1 00:00:00,040 --> 00:00:01,800 Speaker 1: Let's get back to one of the big corporate stories 2 00:00:01,920 --> 00:00:04,440 Speaker 1: of today, and that is shares of Gap plunging this 3 00:00:04,519 --> 00:00:07,440 Speaker 1: morning after the retailer predicted its terriff impact could be 4 00:00:07,480 --> 00:00:11,320 Speaker 1: as much as three hundred million dollars. Let's get right 5 00:00:11,360 --> 00:00:14,880 Speaker 1: now to the CEO of Gap. His name is Richard Dickson, 6 00:00:15,000 --> 00:00:17,520 Speaker 1: and Richard, it's great to have you with us. Normally 7 00:00:17,560 --> 00:00:19,400 Speaker 1: I would ask about the results themselves, but I have 8 00:00:19,520 --> 00:00:22,840 Speaker 1: to start with the share price down nineteen point eight 9 00:00:22,880 --> 00:00:25,160 Speaker 1: percent at the moment. Matt and I were talking about 10 00:00:25,160 --> 00:00:27,520 Speaker 1: earlier how CEOs often come on this program and tell 11 00:00:27,560 --> 00:00:29,360 Speaker 1: us that they don't watch the day to day movements, 12 00:00:29,360 --> 00:00:32,680 Speaker 1: But I feel like this move is hard to miss. Richard, 13 00:00:32,760 --> 00:00:34,640 Speaker 1: So what do you do with this? What does the 14 00:00:34,680 --> 00:00:36,839 Speaker 1: rest of your day look like? Are you having all 15 00:00:36,880 --> 00:00:39,879 Speaker 1: hands meetings, are you in conversations with your board? What 16 00:00:39,920 --> 00:00:40,519 Speaker 1: does it look like? 17 00:00:41,680 --> 00:00:43,560 Speaker 2: Well? I think it's true. I mean we don't manage 18 00:00:43,560 --> 00:00:47,080 Speaker 2: our day to day business focused on our daily stock movement. Clearly, 19 00:00:47,200 --> 00:00:50,440 Speaker 2: it's a dynamic market out there, but much more importantly 20 00:00:50,560 --> 00:00:54,840 Speaker 2: is that our brand reinvigoration is working and it's showed 21 00:00:54,880 --> 00:00:57,720 Speaker 2: up in our results. We delivered another great quarter a 22 00:00:57,800 --> 00:01:03,279 Speaker 2: consistently great quartered expectations across all key financial metrics. Our 23 00:01:03,280 --> 00:01:07,840 Speaker 2: strategic priorities are clear, and despite a dynamic environment, we're 24 00:01:07,840 --> 00:01:11,280 Speaker 2: staying firmly on course and it's showing up in the results. 25 00:01:11,680 --> 00:01:15,319 Speaker 2: Comps were up two percent. That's the fifth consecutive quarter 26 00:01:15,760 --> 00:01:19,200 Speaker 2: of positive comps. It's also the ninth consecutive quarter that 27 00:01:19,240 --> 00:01:23,320 Speaker 2: we gain market share, which indicates our product is resonating. 28 00:01:23,680 --> 00:01:27,160 Speaker 2: We expanded both gross margin and operating margin during the quarter. 29 00:01:27,200 --> 00:01:31,440 Speaker 2: We controlled expenses, We increased our EPs by twenty four percent. 30 00:01:31,840 --> 00:01:34,480 Speaker 2: We strengthened our balance sheet. We have a strong cash 31 00:01:34,520 --> 00:01:37,320 Speaker 2: flow balance, and we've got two point two billion dollars. 32 00:01:37,880 --> 00:01:41,320 Speaker 2: The queue is really another proof point that the strategy 33 00:01:41,400 --> 00:01:46,440 Speaker 2: is working. I remain incredibly optimistic yet realistic about the 34 00:01:46,440 --> 00:01:50,320 Speaker 2: opportunities ahead, and we're all navigating a highly dynamic environment. 