Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. You're listening to Bloomberg
Speaker 1: Business Week with Carol Masser and tim Stenoveek on Bloomberg Radio.
Speaker 1: All right, well, let's get to it because it's the
Speaker 1: cover of the July US edition of Bloomberg Business Week.
Speaker 1: It's about the Gap CEO's battle to save the brand
Speaker 1: and the challenge that it is slammed into as a
Speaker 1: result of the President's tariffs. The iconic nineties retailer was
Speaker 1: on the precipice of death for years. Richard Dixon finally
Speaker 1: had momentum for a comeback, then came Trump. Amanda Mole
Speaker 1: is the lead writer on the story. She joins us
Speaker 1: here in the Bloomberg Interactive Brokers Studio a great deep
Speaker 1: dive on Gap. Congratulations on the cover story. Thank you.
Speaker 1: I want to start historical here and just remind everybody
Speaker 1: what Gap was and what sort of happened when it
Speaker 1: lost its way. Like I'm asking you to give us
Speaker 1: the entire story here, but think back to the nineties.
Speaker 2: And fall into the Gap fell into a slump, Yes
Speaker 2: it did.
Speaker 1: But the nineties this was so I remember. I remember
Speaker 1: having my parents' friends coming and visiting us, from Europe
Speaker 1: in a small town in California, and they wanted to
Speaker 1: go to The Gap absolutely when they got to the
Speaker 1: United States, right, yeah.
Speaker 3: Yeah, It's it's hard to explain to people who are
Speaker 3: too young to like be aware of pop culture during
Speaker 3: the eighties and nineties, but The Gap was sort of
Speaker 3: like the king of American aesthetics for for quite a
Speaker 3: while during the eighties and the nineties. It was a
Speaker 3: store that was so powerful and so so well trafficked
Speaker 3: that it commanded some of the same least terms in
Speaker 3: malls is like anchor department stores that were much much
Speaker 3: larger it. You know, it was a company that that
Speaker 3: sort of married the sort of casualizing clothes of the
Speaker 3: era with this sort of like great fluency in pop culture.
Speaker 3: It's advertisements were these like incredible black and white portraits
Speaker 3: of you know, iconic celebrities and tastemakers, people like Spike Lee,
Speaker 3: Joan Didion, you know, by these fashion photographers who were
Speaker 3: some of the most celebrated minds in the business. It really,
Speaker 3: you know, cast a net in culture outside of the
Speaker 3: you know, forty dollars jeans and fifteen dollars t shirts.
Speaker 3: It clothed everybody. The one hundredth anniversary issue of Vogue
Speaker 3: featured supermodels on the cover wearing Gap jeans and button downs.
Speaker 3: It was truly an incredible force in, you know, creating
Speaker 3: the idea of how Americans dressed now.
Speaker 2: Until it wasn't until it wasn't like what brought it
Speaker 2: down too much competition, like talk walk us through.
Speaker 3: Well, you know, over the past forty years, American retail
Speaker 3: has just changed a lot. Gap really thrived in an
Speaker 3: era when people went out to shop, when people went
Speaker 3: to malls. The rise of the Gap as a national
Speaker 3: retailer sort of sort of mirrors the rise of the
Speaker 3: suburban mall as the place that people thought about going
Speaker 3: to do their shopping for clothes as a cool place
Speaker 3: to go. And when malls started to decline, so to
Speaker 3: Gap for many of the same reasons. Gap had grown
Speaker 3: really really large at that point, and it had a
Speaker 3: lot of leases and a lot of sort of aging
Speaker 3: shopping centers across America. And then you get the one
Speaker 3: two punch of some regulatory changes in the mid two
Speaker 3: thousands that led in a lot of international fast fashion
Speaker 3: retailers Zara, h and m things like that, And then
Speaker 3: the Internet gave people in you know, virtually everywhere in
Speaker 3: America a much wider access to different types of clothing.
Speaker 3: So suddenly there was just a ton of cheap clothes everywhere.
Speaker 3: And the sort of gamut that the Gap ran, which
Speaker 3: was you know, cool jeans and T shirts, people had
Speaker 3: caught onto it, people imitating what they were doing. And
Speaker 3: so you combine that sort of like lease load in
Speaker 3: debt load that they had with all this new competition
Speaker 3: in these new retail channels, and they just fell off.
Speaker 1: We're going to get to Richard Dixon and the task
Speaker 1: that he has set out in the for him and
Speaker 1: the obstacles he has ahead of him in a second.
Speaker 1: First though, Mickey Drexler a legendary name in the world
Speaker 1: of retail. What was his what was his role in
Speaker 1: where Gap is today?
