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- [00:06]
Ryan Knudsen
In the 1990s, the gap was cool. So cool that supermodels wore shirts and jeans by the retailer on the COVID of Vogue magazine. Actress Sharon Stone wore a Gap mock turtleneck to the Academy Awards. And then there were those popular commercials with all the dancers bopping around in khakis and T shirts. But for the last two decades, things were not looking too good for the Gap Inc. The parent company which includes Gap and sister companies Old Navy, Banana Republic and Athleta. Its sales slumped as it faced stiff competition from rival mall chains like American Eagle and fast fashion brands like H and M and Zara. To illustrate just how stagnant the company has been, consider this Gap stock has been essentially flat over the last 20 years, while the S&P 500 has roughly quadrupled. But recently, things have begun to turn around. Over the last two years, as of March, Gap stock is up over 130%. And the person behind that turnaround is CEO Richard Dixon. Dixon joined the company in 2023 after working at Mattel, where he helped revitalize another beloved American brand, Barbie. And he was at the helm during Barbie's big Hollywood debut, having served as executive producer on the Barbie movie. Now Dixon is trying to find the same success at Gap. But with the economy facing new headwinds and consumer confidence taking a nosedive, can Dixon pull off the comeback? Welcome to the Journal, our show about money, business and power. I'm Ryan Knudsen. Coming up on the show, a conversation with Gap CEO Richard Dickson on how he's bringing the roughly 55 year old company back to life and the challenges that still lie ahead. Foreign.
- [02:01]
Richard Dickson
I'm Tim Higgins with the Wall Street Journal. We've got the spot to hear directly from the leaders behind the bold name companies we cover every day. Check out bold names from the Wall Street Journal wherever you get your podcasts.
- [02:22]
Ryan Knudsen
Ra Richard, thanks so much for joining us.
- [02:24]
Richard Dickson
Thank you, Ryan, for having me.
- [02:26]
Ryan Knudsen
So my first question is, how much of your current wardrobe is Gap?
- [02:33]
Richard Dickson
Well, I say it is head to toe on a daily basis. It's not just Gap. We have Old Navy, Banana Republic. I even throw in a little Athleta there every once in a while. But ultimately, brand fan, head to toe all day long. I can't believe how many denim shirts and jeans I have now.
- [02:51]
Ryan Knudsen
Did you own any denim shirts before you became the CEO of Gap?
- [02:55]
Richard Dickson
I did, but I never really understood the complexity of how many versions of a denim shirt there really are. And now I really, I can tell you anything you want to know. About a denim shirt. Fit, feature, function, philosophy, wash, color, heavy light.
- [03:14]
Ryan Knudsen
All right, so we could talk about denim all day, but I want to talk about your job and the challenges that you've been facing and the work that you've been doing as a CEO of Gap. So I want to start just when you took over the brand, when you became CEO of Gap Inc. In August of 2023, what. What did you see as the biggest challenge the company was facing?
- [03:38]
Richard Dickson
It wasn't just one challenge the company was facing. I think first off, it was. It's important to recognize this is a storied legacy portfolio. What I would say from a challenging perspective was recognizing these are legacy brands that ultimately lost their relevance.
- [03:57]
Ryan Knudsen
Why did that happen? Why did they lose their relevance?
- [04:01]
Richard Dickson
Well, the reason why is a multitude of reasons, but most importantly, what I would say is that the company was always strategically well intended. It had great new extensions, great endeavors, accelerated growth intent, but flawed execution. And along the way, you know, this, this was a portfolio of storytelling brands. I mean, Gap, Banana, Republic, Old Navy, Athletic, these are very purpose driven storytelling brands. And somewhere along the way, we lost the, the brand narrative and became a retailer that sold stuff. And that was most evident when you went into our stores or online. It was about the product and the price and not really about the narrative behind the brands or what made that merchandising story appealing. And that's really a lot of where the company went more wrong than right. That being said, it has always maintained a great deal of volume, but ultimately the relevance, if you will, to really start to grow the brands into continuous improvement models was lacking.
- [05:07]
Ryan Knudsen
So how would you, how did you set about trying to make Gap more culturally relevant? How do you do that for a brand that used to be cool, but isn't that cool anymore?
- [05:18]
Richard Dickson
Well, you know, it isn't just one thing, but what I always start with is what made the brand great to begin with? How did it start? What was its breakthrough? How did it scale? What was happening in the world that became so interesting and relevant for the brand to hit those highs? And then where did it go wrong? And so in order to recognize how to fix something, you have to acknowledge what's wrong. And to do that, you had to go back to the origin story. And that's what I do as a playbook. You go back and you sort of look at what made you great to begin with. What is the purpose of a brand? What is your reason for bringing. Does anybody need another denim shirt? Does anybody need another white T shirt? What's Going to make ours unique and different. And so understanding that and then can help you guide the context of how to create relevance for the future. And Gap as a brand started in 1969 in a progressive city in San Francisco selling denim records and tapes. It was about denim and music. It was an all inclusive brand, all sizes, all races, all sexes. And in the context of that conversation back then, that was a really innovative approach in the context of retail and consumer. And so recognizing that origin story and figuring out how to make that relevant today is what's inspiring us.
