GPS - Earnings call transcript Q3 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, ladies and gentlemen. My name is Ashley, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Gap, Inc.

Third Quarter 2017 Conference Call. This call is being recorded. participants a all mode. time, this are listen-only in At

Senior to limit participant. introduce As Corporate Fall, please Relations. questions and your President one Investor Finance Jen to a reminder, like your per of now I host, Vice would

Jennifer Fall

Gap, Welcome conference third quarter Good call. to XXXX afternoon, Inc.'s everyone. earnings

Before that forward-looking information statements. like made conference available you I'd we and contains remind on call begin, to the this webcast

SEC, all which our as on actual forward-looking For recent and statements results please based to differ supplementing These press we information available could Annual well earnings are on financial our of our forward-looking on well or factors gapinc.com. Teri's release, obligation today's materially on no statements. of as most non-GAAP and statements, of information cause publicly XX, as and XXXX, noted Report page update November descriptions the revise as that our reconciliations from remarks, assume of on XX-K are as our with the to as to Form subsequent measures, refer filings forward-looking X slides

on President me List-Stoll. CFO, call Joining CEO, President and Teri Executive and today Art Peck; and the Vice are

view to Investors will mentioned, using As you to our sections going slides be which remarks, can at we gapinc.com. by the supplement

As for to over Art. always, available further be like the call turn Investor the call Relations after questions. I'd the teams will to With that,

Arthur L. Peck

Good us. and everyone, afternoon, thanks joining for

of our you does expansion. the to with seeing strong with along quarter business to happy give As consecutive positive quarter consecutive guidance. very rate fourth The in today again QX confidence fifth always, our of results. our margin we're Teri I and increase us had the quarter delivering full-year share our momentum We another are gross comps

to of quarter dive into impact challenges, had time the opportunity for weather, all of significant impacted take events has their from this business. at want to I to XXX,XXX been I our that an tirelessly unseasonably want disasters, unprecedented our employees recognize that the I my have same and natural and warm co-workers contributing to ranging this while and Before there customers, communities. who've acknowledge horrific do thank however, business, our

it talk growth investing details up our to hearts balanced strengthen that those still in performance four our components industry, protected recovered. important our I it. from impacted moment, in In and all accretive I two, the pillars. growth I'm have But into to about of in extends one, investment differentiation. Teri, will asset, QX before results. to and our Active; accelerating like fully not strategy, communities are continuing pleased to most in reiterate that and I the over lifestyle Number which in and made do, and also is growth business. Our Balanced large, fast-growing, more how value the a a turn and a we And how sustain of to that and mobile some on online highly-profitable, continuity. is importantly, our Number Active, pay people. employees with space. we're the critical I resources share of differentiates who of us key want will This it our with share would

improving And, the Inc. as moment. reduce are our helping number a September, us in that company of through productivity a $X advantages in Gap, store to As we estate to to exposure four, of on growth results Underpinning business. win. terms in the are pleased Republic Gap are traffic-challenged a being spoke the billion were rate. growth talk to more that very path that about accelerate you specialty continuing the substantially its we balanced towards Banana and real continuing rationalization, we business. in brands. Three, largely indicated that with I'll we And

First, customers. retaining attracting, activating us advantaged and profitable in finding, give brands that economics multiple iconic

to device, around or world. they online, our deliver where is meet in X,XXX Second, whether mobile the our the are ability customers and an stores a experience, on exceptional that

teens, continued categories. in high creation then want comps what Third, identify product a scale were leveraging Navy outpacing continuing solid capabilities illustrate strong, our high comps Denim delivered margin responsive from particularly to to profitability, the Navy. innovative starting want gain were and And, very market The brands, the year with the I against to categories. quarter, loyalty another loyalty financial Old to was last and sales in deliver up and compares drove drive quickly focus growth, comps. share I exploit and and with Old on fourth, business. the to discuss consistency. sales our

resonated As it up Old number But, X spots success, and Old it been customer. things, product of a vessel the this Navy four October, Navy it. retailer in fact on number which depending two Denim, is just in Success importantly, with in allows destruction, the by the that not sits platform that weeks XX this LY. of from or we air whether but on driven responsive is print, treatments color, hem it highly silhouettes to ship a category has including on was replenishment was which we

where ensure oldest These remodels with a positive we always will this risk that in last a of inventory, importantly, two associated fleet the faster. financial and expectations to get And, will in get had as but buying driving have As holding low-scope, bottom line response continue capitalize faster, can top highly see Navy Old up also brand developed continue both prototype like I we standards. quarters, our that am pleased we to be designed have share low-cost, results their delivered above reduce the on to we a and we performance. and customer demand. and stores the remodel, will we've to continue effective even to to