35 00:01:50,880 --> 00:01:54,480 Speaker 3: I have to say, though, that you know you've lost. 36 00:01:54,760 --> 00:01:59,200 Speaker 3: Your company has lost fully one fifth of its value today, 37 00:01:59,280 --> 00:02:03,240 Speaker 3: so we're worth over ten billion dollars in market cap 38 00:02:03,280 --> 00:02:06,240 Speaker 3: and now it's eight. That's the kind of thing that 39 00:02:06,280 --> 00:02:08,280 Speaker 3: you just can't look away from. And it looks like 40 00:02:08,600 --> 00:02:12,640 Speaker 3: that's all down to the tariff impact headline, which you 41 00:02:12,720 --> 00:02:17,360 Speaker 3: said as much as three hundred million dollars. That's less 42 00:02:17,400 --> 00:02:22,240 Speaker 3: than one percent of your operating income. I mean, you 43 00:02:22,320 --> 00:02:25,359 Speaker 3: have fifteen billion dollars in sales, so it's a seemingly 44 00:02:25,480 --> 00:02:30,919 Speaker 3: small number. Don't you need Richard to analyze why the 45 00:02:30,960 --> 00:02:35,560 Speaker 3: market is attributing so much to this relatively small number. 46 00:02:36,880 --> 00:02:41,320 Speaker 2: Look, of course, we're on top of and studying obviously 47 00:02:41,400 --> 00:02:44,280 Speaker 2: the marketplace and the reaction. But we are running a 48 00:02:44,320 --> 00:02:48,000 Speaker 2: business for the long term, and like any business, we're 49 00:02:48,080 --> 00:02:52,880 Speaker 2: constantly navigating complexities. In this case, it's tariffs, but it's 50 00:02:52,919 --> 00:02:56,680 Speaker 2: our responsibility to do so without compromising the long term 51 00:02:56,720 --> 00:02:59,920 Speaker 2: integrity of our strategy, and most important to the extent 52 00:03:00,040 --> 00:03:04,000 Speaker 2: of that strategy is our consumer value proposition, which is 53 00:03:04,160 --> 00:03:07,880 Speaker 2: resonating now in relation to the tariff conversation. We did 54 00:03:07,919 --> 00:03:11,760 Speaker 2: share that we've already mitigated over half of the anticipated 55 00:03:11,800 --> 00:03:15,320 Speaker 2: impact teriff. We've done it through very thoughtful adjustments to 56 00:03:15,400 --> 00:03:20,120 Speaker 2: sourcing and manufacturing and our assortments. We also shared that 57 00:03:20,160 --> 00:03:23,840 Speaker 2: we remain committed to achieving the remaining net impact of 58 00:03:23,880 --> 00:03:27,079 Speaker 2: about one hundred to one hundred and fifty million, primarily 59 00:03:27,120 --> 00:03:30,760 Speaker 2: also weighted to the back half that we've been diversifying 60 00:03:30,760 --> 00:03:35,160 Speaker 2: our sourcing footprint for several years. China, as an example, 61 00:03:35,280 --> 00:03:37,120 Speaker 2: used to be a top sourcing country for US, and 62 00:03:37,160 --> 00:03:39,520 Speaker 2: now we also share that we expected to be less 63 00:03:39,520 --> 00:03:42,640 Speaker 2: than three percent by year end, so at the end 64 00:03:42,640 --> 00:03:45,040 Speaker 2: of twenty twenty six, we're also planning for no country 65 00:03:45,080 --> 00:03:47,640 Speaker 2: to account for more than twenty five percent. So our 66 00:03:47,680 --> 00:03:52,120 Speaker 2: goal first and foremost with our investors is transparency, and 67 00:03:52,160 --> 00:03:55,040 Speaker 2: we were very purposeful in separating the outlook from the 68 00:03:55,160 --> 00:03:58,120 Speaker 2: estimated tariff impact, and we believe that the outlook is 69 00:03:58,120 --> 00:04:01,800 Speaker 2: providing a perspective on the underlying health of our business, 70 00:04:01,800 --> 00:04:06,040 Speaker 2: which is working as evidence by our performance as well, 71 00:04:06,080 --> 00:04:08,320 Speaker 2: we share the estimate of the impact of the tariffs, 72 00:04:08,480 --> 00:04:11,880 Speaker 2: which could still change as a couple of days ago 73 00:04:12,040 --> 00:04:15,720 Speaker 2: is also changing. July ninth is also another milestone moment 74 00:04:15,960 --> 00:04:20,640 Speaker 2: with yet another update on tariff. So the estimated tariff 75 00:04:20,800 --> 00:04:24,320 Speaker 2: provided that we shared was primarily weighted to the back 76 00:04:24,360 --> 00:04:27,919 Speaker 2: half and we'll continue to update as we move along. 