Speaker 3: Mickey like was Gap for twenty years. The Fishers, the
Speaker 3: family that found a Gap, hired him in nineteen eighty
Speaker 3: three after he had turned around and Taylor and he
Speaker 3: stayed at Gap for almost twenty years. After that. He
Speaker 3: built the company into the sort of cultural engine that
Speaker 3: it was at its peak. He sort of understood that, like,
Speaker 3: in order to sell jeans and T shirts, you had
Speaker 3: the jeans and T shirts had to mean something, and
Speaker 3: he was great at making meaning out of sort of
Speaker 3: regular close and he was great at, you know, organizing
Speaker 3: a company that really sort of kept its fingers on
Speaker 3: the pulse of like what people were interested in, interested
Speaker 3: in what felt cool, like what might motivate people to
Speaker 3: go out and buy something. And he for twenty years
Speaker 3: was sort of fantastically successful at that, but at the
Speaker 3: end it wasn't enough to save his job.
Speaker 2: Yeah, And I feel like then they kind of bounced
Speaker 2: around a lot, right, I think, like trying to figure
Speaker 2: out what they need to be in this very as
Speaker 2: you say, I think you played out really like I mean,
Speaker 2: let's be clear, retail has had a really tough time
Speaker 2: for a long time, and so the dust is settling.
Speaker 2: I mean, I even think about Levi's that has gone
Speaker 2: through a revival of sorts. I just bought a pair
Speaker 2: of Levi's. I haven't bought Levi's in such a long time.
Speaker 2: But for the gap, they went through a lot of
Speaker 2: bouncing around, and that also takes its toll.
Speaker 3: Yes, So in between Mickey Drexler and Richard Dixon, the
Speaker 3: current CEO or four CEOs who.
Speaker 1: Were that's over like about twenty three years.
Speaker 3: Yes, so they lasted it was actually almost almost exactly
Speaker 3: twenty years, so that they lasted all about like four
Speaker 3: or five years of piece on average.
Speaker 2: Just about getting settled, yeah, initiatives, and then it's like
Speaker 2: gone right.
Speaker 3: And you know, the trouble that GAP has had with
Speaker 3: executives over the past twenty years mirrors a lot of
Speaker 3: the trouble that other sort of like Great American companies
Speaker 3: have had in that period of time looking for people
Speaker 3: to bring in to like solve one problem while then
Speaker 3: accidentally making another problem worse. So you bring in someone
Speaker 3: to deal with the debt load and deal with margin,
Speaker 3: and then they do that, but creativity sort of plummets.
Speaker 3: Then you bring someone into to deal with like the
Speaker 3: the sort of overabundance of leases and closed stores and
Speaker 3: streamline and they do that, but then the quality of
Speaker 3: the clothes also goes down because they're streamlining the you know,
Speaker 3: the materials being used. So you are sort of playing
Speaker 3: whack a mole with all of these different problems. And
Speaker 3: when you are bringing on executives that are meant to
Speaker 3: deal with sort of like systemic issues or logistical issues
Speaker 3: or financial issues, within a company. In a company that
Speaker 3: sells aesthetics, that sells ideas, that sells coolness, that can
Speaker 3: be really, really difficult in the long term unless you
Speaker 3: have like a sort of rare type of person and
Speaker 3: it's just hard to find that person.
Speaker 2: And you know, it's funny as they've gone along, like
Speaker 2: I feel think about I don't know, when my daughter
Speaker 2: was young, our Gap baby and Gap and Kids, like
Speaker 2: it seemed super successful, like there are things that they've
Speaker 2: done that have done well, and then I don't know,
Speaker 2: like just I don't know whether it runs out of
Speaker 2: steam or momentum. I don't know.
Speaker 3: Yeah, No, Gap is a fascinating company because it's got
Speaker 3: a bunch of brands within it. It's got Gap, but
Speaker 3: then Old Navy, Banana Republic, Athleta, Athleta right, and then
Speaker 3: it's a bunch of those brands have sub brands too,
Speaker 3: So like Gap has Gap Kids, Banana Republic, tried Banana
Speaker 3: Republic Home. There used to be Piperlime, which was a
Speaker 3: zappost competitor. There was Intermix, which GAT bought and then
Speaker 3: sold Told Equity. It was trying to get more into
Speaker 3: like the higher end fashion game. Like there's been all
Speaker 3: these sort of like side quests and boondoggles and sub
Speaker 3: brands and things that just didn't work. And what has
Speaker 3: underwritten a lot of that for a long time is
Speaker 3: Old Navy. One of Mickey Drexler's big things that he
Speaker 3: did for the company was launch Old Navy in nineteen
Speaker 3: ninety four and in that time GAP's revenue has has
Speaker 3: fallen by about half since its peak in two thousand
Speaker 3: and three ish, But Old Navy sells over eight billion
Speaker 3: dollars worth of clothes every year and has really like
Speaker 3: financed all these boon doggles.