X,XXX opened and we've the as Old exit Navy XX we America North the in year. about course year, to the Additionally, have stores of over expect

well, new our are openings store accelerating in XXXX. As we

the buy outpacing to on industry stand the the Athleta Top responsive. to back fire. in assortment Simply expansion. This Turning allows operating things initial business we exceptional out: two to us assortment opportunities. and business Athleta. margin pipeline the see responsibly momentum driving seeing with weeks. bottom X but on put, line are feed is growth into continues. is this, XX and of a as market of to Many share XX% the then units We're

time of Second, and has importance marketing with with also and of the was acquisition, incremental power back-to-school. all expressed we're the highly the now than brand, given to focused brand accelerate on grow this continuing and been making the was to back-to-school stores. important you continues targeted industry. QX ask On real grow no a test And why see but continues to to highly importantly, investments efficient file Athleta, in the girl's which And the ROD we to awareness. minimal customer were added fully accretive. and, customer might Athleta, the business making matters brand division highly in it for an not drawing faster expense, disappointed this online

the continue to the open to year. expand continue into stores XX our quarter presence doors of year. we about fleet about this new exit next also be stores total We size new XXX thoughtfully to We opening on and X we'll as the anticipate retail and XXXX,

progress Turning Republic. again performance important teams focused to Inc.'s most and on to Gap, to categories. while quarter-over-quarter. more the in loyalty Gap, on-trend and our The deliver is Banana news leveraging Gap continue capabilities brands, innovation be mature with product improving Starting

Importantly, healthy we beat industry the due traffic weeks also to Fishkill as maintained AUR's we've anniversaried during marketing fire. returning high we most and investments

the acknowledge Banana to brand but into their are product demonstrating reminder, execution. holiday for, work the performance. quarter-over-quarter fact pillars, we the as improved With business improvement We the have executing translate spending. sweaters celebrating results better positive right pants, to the from a makes to priorities, customers and team with couple that acceptance ahead, the is to in and you qualified of is focused to out areas seeing now, improvement consistent the that on the their industry continued traction that Banana do. In the well, the and we're focused that Republic, consistency progress come the and sales, with attracting see the Banana are team narrowing brand. making investment. QX as for. suitings, do, behind customer core Right wallet and traffic, loyal to not through be to is me this more outerwear; which pleased and for taking right is a we're to But success. progress. less it's and Republic, are industry. a beat work lots with to and lot footsteps more has more to year doing I'm and on clear want the Republic When loyalty these the spread our that to I made been with of do Again, quite we're expect quarter the improve sweaters particularly heavy the in product team lifting there's slight traffic, excited things Every And Banana

and confident my of confident each progress seen to continue anxious in teams recently. work results from businesses We're to back profitability the a back level being both we've comments you If the to that about September, the getting improve. done, recall both a focus in for and is business see quite key about

Now, I'd moment on like productivity. to spend a

with make First, XXXX. closures store now of our our year-end we closing plan, continue a announced by towards closure in plan portion progress to healthy

their the We of these year also initial of expectations. of which by potential. through will our lens closures and original long-term anticipate through XXXX, on at a looked We've lens profitability the the end delivering of stores our planned be ahead

making our the fleet represents centers. we We in appropriate to our brands are and are tough calls ensure

earlier drive will York-based week As cost. we speed, Banana. taking the rest for improve operating with and save efficient specialty a Francisco. model the consolidation also rationalize we're we're moving and to it Banana will New San We announced Republic of This our quality, improve brand more opportunity our that this the to will profitable teams footprint, it