- [06:45]
Ryan Knudsen
So at your last job as the chief operating officer of Mattel, you got a lot of credit for reinvigorating the Barbie brand. Can you draw some compare. Were there comparisons that you can draw between what you did at Barbie and Mattel for what you're now doing at Gap?
- [07:05]
Richard Dickson
I would say the methodology is virtually the same. Running a disciplined business, financial and operational rigor, and ultimately reinvigorating brands. And Barbie was no exception. I had a great experience with a fantastic team there working on the revitalization of an iconic brand. Similar attributes to Gab, iconic American brand, going back to the start of that brand. The founder of Barbie, Ruth Handler, invented Barbie, inspired by her daughter playing with paper dolls and imagining a world of possibilities beyond what careers were offered at that particular time to women and girls. And so through that process, again, peaks and pits, Barbie had transformed into an iconic, inspiring figure for little girls. But somewhere along the line, lost that narrative, lost that relevance. And with a team of people and lots of work, we worked to revitalize that brand, change the narrative and create a culturally relevant storytelling methodology around the same figure that inspires girls limitless potential. And that was the original premise of the brand. Fast forward through different executions that ultimately revitalize that brand.
- [08:21]
Ryan Knudsen
So arguably the, the capstone to Barbie's turnaround was the Barbie movie that came out last year, which you, you were the executive producer on now at Gap. Do we expect to see a Gap movie about I, you know, comes to life, perhaps, perhaps, Or.
- [08:40]
Richard Dickson
Or how. Who lives in those khakis? How well lived a person's life is if you sort of walk their life through their khakis?
- [08:48]
Ryan Knudsen
By the way, you've got the same thing.
- [08:49]
Richard Dickson
Don't quote me on that one. Don't quote me on that one. But that was instinctual. Look, I think a brand like Gap is a pop culture brand. It is a canvas for conversation. One of the most beautiful things about our story as a Gap brand is we're not defining your style. We Provide you the style and the apparel for you to define your own style. This is a brand that's all about originality. It's a brand through its history that was inspired by artists and musicians, inventors. If you look back at our history of our ad campaigns, it was always rooted in music and entertainment. We've talked about our methodology, if you will, being fashiontainment. The combination of fashion and entertainment is where Gap sits. And so you can imagine a lot of interesting ways that Gap as a concept, as a brand, as a platform, could express itself in music, in art, in fashion and in culture. And I would watch the space as we continue to evolve into, you know, again, an iconic American brand that really shapes culture.
- [09:58]
Ryan Knudsen
So do you think that Gap needs to have its own, you know, streaming music, streaming service now to get back to the music roots?
- [10:06]
Richard Dickson
Look, I think it's possible. You know, I think when you look at the roots of the brand and where we've taken the brand over the last couple of years and where the brand has always been, it's been at the epicenter of pop culture music dating back to Madonna, Missy Elliott, Lenny Kravitz. Today we work with great musicians, and over the last year and a half, we've experienced, if you will, what we'll call a renaissance, if you will, getting back to some of the things that made Gap great, but interpreting that for today's consumer, today's artists, today's fashions.
- [10:37]
Ryan Knudsen
I wanted to talk with you about your decision to bring in the fashion designer Zac Posen, who a lot of people talk about having a big influence on the brand. He's Gap's creative director. He's been described as a boy wonder in the fashion world. He's well known for his. For his role as a judge on the reality show Project Runway. Why did you want to hire him?
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Richard Dickson
So Zach is a cultural curator. He was brought in to create first the statement that this is an organization that is going to evolve into a design led, more creatively driven organization. Fashion, pop culture is identified by creating wants, and that is a creative process. It's a business about art and science. And Zach is well known certainly for his design capabilities, but he's also really familiar in the content space and the entertainment space, of course, Project Runway, and various other ways that he's expressed his creativity, leveraging his fashion skill sets. He's brought incredible energy to the portfolio and I believe a great addition as a creative leader in an organization that is going to unlock more and more creativity. He's a magnet for talent, which has been fun bringing in new creative talent into the organization and where he started to have influence, whether it's on Gap, with the recent launch of Gap Studio, the PR and the. The special dresses that we've done on on the Runway. Old Navy just launched an occasion segment in dresses that's starting to perform really well, or the technical skill sets that he has on FIT across our brands and how important FIT is to the consumer proposition. So, all in all, you know, again, I. I couldn't be more thrilled to have somebody like Zac Posen in the company. And I believe, you know, the creative energy is just starting.
