Speaker 1: Bloomberg Audio Studios, podcasts, radio news, which.
Speaker 2: I am here on site at the Golden SAX conference
Speaker 2: with Richard Dixon, the CEO of GAP and encompassing GAP,
Speaker 2: the namesake brand, as well as Old Navy Athleta and
Speaker 2: of course Banana Republic, which you are decked out in today.
Speaker 2: I want to start. It's great to see you, thank
Speaker 2: you for being here. I want to start with the
Speaker 2: announcement that you put out today about expanding the beauty
Speaker 2: and accessory line in stores later this fall, maybe at
Speaker 2: Old Navy first.
Speaker 3: Why now, Well, I think one of the reasons why
Speaker 3: now is also sort of a reflection of where we've been,
Speaker 3: and as you know, we've been working really hard at
Speaker 3: fixing fundamentals of our business.
Speaker 1: Our core assets.
Speaker 3: As you mentioned Old Navy, GAFF and m Republic Athleta.
Speaker 3: These are iconic American brands, but ultimately brands that we've
Speaker 3: been working to rebuild the core category apparel into consistent growth.
Speaker 1: We've proven that at this point.
Speaker 3: In fact, we reported our last earning six quarters of
Speaker 3: comping the comm our three largest brands also comping, we're
Speaker 3: growing our share, which means the consumers voting for us
Speaker 3: from a financial perspective, We've stabilized, if you will, in
Speaker 3: the middle of the P and L, and we're starting
Speaker 3: to see growth cash balance really strong.
Speaker 1: So we're at a.
Speaker 3: Very good position now where we're sort of moving into
Speaker 3: the next phase of our transformation strategy, which is about
Speaker 3: building momentum and accelerating growth. And when we look at
Speaker 3: our brand and portfolio, there are categories within our business
Speaker 3: that are small businesses that could be much larger important businesses.
Speaker 3: In those two our beauty and accessories, high margin, really
Speaker 3: exciting categories. Customers resonate with those categories in our stores already,
Speaker 3: and so we know we've got that relationship with consumers
Speaker 3: that are looking for that product in our stores and
Speaker 3: we can really dial that those up to be meaningful
Speaker 3: businesses for our future.
Speaker 2: The impulse purchases as you get to the as you
Speaker 2: get to the counter. If you talk about the turnaround
Speaker 2: plan and you have had two years and there has
Speaker 2: been meaningful growth in a number of the brands, I'm
Speaker 2: just wondering. You've talked about the terraff related hit to
Speaker 2: profits being up to one hundred and seventy five million dollars.
Speaker 2: How much does that set that turnaround plan back.
Speaker 3: Look, I think in any business, you're always dealing with
Speaker 3: things that are not necessarily in your control. And I
Speaker 3: think the reflection of a healthy company and a healthy
Speaker 3: culture is how resilient that culture is, how they remain
Speaker 3: agile and flexible to deal with circumstances that come our way,
Speaker 3: and tariffs is one of those circumstances. It certainly is
Speaker 3: a headwind, but we've done a really good job mitigating
Speaker 3: as much as we can at this juncture.
Speaker 1: We did also.
Speaker 3: Commit in twenty twenty six to see no further degradation
Speaker 3: in the context of.
Speaker 1: The impact of tariffs.
Speaker 3: We have our mitigation strategies that we've shared, working with
Speaker 3: our suppliers, diversifying our manufacturing footprint, ultimately challenging our own
Speaker 3: choices of investments, not compromising our long term integrity, but
Speaker 3: being choiceful about when we invest in, how much we invest,
Speaker 3: and making sure at the end of the day that
Speaker 3: while there are price increases that are part of our
Speaker 3: pricing strategy every year, that we don't lose the value
Speaker 3: proposition to the consumer that we've been really re igniting
Speaker 3: across our portfolio in.
Speaker 2: Order to maintain margin. How much you're looking at efficiencies
Speaker 2: read either cutting back on staffing, not hiring, or even
Speaker 2: looking at using technology to increase the output with fewer people.
Speaker 1: Yeah.
Speaker 3: Well, look, there's a lot of componentry that goes into margin.
Speaker 1: What you could see.
Speaker 3: In the context of our transformation and arguably even longer
Speaker 3: than that, our history. We're operating right now at gross
Speaker 3: margin highs. I mean, we've had a credible expansion of
Speaker 3: our gross margin.
Speaker 1: Now we've done that through real savings and efficiencies.
Speaker 3: We've done it through better assortment planning, cutting our inventory,
Speaker 3: pulling back on unprofitable doors, through that merchandising edit, and
Speaker 3: better storytelling using our playbook as a form of execution.
Speaker 3: We've created more demand and more interest in our brands
Speaker 3: and are driving more full price selling, less discounting, and
Speaker 3: more resonance. And so those are the most important healthy
Speaker 3: components of building back our margin. And I think as
Speaker 3: you look at our margin expansion over the last couple
Speaker 3: of years, we believe that we're sort of at a
Speaker 3: historical high in reference point, but that there's more opportunity
Speaker 3: for us as we get more efficient and as our
Speaker 3: brands get more relevant in the marketplace.