You us few quarter each will from I however, already. a hear of going wanted steps productivity forward. with on share you, continue we've that to taken these to

some we'll to and been to making comments drive on me we've with investments Let the continue close growth. make

every the for been focuses health and of and in to drive grow business. online in Over the our businesses file growth past We've months, the QX. our from to six customer negative, have digits teens the accelerated mid-single acquisition mobile high customer helping critical database brand

also now, we've were and had from continued to an Additionally, early behavior if each all features San are Francisco. Navy Store the Old and in have and our and business, a of QX. year and beating for several capability for we QX build first far. important Find Reserve we seen you extremely the results Up Republic. in with Also, quarter Buy we're improve look also at These of traffic two acceleration our to experience. an the as quarter quarter. years on growth Store quarter This from a store improvement for our ago. consecutive of on It rate and added is web multi-channel where Online but Pick investments customer Chicago even brands on this to Banana traffic the third days, encouraged quarter Store quarter, is functionality excellent online in We've and industry and XXXX and the technologies by in compared app-based so for beat in This to we've in markets, marks Gap driving Ship Store, our

multi-tender Beyond in are live Atlanta. heavily now engaged mobile, and Dallas and loyalty so online program, is Customers far. Rewards, Navy BRIGHT our Old at

Xx exciting rewards lift customer the offer the of her reach our in a we're our a version is able versus step card-based non-card With forward be customers tiered This able holding to offering. of engaged we've an test our rewards to number contact stores, seen to and program.

brands payroll As we growth. of store in look channels to to and digital continue to will in we marketing, invest and holiday, drive form our the

improvements let balanced do to growth given online and on that and growth, this is us In mobile, leverage. do has closing, scale reiterate right specialty, while combining year-to-date to value productivity our and rationalizing focus me in the performance right Our the it. and time Active, driving through confidence accelerating thing

than ago, I'm are growth. delivering few performance from consistent We a that this foundation are today pleased is as platform the for driving year stronger this much years that and we future Teri? a just

Teri L. List-Stoll

afternoon. good Art, Thanks, and

pleased progress we're results of said, Art against making positive As outlined in another balanced quarter to also the strategy growth September. deliver we while

closures now our plans As the expect by to and initially you strategy, Art, as of closure complete also the heard part identified that we're XXXX. end from accelerating store of

progress. we this simplify We'll identify and to work have to model. update and on continue continue our leverage as operating we Additionally, you to scale will opportunities our

due comp Turning despite impact and were spread of is sales were a sales. deliver performance, now year. growth we and and sales largely very to well comp year. The as between quarter, marking fourth the positive X% pleased last $X.X to the Comp closures net hurricanes our from quarter sales. our consecutive negative warmer-than-expected quarter sales to the the throughout up starting sales increase third quarter of the with experienced another from for comp quarter sales last We're the net weather. X%, international as Net billion, positive

days six total the a XXX Just Harvey, stores result of for were quarter. for as reference, third hurricanes average a Maria, and approximately combined closed an of during of Irma

outpaced and its Navy This X% impact X% The women's do. strength. half, were improvement delivered The excluding year, men's excludes category X% the of negative the year is to the to and driven was about the Banana to We negative the Continuing more broad-based against comp advertising. impact point X year. be traffic as the results throughout strength the improved quarter. about Old driven industry. consistent of pillar the positive level, which of sales fire last comp mentioned, traffic Gap points. Navy's while, Fishkill more marks fire. has last points. traffic conversion. continued first Art brands year. Looking Similar Fishkill work about improved of This down It's to feel continues impact this X business a Republic, again, a at fire traction Navy industry Old consistent brand negative year, about was comp positive last against good brand were Gap from in X Old categories. our against that noting comp Fishkill the business the worth negative positive This X% the third the excludes for consecutive X%, all the last negative more At comp the by comp that attribute the the outpaced and sequential by X% We quarter

consecutive Additionally, pleased fourth AUR. quarter we were to positive of deliver our

Moving from gross on When basis to last year gross quarter XXXX to XX.X%. was the restructuring costs, our XX margin. points margin excluding third up

last about costs restructuring year. merch the margin XXXX, Excluding from was flat to

points, primarily to by interruption we to and rent comp Fishkill, the our insurance recovery With Our our regard in occupancy of as leveraged positive XX $X.XX about on basis quarter noted driven we the second sales. second call, half $X.XX business had of year. expected

the third recovery. $X.XX of we received this quarter, During about

throughout reminder, offset been a are proceeds the we've these year. logistics to elevated As intended incurring costs

remaining Our interruption quarter. business current expectation the is XXXX proceeds to the in fourth receive

payroll-related expenses. million was largely bonus expenses accruals. operating as total billion, Regarding largely adjusted SG&A, by XXXX came the quarter in to $X.X our to driven third the operating about expected up $XX expenses at increase half, primarily Similar compared when first to due

marketing also efforts. the increase customer resources to namely an in support added business, and and digital saw our to We support investments

third operations Our $X.XX rate tax the in from favorable favorability about of third year in expect changes full rate XX%. in XX.X% benefited tax and resulting foreign the quarter about tax a effective quarter. impact rate of a now We of tax of EPS