Speaker 2: Can I tell you so many times I'll be like,
Speaker 2: that's really great Old Navy, Like it's just and like
Speaker 2: fashion forward, even like it's pretty impressive.
Speaker 1: So let's fast forward to today, because you've got a
Speaker 1: lot of time with Richard Dixon and some really interesting
Speaker 1: commentary about like what he did when he first got
Speaker 1: to the role in terms of taking the executive shopping,
Speaker 1: hearing about their like relentless positivity and meetings that he
Speaker 1: didn't necessarily see as realistic. What is his path forward
Speaker 1: in the face of tariffs, which you write the piece,
Speaker 1: this company's actually pretty well positioned to deal with, right,
Speaker 1: So on the face right.
Speaker 3: A lot of what Dixon did when he got there
Speaker 3: was sort of changed the attitude of the company, I think,
Speaker 3: because it's something that's interesting always as someone who sits
Speaker 3: like outside of these companies and is trying to figure
Speaker 3: out what's going on that Like when you have a
Speaker 3: company that's been like sort of beleaguered for a long time,
Speaker 3: it's I always wonder, like, what do they think about
Speaker 3: what everybody says about them externally? And something that Dixon
Speaker 3: told us about Lily Meyer was my co reporter on
Speaker 3: the piece. She he was like, you know, he had
Speaker 3: this town hall when he first got there where he
Speaker 3: you know, had a a slide presentation put together of
Speaker 3: all the negative headlines about the company and got up
Speaker 3: in front of the company and was like, everybody knows
Speaker 3: what we should be doing except us, and it's hard
Speaker 3: to say that they're wrong. It was sort of like,
Speaker 3: you know, this like huge legacy company had become like
Speaker 3: a little bit moribund, a little bit complacent, and sort
Speaker 3: of figuring out a way out of that psychologically, I
Speaker 3: think has been a big part of his tenure so far.
Speaker 3: And when you combine that with the sort of like
Speaker 3: long un sexy work that has been going on, you know,
Speaker 3: under him, but also before him, of cleaning up the
Speaker 3: company's debt, of cleaning up the discounting situation, because a
Speaker 3: big issue for Gap has been that they've trained their
Speaker 3: customers to expect everything to be fifty percent off all
Speaker 3: the time. And it's really hard to grow a business.
Speaker 2: So true, it's so true, like you get used to
Speaker 2: it and then no, no, and then exactly you know
Speaker 2: it and you know it's coming. I thought you were
Speaker 2: going to say the barrel gene saved the company.
Speaker 3: Well, they I think are indicative of something that might
Speaker 3: save the company. I would say, which is the capacity
Speaker 3: now for Gap? Because it's cleaned up its logistics, it's
Speaker 3: cleans up its supply chain a little bit to see
Speaker 3: a trend coming, to have a product ready to go
Speaker 3: and have the technological and data capability to like put
Speaker 3: it into stores like at the right moment in order
Speaker 3: to like sell a bunch of it and not have
Speaker 3: to discount it and not have to send it to
Speaker 3: outlet and not have to you know.
Speaker 2: Doesn't end up at tjmax.
Speaker 3: Sorry, yeah, so far, not for these so far, not
Speaker 3: for these genes. And it's it's interesting because it's a barrel.
Speaker 3: Genes are sort of these like like curved outward like
Speaker 3: sort of cartoon cowboy leg jeans that are a little
Speaker 3: bit silly and like very trendy and very young, and
Speaker 3: it's the type of thing that for twenty years, GAP
Speaker 3: has not been able to do because they either bet
Speaker 3: on the wrong thing or it's too earlier, it's too late.
Speaker 3: But the success that they've had with these genes, which
Speaker 3: aren't cheap and they don't discount all of the popular
Speaker 3: colors regularly, is indicative that they figured out the data
Speaker 3: and logistics capabilities to be able to like compete in
Speaker 3: this realm, which is big for them.
Speaker 2: I think, yeah, I mean, but it's certainly fashion forward.
Speaker 2: I've tried them on. They're just not quite for me.
Speaker 2: I don't know. Have you tried them on?
Speaker 1: I don't even know what you're talking about.
Speaker 2: Have you tried them on?
Speaker 3: I bought a parawise the story did. Yeah, if you
Speaker 3: get him in the right the right like weight of Denham,
Speaker 3: they like they look more slouchy than Curby went on.
Speaker 2: Okay, because otherwise you feel like you're like, okay, corral.
Speaker 3: Yes, it's a little it's a little cartoon cowboy.
Speaker 2: Amnimal, you are amazing. She is seen a reporter for
Speaker 2: Bloomberg business Week. Her story it is the cover story
Speaker 2: of the upcoming new issue of Bloomberg Business Week about
Speaker 2: GAP CEO's battle to save the brand, slamming into Trump's terrors,
Speaker 2: because yeah, that is certainly an aspect of this story
Speaker 2: as well, in a big way,