Speaker 2: You keep talking about relevancy which goes to the core
Speaker 2: of your cultural relevancy and bringing cultural relevancy back to
Speaker 2: the gaping brands. Is it more difficult to bring relevancy
Speaker 2: or adapt to current fashions without, say Asia as the
Speaker 2: reliable supply or the manufacturer avctor rejigger supply chains the
Speaker 2: same time as remaining relevant and current.
Speaker 3: Yeah, Look, it is all a challenge and retail, as
Speaker 3: we've talked about, is as a challenging business. It is
Speaker 3: about the detail, but at the end of the day,
Speaker 3: it's about the consumer.
Speaker 1: And as long as you focus on the consumers.
Speaker 3: Wants, needs, driving narratives that connect with consumers and product
Speaker 3: that ultimately appeals to consumers, you can create a winning
Speaker 3: business in any complex industry. And fortunately, again our team
Speaker 3: and talent, particularly in the supply chain, our merchandising teams,
Speaker 3: created teams. They're driving this playbook with agility and conviction,
Speaker 3: and we're winning in a marketplace that's clearly challenged.
Speaker 2: And we have seen the growth in a number of
Speaker 2: the gap brands today. We also saw American Eagle come
Speaker 2: out with better than expected earnings. Their shares rows the
Speaker 2: most ever after the Sydney Sweety advertising campaign highly controversial
Speaker 2: also highly.
Speaker 1: Profitable for them.
Speaker 2: Does that make you think about edge or campaigning or
Speaker 2: edgeer types of advertising that could gain momentum and a
Speaker 2: sort of viral sense.
Speaker 3: Look, I think how I think about it is we
Speaker 3: execute against our playbook and our playbok. It's no secret,
Speaker 3: you know, we talk about it all the time. We
Speaker 3: start it with sort of why do we exist? You know,
Speaker 3: what does each one of our brands mean and represent
Speaker 3: to consumers? And then we execute against that playbook relentlessly,
Speaker 3: and ultimately through that process you do create campaigns or
Speaker 3: what we call releases that drive cultural relevance and connectivity.
Speaker 3: And in the case, for instance, of Gap, which is
Speaker 3: probably the most developed brand within our portfolio, against that playbook,
Speaker 3: we're not just creating cultural conversations.
Speaker 1: We created a cultural takeover.
Speaker 3: Our Better and Denim campaign is by far the best
Speaker 3: in our history. But in the context of the consumer connection,
Speaker 3: it's the number one search on TikTok, eight billion views,
Speaker 3: four hundred million, twenty million in the first three days,
Speaker 3: and we're just getting started. So again we're not necessarily
Speaker 3: look looking left and right, We're looking center and executing
Speaker 3: with conviction. I do think it's really great for the
Speaker 3: industry when there are multiple campaigns and the industry is
Speaker 3: sort of activated through various different points of creativity, and
Speaker 3: it drives industry interest, which helps all of us.
Speaker 2: You talk about consumer demand and driving consumer demand just generally,
Speaker 2: how have you seen the back to school season and
Speaker 2: the shopping. We've heard from the likes of Walmart, We've
Speaker 2: heard from the likes of Macy's. It's been pretty good,
Speaker 2: pretty solid. Do you see that being resilient going forward.
Speaker 1: Yeah, we're off to a good start.
Speaker 3: We're very pleased with the progress the connectivity that our
Speaker 3: merchandise and merchandising is having with consumers. We haven't seen
Speaker 3: any significant change in consumer behavior or sentiment. So we're
Speaker 3: very encouraged with the early start back to school and
Speaker 3: fall season. And I know as I look at the
Speaker 3: product that's coming and some of the other marketing and
Speaker 3: culturally relevant conversations that we're about to have, that will
Speaker 3: be keeping the heat.
Speaker 2: Just thirty seconds, which is your brand, not your favorites,
Speaker 2: All of your babies are your favorites, but going forward
Speaker 2: that you expect to have the greatest momentum over the
Speaker 2: next twelve months.
Speaker 3: Oh, look, I think each brand is in a different
Speaker 3: stage of its reinvigoration process. Clearly, we're very proud of
Speaker 3: our flagship namesake brand GAP. I think that is furthest
Speaker 3: along in the cultural conversation and certainly the metrics four
Speaker 3: percent COMP growth on top of three percent COMP growth
Speaker 3: Old Navy, number one apparel specialty brand in the country,
Speaker 3: consistent deliverables and executing with excellence. We're most proud of
Speaker 3: Banana Republic clearly posting four percent COMP a significant milestone
Speaker 3: in its progress. And as you know, we're working on Athleta,
Speaker 3: which is an important brand in the industry.
Speaker 1: So I can't pick one.
Speaker 3: They're all individually driving and I think as you look ahead,
Speaker 3: we've got a really powerful portfolio of growth.
Speaker 2: Richard Dixon, thank you so much for being with us.
Speaker 2: Was Richard Dixon, the gap In CEO.