QX in negatively $X.XX, of were estimated year-over-year. third Our to adjusted EPS $X.XX, us impacted by quarter an an XXXX. share to third $X.XX per quarter flat compared earnings FX bringing

the in and free last flow, includes cash year-to-date, timing last resulted flow since billion of ended our proceeds completed to outstanding, was the paid year-to-date lease million end of quarter. $XX with we million of cash. we additional Consistent fiscal in the quarter repurchase additional cash equipment. payments and approximately with In an year. the The free versus we year We related million cadence, of in cash inventories flow ended lower with $XXX $X.XX XXX fourth our Regarding $XXX to and with increase $XXX of million commitment cash insurance property dividends return which repurchase plan shares in million to million. shareholders, to line quarter our share We $XXX of year-to-date the an QX.

XX of with consistent a on net company-operated XXXX. about up ended quarter third with And due store in-transit now negative closed expect inventory, our and inventory inventory the is expectations. timing were in foreign seven exchange. stores primarily with ended on to The of our With net to basis, we Regarding year-to-date acceleration compared expenditures increase X% in impact Year-to-date, of we basis $XXX and we've quarter quarter stores. a capital the XXXX. the X,XXX the closures of the closures, fiscal million,

with remainder range expect received impact $X.XX year, to we of for adjusted two. the insurance rate, effective the the $X.XX, we XXXX be our in Now, tax the to to the for in regard earnings excluding earnings $X.XX proceeds share per including of expected fiscal outlook lower of quarter now of that

spend a increase at SG&A in fourth on of Let same the about increase factors fourth year-over-year impacting a expect fourth we've SG&A minute SG&A the of be versus expectations. prior that are couple our are There We the now quarter. to quarter year-to-date. for me seen quarter pace

season. trends. But largely when digital, are now we the spending expect fact QX in we to move during holiday This production is we're out to the to costs year-to-date that important business increase some we also in fourth momentum due largely seeing and some the had quarter the marketing planning support into First, QX. incremental the to of compared spend,

improved we've part by As more are and better traffic believe pleased in our consisting driven marketing. been I with we noted, trends, which

during execute the positive will we've believe important us incremental we holiday this this seen the year, results season. better help Given investment marketing

you've the we investments exceed and, to of making believe internal we We going investments And, variable And by from Second, strategy. with these the goals therefore, today, the balanced the associated store-related in continue are quarter. fourth higher fund bonus future expect lastly, supporting actions driving our our we're across our company. we're to take we the customer heard continuing experience. higher improve accruals objective productivity costs growth the to expect as us in to

year, remain For the unchanged. metrics full all other guidance

against the laid The closing, of fourth goals growth very strategy. taking pleased the during compares against an in we by strengthened I'm we're in is and pleased with pleased were and September. quarter the quarter, actions solid one, the overall, our against we especially the we quarter. to out the the we're brands, enter some So, deliver also progress and the we're events product period environment. in given a improved third making are balanced the results operational discipline up in energized to I'm with initial productivity with plans important and challenging peak the tough

Jennifer Fall

prepared concludes up appreciate to questions. limiting person. We'll our the per now That remarks. open to questions call one We'd your

Operator

with Boss And you. question Thank Matthew comes first JPMorgan. our from

Matthew Robert Boss

Thanks.

So in to from to what margin? performance here, merchandise on by And just gross needed given leverage fourth the quarter? guess, this flat how comp opportunity the And, margin, the quarter? think the comprised merchandise concept occupancy about what then, I is margin was that finally, great best performance the

Teri L. List-Stoll

and be it was We've, you come said we you digit to to saw you remember that to what and leverage. low-single mid-single through Okay. questions ROD. able in all asked, to really historically, this the Matt. got quarter I'll we need start one with that's comp a try the mean leverage I'll I saw last the digit

as get quarter, were we what detail we as But significant would like much the outliers saw. there don't into in as you question, no On say I across can us look the to. we margin

will that's course, And expansion only we've we're focused of fourth the year what fourth of that into expected. quarter some as is The challenge, promotional. on we go fundamentals seeing helped about we seen the drive is quarter. this historically AUR So more we the the remain

very so, to see the across healthy in But that And the you're going the we are with absolute rates. margins brands. comfortable

Matthew Robert Boss

of Best Great. luck.

