secret, 117 00:06:01,040 --> 00:06:03,080 Speaker 3: you know, we talk about it all the time. We 118 00:06:03,120 --> 00:06:05,320 Speaker 3: start it with sort of why do we exist? You know, 119 00:06:05,360 --> 00:06:07,719 Speaker 3: what does each one of our brands mean and represent 120 00:06:07,760 --> 00:06:11,719 Speaker 3: to consumers? And then we execute against that playbook relentlessly, 121 00:06:12,600 --> 00:06:16,880 Speaker 3: and ultimately through that process you do create campaigns or 122 00:06:16,920 --> 00:06:21,840 Speaker 3: what we call releases that drive cultural relevance and connectivity. 123 00:06:21,920 --> 00:06:23,800 Speaker 3: And in the case, for instance, of Gap, which is 124 00:06:23,839 --> 00:06:27,160 Speaker 3: probably the most developed brand within our portfolio, against that playbook, 125 00:06:27,360 --> 00:06:29,600 Speaker 3: we're not just creating cultural conversations. 126 00:06:29,839 --> 00:06:31,320 Speaker 1: We created a cultural takeover. 127 00:06:31,760 --> 00:06:35,040 Speaker 3: Our Better and Denim campaign is by far the best 128 00:06:35,120 --> 00:06:38,599 Speaker 3: in our history. But in the context of the consumer connection, 129 00:06:38,760 --> 00:06:42,000 Speaker 3: it's the number one search on TikTok, eight billion views, 130 00:06:42,080 --> 00:06:44,880 Speaker 3: four hundred million, twenty million in the first three days, 131 00:06:45,240 --> 00:06:48,600 Speaker 3: and we're just getting started. So again we're not necessarily 132 00:06:48,600 --> 00:06:52,039 Speaker 3: look looking left and right, We're looking center and executing 133 00:06:52,040 --> 00:06:55,520 Speaker 3: with conviction. I do think it's really great for the 134 00:06:55,640 --> 00:06:59,400 Speaker 3: industry when there are multiple campaigns and the industry is 135 00:06:59,440 --> 00:07:03,080 Speaker 3: sort of activated through various different points of creativity, and 136 00:07:03,160 --> 00:07:05,840 Speaker 3: it drives industry interest, which helps all of us. 137 00:07:06,520 --> 00:07:10,480 Speaker 2: You talk about consumer demand and driving consumer demand just generally, 138 00:07:10,480 --> 00:07:12,240 Speaker 2: how have you seen the back to school season and 139 00:07:12,280 --> 00:07:14,520 Speaker 2: the shopping. We've heard from the likes of Walmart, We've 140 00:07:14,520 --> 00:07:16,560 Speaker 2: heard from the likes of Macy's. It's been pretty good, 141 00:07:16,600 --> 00:07:19,840 Speaker 2: pretty solid. Do you see that being resilient going forward. 142 00:07:19,960 --> 00:07:21,280 Speaker 1: Yeah, we're off to a good start. 143 00:07:22,520 --> 00:07:25,240 Speaker 3: We're very pleased with the progress the connectivity that our 144 00:07:25,280 --> 00:07:29,760 Speaker 3: merchandise and merchandising is having with consumers. We haven't seen 145 00:07:30,000 --> 00:07:35,160 Speaker 3: any significant change in consumer behavior or sentiment. So we're 146 00:07:35,280 --> 00:07:38,160 Speaker 3: very encouraged with the early start back to school and 147 00:07:38,280 --> 00:07:40,720 Speaker 3: fall season. And I know as I look at the 148 00:07:40,760 --> 00:07:43,840 Speaker 3: product that's coming and some of the other marketing and 149 00:07:43,880 --> 00:07:47,680 Speaker 3: culturally relevant conversations that we're about to have, that will 150 00:07:47,680 --> 00:07:49,120 Speaker 3: be keeping the heat. 151 00:07:48,960 --> 00:07:51,960 Speaker 2: Just thirty seconds, which is your brand, not your favorites, 152 00:07:52,120 --> 00:07:54,720 Speaker 2: All of your babies are your favorites, but going forward 153 00:07:54,800 --> 00:07:56,600 Speaker 2: that you expect to have the greatest momentum over the 154 00:07:56,640 --> 00:07:57,360 Speaker 2: next twelve months. 155 00:07:58,040 --> 00:08:00,960 Speaker 3: Oh, look, I think each brand is in a different 156 00:08:00,960 --> 00:08:05,040 Speaker 3: stage of its reinvigoration process. Clearly, we're very proud of 157 00:08:05,040 --> 00:08:08,560 Speaker 3: our flagship namesake brand GAP. I think that is furthest 158 00:08:08,600 --> 00:08:11,920 Speaker 3: along in the cultural conversation and certainly the metrics four 159 00:08:11,960 --> 00:08:15,000 Speaker 3: percent COMP growth on top of three percent COMP growth 160 00:08:15,280 --> 00:08:19,600 Speaker 3: Old Navy, number one apparel specialty brand in the country, 161 00:08:20,040 --> 00:08:24,280 Speaker 3: consistent deliverables and executing with excellence. We're most proud of 162 00:08:24,320 --> 00:08:30,120 Speaker 3: Banana Republic clearly posting four percent COMP a significant milestone 163 00:08:30,200 --> 00:08:32,920 Speaker 3: in its progress. And as you know, we're working on Athleta, 164 00:08:32,960 --> 00:08:34,400 Speaker 3: which is an important brand in the industry. 165 00:08:34,440 --> 00:08:36,000 Speaker 1: So I can't pick one. 166 00:08:36,360 --> 00:08:40,600 Speaker 3: They're all individually driving and I think as you look ahead, 167 00:08:40,600 --> 00:08:43,040 Speaker 3: we've got a really powerful portfolio of growth. 168 00:08:43,360 --> 00:08:45,120 Speaker 2: Richard Dixon, thank you so much for being with us. 169 00:08:45,280 --> 00:08:48,000 Speaker 2: Was Richard Dixon, the gap In CEO.