WEBVTT - Gap CEO Richard Dickson Talks Retail Plan

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<v Speaker 1>Let's get back to one of the big corporate stories

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<v Speaker 1>of today, and that is shares of Gap plunging this

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<v Speaker 1>morning after the retailer predicted its terriff impact could be

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<v Speaker 1>as much as three hundred million dollars. Let's get right

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<v Speaker 1>now to the CEO of Gap. His name is Richard Dickson,

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<v Speaker 1>and Richard, it's great to have you with us. Normally

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<v Speaker 1>I would ask about the results themselves, but I have

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<v Speaker 1>to start with the share price down nineteen point eight

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<v Speaker 1>percent at the moment. Matt and I were talking about

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<v Speaker 1>earlier how CEOs often come on this program and tell

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<v Speaker 1>us that they don't watch the day to day movements,

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<v Speaker 1>But I feel like this move is hard to miss. Richard,

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<v Speaker 1>So what do you do with this? What does the

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<v Speaker 1>rest of your day look like? Are you having all

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<v Speaker 1>hands meetings, are you in conversations with your board? What

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<v Speaker 1>does it look like?

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<v Speaker 2>Well? I think it's true. I mean we don't manage

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<v Speaker 2>our day to day business focused on our daily stock movement. Clearly,

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<v Speaker 2>it's a dynamic market out there, but much more importantly

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<v Speaker 2>is that our brand reinvigoration is working and it's showed

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<v Speaker 2>up in our results. We delivered another great quarter a

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<v Speaker 2>consistently great quartered expectations across all key financial metrics. Our

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<v Speaker 2>strategic priorities are clear, and despite a dynamic environment, we're

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<v Speaker 2>staying firmly on course and it's showing up in the results.

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<v Speaker 2>Comps were up two percent. That's the fifth consecutive quarter

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<v Speaker 2>of positive comps. It's also the ninth consecutive quarter that

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<v Speaker 2>we gain market share, which indicates our product is resonating.

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<v Speaker 2>We expanded both gross margin and operating margin during the quarter.

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<v Speaker 2>We controlled expenses, We increased our EPs by twenty four percent.

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<v Speaker 2>We strengthened our balance sheet. We have a strong cash

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<v Speaker 2>flow balance, and we've got two point two billion dollars.

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<v Speaker 2>The queue is really another proof point that the strategy

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<v Speaker 2>is working. I remain incredibly optimistic yet realistic about the

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<v Speaker 2>opportunities ahead, and we're all navigating a highly dynamic environment.

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<v Speaker 3>I have to say, though, that you know you've lost.

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<v Speaker 3>Your company has lost fully one fifth of its value today,

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<v Speaker 3>so we're worth over ten billion dollars in market cap

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<v Speaker 3>and now it's eight. That's the kind of thing that

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<v Speaker 3>you just can't look away from. And it looks like

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<v Speaker 3>that's all down to the tariff impact headline, which you

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<v Speaker 3>said as much as three hundred million dollars. That's less

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<v Speaker 3>than one percent of your operating income. I mean, you

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<v Speaker 3>have fifteen billion dollars in sales, so it's a seemingly

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<v Speaker 3>small number. Don't you need Richard to analyze why the

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<v Speaker 3>market is attributing so much to this relatively small number.

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<v Speaker 2>Look, of course, we're on top of and studying obviously

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<v Speaker 2>the marketplace and the reaction. But we are running a

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<v Speaker 2>business for the long term, and like any business, we're

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<v Speaker 2>constantly navigating complexities. In this case, it's tariffs, but it's

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<v Speaker 2>our responsibility to do so without compromising the long term

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<v Speaker 2>integrity of our strategy, and most important to the extent

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<v Speaker 2>of that strategy is our consumer value proposition, which is

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<v Speaker 2>resonating now in relation to the tariff conversation. We did

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<v Speaker 2>share that we've already mitigated over half of the anticipated

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<v Speaker 2>impact teriff. We've done it through very thoughtful adjustments to

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<v Speaker 2>sourcing and manufacturing and our assortments. We also shared that

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<v Speaker 2>we remain committed to achieving the remaining net impact of

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<v Speaker 2>about one hundred to one hundred and fifty million, primarily

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<v Speaker 2>also weighted to the back half that we've been diversifying

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<v Speaker 2>our sourcing footprint for several years. China, as an example,

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<v Speaker 2>used to be a top sourcing country for US, and

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<v Speaker 2>now we also share that we expected to be less

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<v Speaker 2>than three percent by year end, so at the end

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<v Speaker 2>of twenty twenty six, we're also planning for no country

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<v Speaker 2>to account for more than twenty five percent. So our

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<v Speaker 2>goal first and foremost with our investors is transparency, and

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<v Speaker 2>we were very purposeful in separating the outlook from the

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<v Speaker 2>estimated tariff impact, and we believe that the outlook is

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<v Speaker 2>providing a perspective on the underlying health of our business,

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<v Speaker 2>which is working as evidence by our performance as well,

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<v Speaker 2>we share the estimate of the impact of the tariffs,

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<v Speaker 2>which could still change as a couple of days ago

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<v Speaker 2>is also changing. July ninth is also another milestone moment

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<v Speaker 2>with yet another update on tariff. So the estimated tariff

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<v Speaker 2>provided that we shared was primarily weighted to the back

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<v Speaker 2>half and we'll continue to update as we move along.