77 00:04:27,920 --> 00:04:31,960 Speaker 2: But we're very focused on executing our playbook. It is 78 00:04:32,040 --> 00:04:34,919 Speaker 2: showing up our two biggest brands, Gap and Old Navy, 79 00:04:34,960 --> 00:04:38,360 Speaker 2: are winning in the marketplace. We're building stronger identities, we're 80 00:04:38,440 --> 00:04:41,560 Speaker 2: driving new customers to our site, and we're very excited 81 00:04:41,560 --> 00:04:43,680 Speaker 2: about obviously the back half of twenty twenty five. 82 00:04:43,839 --> 00:04:46,440 Speaker 1: Well, Richard, it's a fair point that the tariff landscape, 83 00:04:46,440 --> 00:04:49,440 Speaker 1: it changes day to day, hour to hour in some cases, 84 00:04:49,480 --> 00:04:52,040 Speaker 1: so we'll keep a close eye on that. Let's talk 85 00:04:52,040 --> 00:04:54,719 Speaker 1: a little bit more about your portfolio. You mentioned Old Navy, 86 00:04:54,760 --> 00:04:58,359 Speaker 1: you mentioned Gap doing very well and performing strongly in 87 00:04:58,440 --> 00:05:01,600 Speaker 1: this market. But talk to us little bit more about Athleta, 88 00:05:01,640 --> 00:05:05,640 Speaker 1: about Banana Republic, which haven't seen that same momentum. How 89 00:05:05,640 --> 00:05:10,240 Speaker 1: do you specifically plan to revitalize those brands well. 90 00:05:09,920 --> 00:05:12,159 Speaker 2: As you mentioned first, let's start with Old Navy, because 91 00:05:12,160 --> 00:05:15,160 Speaker 2: Old Navy is our largest brand in the portfolio and 92 00:05:15,200 --> 00:05:18,320 Speaker 2: it continues to deliver. This is the ninth consecutive quarter 93 00:05:18,520 --> 00:05:22,080 Speaker 2: of market share gains. Comps were up three percent. We're 94 00:05:22,080 --> 00:05:26,240 Speaker 2: winning in the categories that we've intended to drive, active 95 00:05:26,400 --> 00:05:29,920 Speaker 2: and denim. We've been pursuing a leadership position, and the 96 00:05:29,920 --> 00:05:34,040 Speaker 2: market share continues to gain quarter after quarter. We also 97 00:05:34,320 --> 00:05:37,520 Speaker 2: just introduced Old Navy New Moves, a new campaign that 98 00:05:37,600 --> 00:05:42,120 Speaker 2: really solidifies and supports our activewear strategy. It is a 99 00:05:42,120 --> 00:05:45,599 Speaker 2: clear example of how we're accelerating Old Navy's adoption of 100 00:05:45,640 --> 00:05:49,320 Speaker 2: our playbook. We take big ideas and big product categories, 101 00:05:49,680 --> 00:05:53,640 Speaker 2: we amplify them with great storytelling, and then we connect 102 00:05:53,640 --> 00:05:57,520 Speaker 2: them to the consumer. Denham was another standout category share 103 00:05:57,560 --> 00:06:01,400 Speaker 2: gains across that category with a fourth just adult denim 104 00:06:01,440 --> 00:06:04,200 Speaker 2: brand in the US, and these are real elements that 105 00:06:04,240 --> 00:06:07,240 Speaker 2: we can count on that are giving us the confidence 106 00:06:07,400 --> 00:06:09,920 Speaker 2: that ultimately we're going to deliver in twenty twenty five. 107 00:06:10,480 --> 00:06:14,440 Speaker 2: Gap is another brand that's gaining momentum. We're incredibly proud 108 00:06:14,839 --> 00:06:17,200 Speaker 2: of the progress that we're making with Gap. Comps up 109 00:06:17,240 --> 00:06:21,560 Speaker 2: five percent, eight consecutive quarters of market share gains, Incredible 110 00:06:21,600 --> 00:06:26,880 Speaker 2: performance based on innovation, product newness, compelling marketing collaborations that 111 00:06:26,920 --> 00:06:30,760 Speaker 2: are driving a whole new generation to GAP. Recent campaign 112 00:06:30,839 --> 00:06:35,520 Speaker 2: with Parker Posey, which resonated with consumers a great example 113 00:06:35,560 --> 00:06:38,599 Speaker 2: again of our playbook, and