Gap CEO Is Looking for Acquisitions: "I Have My Eyes Wide Open"
Retailer plans to close more Gap and Banana Republic stores and open additional Old Navy and Athleta stores.
[MUSIC PLAYING] Art, the big news for Gap is that you finally have hired a new CEO for the Gap brand. What's he going to do to fix it up and get it growing again? He understands the brand. He understands the aesthetic. He's truly an omnichannel executive. He has very high standards in terms of how he execute quality, trend, in-store experience, et cetera. And I think he's got an amazing opportunity here with a great brand to really make Gap brand in a moment in time when the brand's place should be here and now. Bring it back to relevance. What's really holding Gap back? I think part of it, frankly, is the fact that we lost a little bit of the focus of the brand, tried to do too many things, tried to go to places in fashion that didn't make sense for the brand. And that's the other thing I see with him, super tight in his focus about what the brand should be. It's just been the opposite story with Old Navy. It is just doing great. It now accounts for nearly half of the whole company's revenues, a big chunk of profits. What's behind the Old Navy success story? What's the biggest reason? Focus and discipline on what the brand stands for, and executing against what consumers expect every day in a very consistent way. Value, trend, fun, family, those are key parts of the business. And retail is hard, but retail is easy, oftentimes. And it's really about that consistency and discipline. You know, retailers everywhere are all struggling to figure out this balance between how many physical stores you need and how to still keep up the strong online presence and demand. Now you've closed hundreds of Gap and Banana Republic stores. You've opened lots of new Old Navy stores. So do you think you have the right mix here? I think the right mix is dynamic, honestly. We want to be where the customer is, serve them how they want to shop. Basically, they want to browse, they want to buy, they want to fulfill. Be wherever they are, and make money wherever they are doing that. And if that means I close more stores and I grow my e-commerce business at an accelerating rate, I am totally good with that. The customer is going to shop how they shop. We want to be where they are. Do you think you have the right mix, though, of stores and online? We're going to close more Gap stores. It's the oldest label that we have in the business. How many? We haven't said the exact number yet. And over the last several years, we've closed over 600 stores. We're going to continue to be nimble. And we're doing the work right now, and we'll continue to do that, and some Banana Republic stores as well, and open Old Navy and Athleta stores. I've got to ask you about Amazon. It's soon going to be named-- I was really surprised to hear this-- the number one clothing retailer here in the US. What is your strategy to compete with Amazon? You know, our strategy to compete with Amazon, first, is to have great brands. And people come to clothing-- you and I both do-- because of a brand that they love. I've also said very publicly that I want to be where my customer is. And so I'm not shy about like we do in China, doing business with Tmall in China. We continue to talk to everybody in the business that's relevant. And I just want to be present and accounted for and make money where my customer is. What do you think it takes to compete effectively against Amazon? Is there a retailer out there who's figuring it out? My e-commerce business in Q4 grew 30%. So that's a super-- and we have one of the biggest apparel e-commerce businesses on the planet. I think we're competing pretty effectively with Amazon right now. Do you think you can do even more? I do. I do. We've continued to talk about how we can grow our e-commerce business at an accelerating rate. We're super pleased there. And let's remember, 80% of apparel purchases still take place in stores. And that's a place where I can compete with Amazon all day long, because they don't have clothing stores. So looking ahead, let's say, three years from now, what will the future Gap look like? How will it be different from the way we see it today? You know, when you go into Gap, what I want you to see is I want you to see amazing, well-made, versatile essentials for your wardrobe. And that's where Gap is at its strength, a great pair of jeans, well-priced. A great pair of khakis, a t-shirt that lasts and is amazing, a woven shirt, et cetera. Old Navy, fun fashion for the family. Athleta, amazing performance lifestyle. And Banana is really about your more dressy and professional space. And then, what else will there be? I'm looking and have my eyes wide open. All right, so you're telling us that you might make another acquisition? Give us some hints. I love Athleta. That's the hint I would give. We have a great portfolio today. And I believe we're going to be in an environment where we have the resources to add something else to the platform. So you may be looking for more athletic Lululemon-type of acquisition? The performance space, the performance lifestyle space is certainly super interesting. There's other spaces that we're looking at as well. I love the intimates space. We have an amazing intimates business in the company we might build on. And again, not signaling anything imminent, but I'm always eyes wide open and very curious about what's out there.