Operator

Fargo. Ike question comes with from next Boruchow our Wells And

Ike Boruchow

Teri, you. taking question. Hi. guess, Thanks my for is this question I for

many out sounds whatever and closures, it QX? this previously for by like moved XXX store took XX QX closures you place the year. year. in in stores up How is that of your laid net the for incorporated you've a plan them On

Teri L. List-Stoll

manage as an This about out said, out acceleration is very year list and the how closure XXX-store next next over feel net-net, will closures through I the through between we laid which acceleration, of that plans take have the finish will fourth split of we what how the timing is of will the you going answer to what now store But, that will planned is the year. quarter, an the accomplish we a us acceleration finalizing is and and year. year over is spread and for that We're then this confident it, there. those. we line we And,

Ike Boruchow

way there should place? is just be initiative net maybe store So closure your year a thinking next all footage another way, we takes the after about

Teri L. List-Stoll

Yes.

haven't to We that gotten publicly. level detail of

Arthur L. Peck

just would imagine, you and landlords, of that, there's can I as now. say a that dance Yes. right going this our delicate with on doing negotiation we're a fair is amount

to start share to right we're really And way appropriate as harden this. in But of we certainly a details. our this the now relevant and down, is what through we're dialogue midst eyeballs constructive the as working up we'll our so,

Ike Boruchow

Art. Got it. Thanks, That's helpful.

Operator

Brian question of Royal Canada. with our And from next Bank Tunick is

Brian Jay Tunick

just you on obviously, update division go question, curious talked maybe Old a before, they where give about sort relative on your what's Navy is, to given on you've year? thinking perspective Banana, but you've sort Gap was fabric year-over-year viewpoint fabric I and where that much. next Old on us on of the are us how platforming? sense maybe an Navy of and very the platforming us the you're should maybe investment where then, marketing marketing by of happening Can second spend. about give Thanks some And

Arthur L. Peck

Yes.

Sorry, then flushed go question and that back again? the out. I Can first you the second – it was was listening and on the one what to

Teri L. List-Stoll

Advertising.

Arthur L. Peck

Advertising.

Brian Jay Tunick

division. by advertising Yes,

Arthur L. Peck

on business; last and of as frequency a know returns, beat we we're to increasing and tell going are, traffic side back pin in I current other, we the to is one the you that mix. manifest dollar themselves multiple. I more customers. the themes our of print, line our can calculations We probably growth the forms away components, the level. important on that more what et want to the traction, ROAS on the variety good about sight, us and continuing very mix pivoting curve reactivating importantly But cetera. across don't the terms we then can is, focus business. had traditional much honest, ROAS And the of customers, excellent and I I'd go in advertising, industry towards which that look we of probably to the And, get are, to of digital from a we're most again, continue managed we most move a when is of can to seeing we've we're where at customers focused they heavily to want And don't It's a specifics those where into say just here. we see which that two entire to across far funnel accelerating to more is: or online is with put then, across implement and of at continuing be on measure we've and and brings spend. And all to businesses. filling down make how all biggest clear the side... strong the that gotten that change consistent a intelligent want the the spend new rate that's the focus the other we're spend

Teri L. List-Stoll

Fabric platforming.

Arthur L. Peck

faster smallest would I along. a associated their outcomes, vengeance. be I spread the whether with as out farthest say Athleta seeing is more Yes. in vessel to the just, if mean, really absolutely And put And the get that now gone responsive. and, our air fact look it And numbers again, rank as to platforming. I'm now. we or what Fabric to the is noted, I again, them, highly point business. it it's on giving we're oftentimes would I ability And, continue ways it continuing specific we're at to as again, business right ocean, with after I probably is, you they've much

how a category direct from outcomes sometimes with do outcomes, receive work but Navy then, still I'd probably order, excellent in is parts varies do the vendor-to-store some deliveries, put different DCs business. category. If it's our Athleta kind it we heads some associated to And that I'd we're faster, consistent on it seeing start And faster, by put fast speed. how the to because of Gap we've doing other business really thing, model. Old absolutely I to with get second business rank down we a but And has of follower do, the close seen it's Banana what being there behind, team super first,

Brian Jay Tunick

Thanks. And good luck for holiday.