- [12:33]
Ryan Knudsen
One of the things that he's been doing is, you know, he dressed Timothee Chalamet at a red carpet event. He dressed Divine Joy Randolph for the Met Gala. How important are things like that? This sort of like little collaborations, little partnerships with celebrities to try to make the brand feel cooler and more relevant.
- [12:50]
Richard Dickson
Yeah, and Hathaway was also in that mix, and there'll be many others. It's an important part of the relevant narrative. Um, it's not necessarily a vital ingredient for the scale of our brand, but it's a really important part of the cultural conversation that our brands can now start to re. Engage in. As I mentioned, you know, part of our objective is to create more relevance for the brands that, if done well, drive revenue. But I wouldn't say it's the single silver bullet to create relevance. Relevance is a complicated marketing conversation that ultimately drives your media mix model that changes very dramatically. Your digital dialogue. That changes pretty dramatically the assets and creative that you create. So it's a multifaceted narrative, but certainly one that is topped off, if you will, with celebrity dressing.
- [13:49]
Ryan Knudsen
How much is Gap benefiting right now from the fact that the 90s are kind of back in style again? Like, how much do you think that this is what you're doing versus just the fact that trends are cyclical. Maybe there's some nostalgia for Gap, and therefore it's putting some wind in your sails.
- [14:05]
Richard Dickson
Yeah, perhaps. But, you know, what I would suggest is that there are a lot of brands from the 90s that are not feeling nostalgia and they're not enjoying a resurgence. So I think that you've got to be able to recognize consumer trend and how to play into them. And we are doing a good job capturing the interest of nostalgia in a way that connects with this generation, that is the art behind the business. And there are other brands today that are enjoying that with their own version of renewed relevance. But there are plenty of brands in the 90s, by the way, having lived through them that have not necessarily seen that kind of energy.
- [14:46]
Ryan Knudsen
All right, we're going to take a short break, and when we come back, we're going to talk more with Gap Inc. CEO Richard Dickson on how to ensure the momentum doesn't fizzle out and what he sees in the broader economy. I'm Christopher Mims of the Wall Street Journal. Every day we talk to the leaders behind bold name companies and you can hear from them in bold names from the Wall Street Journal, wherever you get your podcasts. How do you what gives you confidence that this won't, this turnaround won't fizzle out? I mean, Gap had 15, a little over $15 billion in net sales last year, which is an improvement. It's more than 2023, but it's still less than where the company was in 2018. So what work do you feel like still needs to be done?
- [15:48]
Richard Dickson
Well, the metrics that we shared in our last quarterly call were not one and done, if you will. We talked about we exceeded financial expectations, we grew market share. It's the eighth consecutive quarter that we've grown market share. It's a really important metric to understand because the market itself, the apparel industry, has been declining for the past two years. We don't love that, by the way. We want to be part of a growing industry. But the facts are what they are. The apparel industry has declined over last two years. We have grown our market share over the last couple of years. That's an indication that we are breaking through. We are resonating with consumers. Pricing, promotion, product value, the orientation of relevance. It's all orchestrated and improving our trajectory going forward. There is no doubt that there'll be headwinds. We're dealing with them now, whether they be tariffs or consumer sentiment. These everybody's dealing with. But it's our job to create great product at great prices with great experiences and execute with excellence. And as long as we stay true to that, there is plenty of market share to go after.
- [16:56]
Ryan Knudsen
Speaking of tariffs and economic uncertainty, one of the big stories this year has been the tariffs the Trump administration is putting on countries around the world. Is there anything that concerns you about this business environment and tariffs specifically?
- [17:14]
Richard Dickson
It's all concerning, but I think it's no different than any other year of complexity. We can talk about tariffs being the challenge of this year, but there's been challenges every year that companies go through, and it's how you deal with the challenges at hand. We're working hard, obviously, to mitigate any price increases to consumers. We want to maintain that integrity of our price value.
- [17:46]
Ryan Knudsen
So how are you, how are you doing that? Are you importing more products right now, more materials?
- [17:52]
Richard Dickson
No, no, no, no. We haven't changed. We haven't changed our inventory management methodology or our open to buy methodology. Currently, as I shared, you know, less than 10% of our product comes from China, which has been obviously one of the countries that has been impacted by tariffs, as Canada and Mexico have been in the limelight context of tariffs. Less than 1% of our product comes from Canada and Mexico, by the way, that's combined.
- [18:19]
Ryan Knudsen
Where do your products mostly come from?
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Richard Dickson
We have Vietnam, Central America, Bangladesh, other parts of the world that we've been diversifying for the last several years, our manufacturing footprint. So it doesn't make us immune to the situation, but we do have a bit more resiliency, an optionality that is obviously resonating well currently with the dynamic that we're all dealing with, there are.