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<v Speaker 2>But we're very focused on executing our playbook. It is

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<v Speaker 2>showing up our two biggest brands, Gap and Old Navy,

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<v Speaker 2>are winning in the marketplace. We're building stronger identities, we're

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<v Speaker 2>driving new customers to our site, and we're very excited

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<v Speaker 2>about obviously the back half of twenty twenty five.

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<v Speaker 1>Well, Richard, it's a fair point that the tariff landscape,

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<v Speaker 1>it changes day to day, hour to hour in some cases,

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<v Speaker 1>so we'll keep a close eye on that. Let's talk

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<v Speaker 1>a little bit more about your portfolio. You mentioned Old Navy,

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<v Speaker 1>you mentioned Gap doing very well and performing strongly in

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<v Speaker 1>this market. But talk to us little bit more about Athleta,

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<v Speaker 1>about Banana Republic, which haven't seen that same momentum. How

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<v Speaker 1>do you specifically plan to revitalize those brands well.

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<v Speaker 2>As you mentioned first, let's start with Old Navy, because

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<v Speaker 2>Old Navy is our largest brand in the portfolio and

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<v Speaker 2>it continues to deliver. This is the ninth consecutive quarter

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<v Speaker 2>of market share gains. Comps were up three percent. We're

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<v Speaker 2>winning in the categories that we've intended to drive, active

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<v Speaker 2>and denim. We've been pursuing a leadership position, and the

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<v Speaker 2>market share continues to gain quarter after quarter. We also

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<v Speaker 2>just introduced Old Navy New Moves, a new campaign that

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<v Speaker 2>really solidifies and supports our activewear strategy. It is a

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<v Speaker 2>clear example of how we're accelerating Old Navy's adoption of

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<v Speaker 2>our playbook. We take big ideas and big product categories,

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<v Speaker 2>we amplify them with great storytelling, and then we connect

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<v Speaker 2>them to the consumer. Denham was another standout category share

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<v Speaker 2>gains across that category with a fourth just adult denim

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<v Speaker 2>brand in the US, and these are real elements that

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<v Speaker 2>we can count on that are giving us the confidence

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<v Speaker 2>that ultimately we're going to deliver in twenty twenty five.

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<v Speaker 2>Gap is another brand that's gaining momentum. We're incredibly proud

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<v Speaker 2>of the progress that we're making with Gap. Comps up

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<v Speaker 2>five percent, eight consecutive quarters of market share gains, Incredible

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<v Speaker 2>performance based on innovation, product newness, compelling marketing collaborations that

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<v Speaker 2>are driving a whole new generation to GAP. Recent campaign

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<v Speaker 2>with Parker Posey, which resonated with consumers a great example

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<v Speaker 2>again of our playbook, and the strength of that brand

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<v Speaker 2>is going to continue, and we believe Gap is well

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<v Speaker 2>positioned to continue to momentum. Banana Republic is a brand

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<v Speaker 2>that we've been re establishing. Fundamentals are improving. We were

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<v Speaker 2>flat for the quarter. We're seeing trends continue in men's

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<v Speaker 2>which we're very proud of, and the team has done

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<v Speaker 2>a great job strategically deploying more marketing to culturally relevant

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<v Speaker 2>storytelling are women's bi This has started to take traction.

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<v Speaker 2>The collaboration with White Lotus was incredible and we believe

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<v Speaker 2>that that brand quarter after quarter is starting to see

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<v Speaker 2>great progress. And lastly, just to finish up our portfolio,

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<v Speaker 2>Athleta is an incredible valuable place in our portfolio and

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<v Speaker 2>in the industry. By the way, we've been resetting that

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<v Speaker 2>brand to more effectively compete in the marketplace. We did

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<v Speaker 2>share that we expected to be a bit choppy as

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<v Speaker 2>we continue to fix the fundamentals. We provided that outlook

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<v Speaker 2>yesterday in our in our call, but Athleta needs to

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<v Speaker 2>become a much more exciting brand for our consumer. We

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<v Speaker 2>had an over rotation that we discussed last quarter towards

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<v Speaker 2>new consumers, which we did attract, but we still didn't

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<v Speaker 2>have enough compelling product to appeal to our large consumer

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<v Speaker 2>base and it's showed in the performance. So we're investing

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<v Speaker 2>in design talent, we're driving newness into the brand, and

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<v Speaker 2>we have more work to do, but we're committed to

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<v Speaker 2>really taking the necessary steps to reset that brand.

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<v Speaker 3>Richard, you seem to have a particular affection for Banana Republic.

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<v Speaker 3>You're personally running that brand. Are you any closer though,

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<v Speaker 3>to finding someone else to do some of that work

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<v Speaker 3>for you?

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<v Speaker 2>We've met some extraordinary talent. We are very close to

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<v Speaker 2>what we believe will be the right pick at the

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<v Speaker 2>right time, and as you see, we're continue to we're

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<v Speaker 2>continuing to strengthen the brand. So as much as obviously

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<v Speaker 2>we're sort of looking for the right person, we take

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<v Speaker 2>these positions very seriously and we want to make sure

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<v Speaker 2>that we have the right talent that can take that

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<v Speaker 2>brand and drive it to the next level.

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<v Speaker 3>All right, Richard, thanks so much for your time. Really

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<v Speaker 3>appreciated GAP CEO Richard Dixon talking to us about his results.