Arthur L. Peck

Thanks.

Operator

comes And | our with question Siegel next Nomura from Instinet. Simeon

Simeon Avram Siegel

on congrats Thanks. guys. and nice afternoon, Good the results,

So at congrats on that positive comp Gap.

Global then, include the question, you when clarify, does right also the talk Just about just compare or recognizing is to that And QX? you sorry level the dumb that traffic, on way it to Gap into thoughts go-forward store think comps were lapping the from Thanks. the any about fire, for online?

Arthur L. Peck

the cetera, I I'm and going to looking is that that. QX, improvement, et business into seen now. really and I two under mean, call And I'm and going comments can of not see. call right covers weeks my to in we're to QX what for not Gap, to that going we've quarter-over-quarter is expectation I what on why we're I'm think noted But that's getting here continue really it. consistent look my improvement; and the we're I and see

much focused I'm one second Sorry. on... Then, was? the so

Teri L. List-Stoll

Traffic.

Arthur L. Peck

Traffic, week been a long yes. already. It's Traffic.

kind traffic. more online have We I'm but metrics talking it's the that's to don't just industry as looking at at there. same overall look when rates, really really of about So little looser our growth traffic, and physical they demand We traffic a stores. into apply there

comes And, I measures. really really matching traffic, and as industry Old beating Banana and the which And that's underlying on the got the the when of out AUR, then consistently, that around get we've pretty is we've formula top well. here conversion, basket. your consistently. of size on traffic traffic Gap say more Navy bandwagon here And now this of from numbers quarter So levers to And nice the formula standard again, inbox been that, industry traffic, in it's the see get nice less around around then moving. sales going

Teri L. List-Stoll

just for And to is that we Fishkill. compare you, the do Gap it on want adjusted I clarify comp gave

So The X%. year X% normalized normalized the a of see X% can so more the you negative negative progress. against last the is is positive

Simeon Avram Siegel

right. All Perfect.

or Okay. you impact quick a sales week one. Have then, XXrd the And EPS, either just to Teri, any – there? help

Teri L. List-Stoll

on the Yes. about year. We've said $X.XX it's

Simeon Avram Siegel

Best for you. holiday, of Thank luck Great. guys. Okay.

Teri L. List-Stoll

Thanks.

Operator

Ladies please questions limit to one and gentlemen, as participant. a your per reminder,

next Your the Morgan Kimberly from line Greenberger question of with Stanley. comes

Kimberly Conroy Greenberger

much. Great. in I'm Art, if same back put in there? talked then, sort a you so bone were more Thank about discussing of savings at you wondering term time you on that some little business. some meat savings the opportunities. opportunities SG&A you can SG&A just the see I medium-ish September, the And you think

areas about invest you talking You were that to other would like in.

net do there Thank So a you. as some will think And savings? could talk balance, on be well? that SG&A you maybe little about you

Arthur L. Peck

Yes.

a will. process moment, rather because I know but fully times and more others answer I bang At specifics. you it a question productivity we're basis. others bit heard more that. little the we So to detail, with I the success several I've should; in and this going episodic how back probably way cost less getting the you frustrate I'm approached the you have an with reduction big then, want different we little sticking on appreciate approaching than bit, of forms really many have we characterize And and in the many had that than and and the organization difference is And and often we would efficiency that

so, And different. is this

We structure, are there some then the the of are our the accelerating and of as I around and restructuring stores Banana taking, noted, headquarter organization. bits pieces

We the part we and going And become several to as been not much business. are to those highly-managed right taking I honestly, we're quite really this I ongoing, is initiative this that, September, for how said of our really of an actions approaching focused, productivity has in some as anticipate live be. do of But as also now. years as that culture it needs of culture

that investment I've in an we And with differentiate first building also the underlying space. it's direct that of pieces demand customer that's where out things as about the customer-facing side, we're out I seeing talked online There's retail would things invest capabilities we the But that and continuing investing that to And going talk investment it's we orders but is work productivity, in a our where would in continuing have come work of piece. as an a able as existing to to a by that's well. opportunities. and the are accelerating be in doing about centers. right do. there or still the and middle But distribution we're going well. an conversation well. as call before meeting and more we fulfill note leveraging bundling important are know that to DCs called the to those feel be our really experience. other Teri that in fulfillment are fact I opportunity to up together, to in-store that some you'll On whether acquisition our And we in out, to have say we're big now, that of be our in we when the If opportunity of through we'll we we're DCs the part capacity it. technology said, to I take continuing Like identify one-time already

Kimberly Conroy Greenberger

Art. you, Thank Great.