- [18:46]
Ryan Knudsen
Reciprocal tariffs that are being talked about being put in place. It's not like this is necessarily targeted on one place. So are you thinking about moving your supply chains anywhere? I mean, you have to be preparing for a world where places like Vietnam and Bangladesh do start to see import tariffs.
- [19:06]
Richard Dickson
Yeah, well, look, I think that the only place that you could assume to be encouraged with a reduction to do business would be in the US I think if you spend all your time trying to chase, if you will, where the opportunity is to manufacture goods without the burden of tariffs, you're going to waste time.
- [19:29]
Ryan Knudsen
So is there any chance that Gap will start making jeans in the United States?
- [19:35]
Richard Dickson
We do have some manufacturing in the United States. We do T shirts, we have some denim. We would love to do more in the United States. And there are different teams working on that as a possibility. The size and scale of our business would preclude us from manufacturing everything in the US but there are some encouraging incentives to think about as we start to diversify our retail footprint, diversify our manufacturing footprint and think about ways that we can grow perhaps more manufacturing in.
- [20:07]
Ryan Knudsen
The U.S. the other thing that's happening in the economy right now is that there is consumer sentiment has been nosediving over the past few weeks. It's now the lowest that it's been since 2022. Are you seeing any changes in consumer behavior across your brand?
- [20:25]
Richard Dickson
Well, we've been growing our business again in the context of a market that's declining. We're breaking through. Our brands are growing. We stabilize them. They're starting to put up Scores on the scoreboard in terms of growth, we're growing our market share. We're very conscious of the consumer. We maintained our position with the value consumer with Old Navy, and we grew the income cohort.
- [20:50]
Ryan Knudsen
At the higher level, you're not seeing your customers sort of move down to the more affordable end.
- [20:55]
Richard Dickson
Not necessarily. There is a flight to value that exists, but the higher end consumer still wants to be associated with brand relevance, higher quality brand narratives. And I do believe because we have upped our game, we become more relevant, we become more stylish, we become more effective in that space, that there is a migration of higher end consumers that might not have thought about our brands like Gap and Old Navy and Banana and Athleta and are now starting to be either introduced or reintroduced. So I actually believe our portfolio creates resilience in the context of where consumers are because we have a broad consumer base.
- [21:37]
Ryan Knudsen
The last question I have for you is one that I'm just genuinely very curious about, which is that Zac Posen, your Chief Creative officer, said in an interview not too long ago, he was quoting you, so this is a bit of hearsay.
- [21:49]
Richard Dickson
Okay.
- [21:49]
Ryan Knudsen
You said, I've been a Willy Wonka at Mattel and I need to find my Willy for Gap. What did you mean by that? What does it mean to be the Willy Wonka of Mattel? And why is that something that you needed at Gap?
- [22:02]
Richard Dickson
Oh, it's a great. It's a great question. I'm not sure I loved him sharing that. But what I would say is, you know, at Mattel, Mattel is a toy company. The heart and soul of the company is about fun. It's about surprise, it's about innovation, it's about creativity. And as a leader in that company that led product design and marketing and new brand development and reinvigorating brands, you had a responsibility to be the inspiration, as well as the innovation, if you will, to unlock innovation, to inspire creativity, to bring back that element of surprise and delight. And in my personal history, Willy Wonka was this sort of character that you just were excited around. What was behind the closed door? What was the innovation that you were going to reveal? And so my role at Mattel was very much leading that creative endeavor. And as I was looking at bringing in creative talent, I referenced Zach as the Willy Wonka of Gaff Inc. You.
- [23:19]
Ryan Knudsen
Do kind of remind me of like a young Gene Wilder a little bit. So I think you can. I think you fit the bill.
- [23:26]
Richard Dickson
I just need a top hat.
- [23:27]
Ryan Knudsen
You just need a top hat. But you got the hair already. You got the. You got the big stuff.
- [23:31]
Richard Dickson
Holding on. I'm holding on. I'm holding on. But you, you've got the hair. I'm holding on.
- [23:35]
Ryan Knudsen
All right, great. Well, Richard, thank you so much for your time. It's been a pleasure.
- [23:39]
Richard Dickson
I appreciate it, Ryan. Thank you very much.
- [23:41]
Ryan Knudsen
That's all for today. The Journal is a co production of Spotify and the Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow.
- [24:00]
Richard Dickson
Every day, Wall Street Journal reporters talk with the most powerful, influential, and interesting people. And now we're bringing some of those conversations directly to you. I'm Tim Higgins.
- [24:11]
Ryan Knudsen
And I'm Christopher Mims. We're teaming up to ask tough questions of the leaders behind the bold name companies found in the pages of the Journal every day. Are you going to build that $20,000 vehicle? No, because that market sucks.
- [24:25]
Richard Dickson
Check out bold names from the Wall Street Journal wherever you get your podcasts.