Gap CEO Richard Dickson Talks Retail Plan
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Thrivent, where money means more. Let's get back to one of the big corporate stories of today, and that is shares of Gap plunging this morning after the retailer predicted its tariff impact could be as much as $300 million. Let's get right now to the CEO of Gap. His name is Richard Dixon. And Richard, it's great to have you with us. Normally, I would ask about the results themselves, but I have to start with the share price down 19.8%.

at the moment. Matt and I were talking about earlier how CEOs often come on this program and tell us that they don't watch the day-to-day movements, but I feel like this move is hard to miss, Richard. So what do you do with this? What does the rest of your day look like? Are you having all hands meetings? Are you in conversations with your board? What does it look like?

Well, I think it's true. We don't manage our day-to-day business focused on our daily stock movement. Clearly, it's a dynamic market out there. But much more importantly is that our brand reinvigoration is working.

And it showed up in our results. We delivered another great quarter, a consistently great quarter. We exceeded expectations across all key financial metrics. Our strategic priorities are clear. And despite a dynamic environment, we're staying firmly on course. And it's showing up in the results. Comps were up 2%. That's the fifth consecutive quarter of positive comps. It's also the ninth consecutive quarter that we gained market share.

which indicates our product is resonating. We expanded both gross margin and operating margin during the quarter. We controlled expenses. We increased our EPS by 24%. We strengthened our balance sheet. We have a strong cash flow balance, and we've got $2.2 billion.

The Q is really another proof point that the strategy is working. I remain incredibly optimistic, yet realistic, about the opportunities ahead and we're all navigating a highly dynamic environment. I have to say though that you know you've lost, your company has lost fully one-fifth of its value today. So you were worth over ten billion dollars in market cap and now it's eight. That's

the kind of thing that you just can't look away from. And it looks like that's all down to the tariff impact headline, which you said as much as $300 million, that's less than 1% of your operating income. I mean, you have $15 billion in sales, so it's a seemingly small number. Don't you need, Richard, to analyze

Why the market is attributing so much to this relatively small number? Look, of course, we're on top of and studying, obviously, the marketplace and the reaction. But we are running a business for the long term. And like any business, we're constantly navigating complexities. In this case, it's tariffs.

But it's our responsibility to do so without compromising the long-term integrity of our strategy. And most important to the extent of that strategy is our consumer value proposition, which is resonating. Now, in relation to the tariff conversation, we did share that we've already mitigated over half of the anticipated impact tariff.

We've done it through very thoughtful adjustments to sourcing and manufacturing and our assortments. We also shared that we remain committed to achieving the remaining net impact of about 100 to 150 million.

primarily also weighted to the back half. Now we've been diversifying our sourcing footprint for several years. China, as an example, used to be a top sourcing country for us and now we also share that we expect it to be less than 3% by year end. So at the end of 2026, we're also planning for no country to account for more than 25%. So our goal, first and foremost with our investors, is transparency.

And we were very purposeful in separating the outlook from the estimated tariff impact. And we believe that the outlook is providing a perspective on the underlying health of our business, which is working as evidenced by our performance. As well, we shared the estimate of the impact of the tariffs, which could still change. As of a couple days ago, it was also changing. July 9th is also another milestone moment with yet another milestone.

update on tariffs. So the estimated tariffs provided that we shared was primarily weighted to the back half and we'll continue to update as we move along. But we're very focused on executing our playbook. It is showing up. Our two biggest brands, Gap and Old Navy, are winning in the marketplace. We're building stronger identities. We're driving new customers to our sites.

and we're very excited about obviously the back half of 2025. Well Richard it's a fair point that the tariff landscape it changes day to day, hour to hour in some cases so we'll keep a close eye on that. Let's talk a little bit more about your portfolio. You mentioned Old Navy, you mentioned Gap doing very well and performing strongly in this market but talk to us a little bit more about Athleta, about Banana Republic which haven't seen that same momentum. How do you specifically plan to revitalize those brands?

Well, as you mentioned, first let's start with Old Navy because Old Navy is our largest brand in the portfolio and it continues to deliver. This is the ninth consecutive quarter of market share gains. Comps were up 3%. We're winning in the categories that we've intended to drive.

active and denim. We've been pursuing a leadership position and the market share continues to gain quarter after quarter. We also just introduced Old Navy New Moves, a new campaign that really solidifies and supports our activewear strategy. It is a clear example of how we're accelerating Old Navy's adoption of our playbook. We take big ideas and big product categories, we amplify them,

with great storytelling, and then we connect them to the consumer. Denim was another standout category. Share gains across that category. We're the fourth largest adult denim brand in the U.S. And these are real elements that we can count on that are giving us the confidence that ultimately we're going to deliver in 2025. Gap is another brand that's gaining momentum. We're incredibly...

proud of the progress that we're making with Gap. Comp's up 5%, eight consecutive quarters of market share gains. Incredible performance based on innovation, product newness, compelling marketing, collaborations that are driving a whole new generation to Gap. Recent campaign with Parker Posey, which resonated with consumers.

a great example again of our playbook and the strength of that brand is going to continue and we believe Gap is well positioned to continue the momentum.

Banana Republic is a brand that we've been re-establishing. Fundamentals are improving. We were flat for the quarter. We're seeing trends continue in men's, which we're very proud of. And the team has done a great job strategically deploying more marketing to culturally relevant storytelling. Our women's business is starting to take traction. The collaboration with White Lotus was incredible. And we believe that that brand, quarter after quarter, is starting to see great progress. And lastly, just to finish up our portfolio,

Athleta is an incredible valuable place in our portfolio and in the industry, by the way. We've been resetting that brand to more effectively compete in the marketplace. We did share that we expected to be a bit choppy as we continue to fix the fundamentals. We provided that outlook yesterday in our call. But Athleta needs to become a much more exciting brand for our consumer. We had an over-rotation that we discussed last quarter towards new consumers, which we did attract.

but we still didn't have enough compelling product to appeal to our large consumer base, and it showed in the performance. So we're investing in design talent, we're driving newness into the brand, and we have more work to do, but we're committed to really taking the necessary steps to reset that brand. Richard, you seem to have a particular affection for Banana Republic. You're personally running that brand. Are you any closer, though, to finding someone else to do some of that work for you?

We've met some extraordinary talent. We are very close to what we believe will be the right pick at the right time. And as you see, we're continuing to strengthen the brand. So as much as obviously we're sort of looking for the right person, we take these positions very seriously and we want to make sure that we have the right talent that can take that brand and drive it to the next level.

All right, Richard, thanks so much for your time. Really appreciate it. Gap CEO Richard Dixon talking to us about his results.

while also creating opportunities to give back along the way. Visit Thrivent.com to learn more. Thrivent, where money means more. This is an iHeart Podcast. ♪