Operator

Oppenheimer. Andreeva And our with next question comes from Anna

Anna Andreeva

the seeing and division. much. right the most on product what on excited maybe gross a think questions the XQ to pretty you're is Couple just about on implied Good about Art, in the the guide, Maybe Thanks content XQ? rate promotional And stance you business. view growth congrats about what's big so for Thanks Gap the into in improvements that improvement SG&A so do now talk and your much. acceleration. margin. Great. follow-up of guys How what holiday? afternoon, the talk the driving

Arthur L. Peck

Okay.

heard I think I it.

the in faint very second got one. You

off-track, stop me I'm me. and just if correct So

there platform the have end fit, the well, foremost, Movement we is a It's GapBody highlights innovation. plus Super for of better it's innovation in or it. whole Active of product gross the of assortment, on from men high-rate denim registering that to in into important off, expressed. Broadway most with Banana which years feel Excellent trend On see denim couple and pretty Chino of being the really consistently with that that there Banana it was about opened of space. months been the to across it's the what to well. we a the in much on numbers an that we've period-over-period our of formula excited pant. pay actually as Where now out But innovation, willing and solid his our pretty this, also starting associated and I'd doing focus traffic, to pull great-looking, et with comfort, with of the being business excellent product, chino seeing is to opportunity a If deliver classic first one product, appropriate diversified we're all lever assortment it's a giant appropriate pay several because pay the talking on lot that those that sits those beginning the performance, store very cetera, go but that concept back promotion, bottoms women's, a and bought, product, a seeing But really for a right responding very margin, see continuing and first a for winning I've great-fitting, across couple the, put stretch, could place customers on been and Again, water say season price product and platform. going that that's traction it the And that work solid of would its ago, responding And then is that things. obviously And then delivers, real And I'd again, to been an worried. do is traction important it. a space is the decent about business one the things. businesses. also of that's seeing now, get off traction what the properly blowout that's am the that starting couple And acceptance, of all product back good properly the Athleta for On is where where pulled, are we resistance experience, we've that now product is with consistency Gap, progress in And, we willing always winner with able successfully good that get that And in If quality traction we're develop all bought. work performance in to doing and I at up are that composite we're the in the and of about lifestyle in most day. comes here in trend, be dig lever we our the that And which putting yields everything as over business that are is management, business. I'd an on on that. wallet in seeing it inside years Rapid yes, elements are you is, performance, our I to to which in introduced he's stain now. traction he's we're and season. whether And stores to a so has and outcomes into some is delivering better all to having and the just to much of it's example you. out. call customer And right the frankly, business there's on excellent the it. Love GapBody. the in product units delivered, I in of have improvement. very If I excited Republic adjacent on lifestyle what's on, Gap and in Soho of one in space about? the we're responsive, across

Anna Andreeva

Very helpful. luck. of Best Okay.

Operator

And Yruma KeyBanc Ed Capital our next from question comes with Markets.

Edward J. Yruma

drive idea the guess, you've is a Good Chino. call. banner how lifestyle you the Art, times question. Hi. I we lifestyle? think Thanks Thank opportunity performance think you. you amount know taking the Movement can for opportunity the you delineated performance this about highlighted the where should And evening. how of most the I and on business? for big of couple But, Rapid conference

Arthur L. Peck

the into that that we tell innovation innovation, ready-to-wear Active continue you as would comfort, we delivers customer technical continue performance see that respond I What fabrications. when care to features, bring bring characteristics, we is to

dry encouraged might relevant this not casual have a in to it you woman, is save of benefit being suiting to that we've convenience a there's take call very to our road that respond. stretch it's short having lot a coming that cleaner. brands Italian a and so, here, high because man for it to as able with do than wool down a see men's it's or factor a men's rather big and launder it, just but And beach is is we're super interesting and happen of going across the the yourself. continued And And as meaningful to washable that's I'm in how a a all in money in high customer to actually associated as