the strength of that brand 114 00:06:38,640 --> 00:06:41,560 Speaker 2: is going to continue, and we believe Gap is well 115 00:06:41,560 --> 00:06:45,279 Speaker 2: positioned to continue to momentum. Banana Republic is a brand 116 00:06:45,279 --> 00:06:48,640 Speaker 2: that we've been re establishing. Fundamentals are improving. We were 117 00:06:48,640 --> 00:06:52,000 Speaker 2: flat for the quarter. We're seeing trends continue in men's 118 00:06:52,000 --> 00:06:54,280 Speaker 2: which we're very proud of, and the team has done 119 00:06:54,279 --> 00:06:58,279 Speaker 2: a great job strategically deploying more marketing to culturally relevant 120 00:06:58,320 --> 00:07:01,320 Speaker 2: storytelling are women's bi This has started to take traction. 121 00:07:01,760 --> 00:07:04,880 Speaker 2: The collaboration with White Lotus was incredible and we believe 122 00:07:05,279 --> 00:07:07,920 Speaker 2: that that brand quarter after quarter is starting to see 123 00:07:07,920 --> 00:07:11,080 Speaker 2: great progress. And lastly, just to finish up our portfolio, 124 00:07:11,480 --> 00:07:15,720 Speaker 2: Athleta is an incredible valuable place in our portfolio and 125 00:07:15,760 --> 00:07:18,160 Speaker 2: in the industry. By the way, we've been resetting that 126 00:07:18,200 --> 00:07:21,440 Speaker 2: brand to more effectively compete in the marketplace. We did 127 00:07:21,520 --> 00:07:23,560 Speaker 2: share that we expected to be a bit choppy as 128 00:07:23,560 --> 00:07:26,720 Speaker 2: we continue to fix the fundamentals. We provided that outlook 129 00:07:27,040 --> 00:07:30,720 Speaker 2: yesterday in our in our call, but Athleta needs to 130 00:07:30,760 --> 00:07:34,120 Speaker 2: become a much more exciting brand for our consumer. We 131 00:07:34,200 --> 00:07:37,560 Speaker 2: had an over rotation that we discussed last quarter towards 132 00:07:37,600 --> 00:07:40,880 Speaker 2: new consumers, which we did attract, but we still didn't 133 00:07:40,920 --> 00:07:44,560 Speaker 2: have enough compelling product to appeal to our large consumer 134 00:07:44,600 --> 00:07:46,880 Speaker 2: base and it's showed in the performance. So we're investing 135 00:07:46,920 --> 00:07:50,040 Speaker 2: in design talent, we're driving newness into the brand, and 136 00:07:50,080 --> 00:07:51,800 Speaker 2: we have more work to do, but we're committed to 137 00:07:51,920 --> 00:07:54,640 Speaker 2: really taking the necessary steps to reset that brand. 138 00:07:54,720 --> 00:07:58,520 Speaker 3: Richard, you seem to have a particular affection for Banana Republic. 139 00:07:58,560 --> 00:08:02,200 Speaker 3: You're personally running that brand. Are you any closer though, 140 00:08:02,240 --> 00:08:05,960 Speaker 3: to finding someone else to do some of that work 141 00:08:06,000 --> 00:08:06,360 Speaker 3: for you? 142 00:08:07,440 --> 00:08:10,960 Speaker 2: We've met some extraordinary talent. We are very close to 143 00:08:11,040 --> 00:08:12,720 Speaker 2: what we believe will be the right pick at the 144 00:08:12,800 --> 00:08:16,000 Speaker 2: right time, and as you see, we're continue to we're 145 00:08:16,000 --> 00:08:19,240 Speaker 2: continuing to strengthen the brand. So as much as obviously 146 00:08:19,480 --> 00:08:23,000 Speaker 2: we're sort of looking for the right person, we take 147 00:08:23,040 --> 00:08:25,320 Speaker 2: these positions very seriously and we want to make sure 148 00:08:25,360 --> 00:08:27,440 Speaker 2: that we have the right talent that can take that 149 00:08:27,520 --> 00:08:29,200 Speaker 2: brand and drive it to the next level. 150 00:08:29,400 --> 00:08:31,080 Speaker 3: All right, Richard, thanks so much for your time. Really 151 00:08:31,120 --> 00:08:36,600 Speaker 3: appreciated GAP CEO Richard Dixon talking to us about his results.