Speaker 1: Let's get back to one of the big corporate stories
Speaker 1: of today, and that is shares of Gap plunging this
Speaker 1: morning after the retailer predicted its terriff impact could be
Speaker 1: as much as three hundred million dollars. Let's get right
Speaker 1: now to the CEO of Gap. His name is Richard Dickson,
Speaker 1: and Richard, it's great to have you with us. Normally
Speaker 1: I would ask about the results themselves, but I have
Speaker 1: to start with the share price down nineteen point eight
Speaker 1: percent at the moment. Matt and I were talking about
Speaker 1: earlier how CEOs often come on this program and tell
Speaker 1: us that they don't watch the day to day movements,
Speaker 1: But I feel like this move is hard to miss. Richard,
Speaker 1: So what do you do with this? What does the
Speaker 1: rest of your day look like? Are you having all
Speaker 1: hands meetings, are you in conversations with your board? What
Speaker 1: does it look like?
Speaker 2: Well? I think it's true. I mean we don't manage
Speaker 2: our day to day business focused on our daily stock movement. Clearly,
Speaker 2: it's a dynamic market out there, but much more importantly
Speaker 2: is that our brand reinvigoration is working and it's showed
Speaker 2: up in our results. We delivered another great quarter a
Speaker 2: consistently great quartered expectations across all key financial metrics. Our
Speaker 2: strategic priorities are clear, and despite a dynamic environment, we're
Speaker 2: staying firmly on course and it's showing up in the results.
Speaker 2: Comps were up two percent. That's the fifth consecutive quarter
Speaker 2: of positive comps. It's also the ninth consecutive quarter that
Speaker 2: we gain market share, which indicates our product is resonating.
Speaker 2: We expanded both gross margin and operating margin during the quarter.
Speaker 2: We controlled expenses, We increased our EPs by twenty four percent.
Speaker 2: We strengthened our balance sheet. We have a strong cash
Speaker 2: flow balance, and we've got two point two billion dollars.
Speaker 2: The queue is really another proof point that the strategy
Speaker 2: is working. I remain incredibly optimistic yet realistic about the
Speaker 2: opportunities ahead, and we're all navigating a highly dynamic environment.
Speaker 3: I have to say, though, that you know you've lost.
Speaker 3: Your company has lost fully one fifth of its value today,
Speaker 3: so we're worth over ten billion dollars in market cap
Speaker 3: and now it's eight. That's the kind of thing that
Speaker 3: you just can't look away from. And it looks like
Speaker 3: that's all down to the tariff impact headline, which you
Speaker 3: said as much as three hundred million dollars. That's less
Speaker 3: than one percent of your operating income. I mean, you
Speaker 3: have fifteen billion dollars in sales, so it's a seemingly
Speaker 3: small number. Don't you need Richard to analyze why the
Speaker 3: market is attributing so much to this relatively small number.
Speaker 2: Look, of course, we're on top of and studying obviously
Speaker 2: the marketplace and the reaction. But we are running a
Speaker 2: business for the long term, and like any business, we're
Speaker 2: constantly navigating complexities. In this case, it's tariffs, but it's
Speaker 2: our responsibility to do so without compromising the long term
Speaker 2: integrity of our strategy, and most important to the extent
Speaker 2: of that strategy is our consumer value proposition, which is
Speaker 2: resonating now in relation to the tariff conversation. We did
Speaker 2: share that we've already mitigated over half of the anticipated
Speaker 2: impact teriff. We've done it through very thoughtful adjustments to
Speaker 2: sourcing and manufacturing and our assortments. We also shared that
Speaker 2: we remain committed to achieving the remaining net impact of
Speaker 2: about one hundred to one hundred and fifty million, primarily
Speaker 2: also weighted to the back half that we've been diversifying
Speaker 2: our sourcing footprint for several years. China, as an example,
Speaker 2: used to be a top sourcing country for US, and
Speaker 2: now we also share that we expected to be less
Speaker 2: than three percent by year end, so at the end
Speaker 2: of twenty twenty six, we're also planning for no country
Speaker 2: to account for more than twenty five percent. So our
Speaker 2: goal first and foremost with our investors is transparency, and
Speaker 2: we were very purposeful in separating the outlook from the
Speaker 2: estimated tariff impact, and we believe that the outlook is
Speaker 2: providing a perspective on the underlying health of our business,
Speaker 2: which is working as evidence by our performance as well,
Speaker 2: we share the estimate of the impact of the tariffs,
Speaker 2: which could still change as a couple of days ago
Speaker 2: is also changing. July ninth is also another milestone moment
Speaker 2: with yet another update on tariff. So the estimated tariff
Speaker 2: provided that we shared was primarily weighted to the back
Speaker 2: half and we'll continue to update as we move along.
