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