Speaker 2: But we're very focused on executing our playbook. It is
Speaker 2: showing up our two biggest brands, Gap and Old Navy,
Speaker 2: are winning in the marketplace. We're building stronger identities, we're
Speaker 2: driving new customers to our site, and we're very excited
Speaker 2: about obviously the back half of twenty twenty five.
Speaker 1: Well, Richard, it's a fair point that the tariff landscape,
Speaker 1: it changes day to day, hour to hour in some cases,
Speaker 1: so we'll keep a close eye on that. Let's talk
Speaker 1: a little bit more about your portfolio. You mentioned Old Navy,
Speaker 1: you mentioned Gap doing very well and performing strongly in
Speaker 1: this market. But talk to us little bit more about Athleta,
Speaker 1: about Banana Republic, which haven't seen that same momentum. How
Speaker 1: do you specifically plan to revitalize those brands well.
Speaker 2: As you mentioned first, let's start with Old Navy, because
Speaker 2: Old Navy is our largest brand in the portfolio and
Speaker 2: it continues to deliver. This is the ninth consecutive quarter
Speaker 2: of market share gains. Comps were up three percent. We're
Speaker 2: winning in the categories that we've intended to drive, active
Speaker 2: and denim. We've been pursuing a leadership position, and the
Speaker 2: market share continues to gain quarter after quarter. We also
Speaker 2: just introduced Old Navy New Moves, a new campaign that
Speaker 2: really solidifies and supports our activewear strategy. It is a
Speaker 2: clear example of how we're accelerating Old Navy's adoption of
Speaker 2: our playbook. We take big ideas and big product categories,
Speaker 2: we amplify them with great storytelling, and then we connect
Speaker 2: them to the consumer. Denham was another standout category share
Speaker 2: gains across that category with a fourth just adult denim
Speaker 2: brand in the US, and these are real elements that
Speaker 2: we can count on that are giving us the confidence
Speaker 2: that ultimately we're going to deliver in twenty twenty five.
Speaker 2: Gap is another brand that's gaining momentum. We're incredibly proud
Speaker 2: of the progress that we're making with Gap. Comps up
Speaker 2: five percent, eight consecutive quarters of market share gains, Incredible
Speaker 2: performance based on innovation, product newness, compelling marketing collaborations that
Speaker 2: are driving a whole new generation to GAP. Recent campaign
Speaker 2: with Parker Posey, which resonated with consumers a great example
Speaker 2: again of our playbook, and the strength of that brand
Speaker 2: is going to continue, and we believe Gap is well
Speaker 2: positioned to continue to momentum. Banana Republic is a brand
Speaker 2: that we've been re establishing. Fundamentals are improving. We were
Speaker 2: flat for the quarter. We're seeing trends continue in men's
Speaker 2: which we're very proud of, and the team has done
Speaker 2: a great job strategically deploying more marketing to culturally relevant
Speaker 2: storytelling are women's bi This has started to take traction.
Speaker 2: The collaboration with White Lotus was incredible and we believe
Speaker 2: that that brand quarter after quarter is starting to see
Speaker 2: great progress. And lastly, just to finish up our portfolio,
Speaker 2: Athleta is an incredible valuable place in our portfolio and
Speaker 2: in the industry. By the way, we've been resetting that
Speaker 2: brand to more effectively compete in the marketplace. We did
Speaker 2: share that we expected to be a bit choppy as
Speaker 2: we continue to fix the fundamentals. We provided that outlook
Speaker 2: yesterday in our in our call, but Athleta needs to
Speaker 2: become a much more exciting brand for our consumer. We
Speaker 2: had an over rotation that we discussed last quarter towards
Speaker 2: new consumers, which we did attract, but we still didn't
Speaker 2: have enough compelling product to appeal to our large consumer
Speaker 2: base and it's showed in the performance. So we're investing
Speaker 2: in design talent, we're driving newness into the brand, and
Speaker 2: we have more work to do, but we're committed to
Speaker 2: really taking the necessary steps to reset that brand.
Speaker 3: Richard, you seem to have a particular affection for Banana Republic.
Speaker 3: You're personally running that brand. Are you any closer though,
Speaker 3: to finding someone else to do some of that work
Speaker 3: for you?
Speaker 2: We've met some extraordinary talent. We are very close to
Speaker 2: what we believe will be the right pick at the
Speaker 2: right time, and as you see, we're continue to we're
Speaker 2: continuing to strengthen the brand. So as much as obviously
Speaker 2: we're sort of looking for the right person, we take
Speaker 2: these positions very seriously and we want to make sure
Speaker 2: that we have the right talent that can take that
Speaker 2: brand and drive it to the next level.
Speaker 3: All right, Richard, thanks so much for your time. Really
Speaker 3: appreciated GAP CEO Richard Dixon talking to us about his results.