kind it's with the We talk and very drawing to we And ready-to-wear I maybe attractive, the as on delivers of really social not the best far of been just this and to And are I it are categories, it weird, it product at attributes. the unlock product frankly, There mean in a be space. obvious, really a see to kind small don't work there these product to the where reinvention that's not in but see think about performance space, of it's occasion-appropriate, Active the lot. of and respects customer encouraging as brands it's some So doing occasion, playing silhouettes in this. and be responding. expressing of and fabrications can be we very performance magic be how where the the the performance also really so out a level, important responding customer's that traditional one state some crunchy, some lifestyle, the techy, be not but be but see or few, scale sort around that the of you actually, happening, of it's wear traditional place it. we a are ready-to-wear a traditional is mass that where

Edward J. Yruma

Thanks much. so

Operator

question Mallela our And Barclays. from is next Chethan with

Chethan Bhaskaran Mallela

Good Hi. evening.

key detail very provided of I margin the headwind XXXX in that reverse by FX the that had the more activity could has you the just time? But can as Gap other are about to and banner closure profitability. digit when also on low-single help can a future brand? So for banner, sustainable brand specific disclosed follow-up, as operating see some a that unlocks you you recognized planned that you talk profile been Gap in September then, believe store that margin And and over a what

Arthur L. Peck

improvement of my the I'm knee expectations recently. in mean, my team how back will brand indexing their you, of I tell performed in the Yes. relatively and terms off

Some actually of it I the running my under brand. was time when

significantly and have than mean the we're secular most that's mean. to reason And those a we industry things important interpret whatever the better kinds seeing is what that can the And trend you just seen to that be number, acknowledge me, we recently. performance those and all revealing tell of for I can clear, surrounding is so, that they without the

As this doing is as money lost and, work therefore, view that I now. have money we're I've recoverable. we said right the before, that's And that

I both again, and, indexing don't right should pressure into from expectations, definitely that and of we've on put at it want set kind come something cetera. But all were has so, it's And delineated that. to FX and it's the et business the above. respect it say performance. Gap, on If looking Clearly, then recent because of go with where expectations back I'll to Gap Banana now I

are closures down things and continuing which doing, store by, on. yields structure all the to aggressively get we're to And cost get make of working some the that But better, that well. our have promotional frankly, inside fundamentally those will manage up, help product We starts our to intensity to it as business. the we're

Chethan Bhaskaran Mallela

Thanks much. so Perfect.

Operator

is question next Drucker Mann our from Goldman Sachs. And with Lindsay

Lindsay Drucker Mann

Could And part you A, about your Old what Navy thinking quick that or you're an remarks little in Teri. a Thanks. prepared just flowing B, a you it that's bit some $X.XX about: one all other of confirm remodel. for goods you of housekeeping The and, from Fishkill on detail: rolling cost more Good give how Thanks. quarter afternoon. Art, then, the through the P&L? can is recovery, out? this mentioned

Arthur L. Peck

Yes.

look that reason Old the I'm And remodel. gut the locations stores they signs register, still still customers call very old and cetera. calling circus Navy's. a them age the et but in stores a remodel. about lot talk merit out full you are in, their the with a that for Navy supermarket like us in type are And maybe the cash me they're booth typically have and the shopping original would fleet a Let Old for We this around recognize while, them And don't that sets productive of is we been fitment. have that

the fixtures, and remodel the redo relatively done Oftentimes, with typically gone lighting, So we've we've and perhaps relatively starting the the in things, simple cash-wrap. paint. low-cost we'll paint the

Sometimes store it's we'll the because perhaps large. down even shrink too

first some we're in with environment foremost, we lift. a the oftentimes those I so, been line the up that and, and feel at rolling and respectful. top make the now and lift bigger. little as product And the deciding on pulled fresher we'll go tighten we've And because that wall displayed say build this a And bit an to the back it's all it more more false and customer before the to is response we seeing will is store said, new they bottom trigger intimate. And out line found really tests

to we so like clean really that's the it. what us. encouraging in economics deserve and a And of deserves And encouraging see bunch with product it's doing. right it so, and and the our it's And those customers is fresh our system that to very stage, now feel we're come a exceptional got we've that

Teri L. List-Stoll

Yeah.

the offsets Lindsay, $X.XX in It is matter, of logistics sold. housekeeping the goods cost On the cost.

Lindsay Drucker Mann

Thank and lift. system the how done any of many bottom and of or have you a in of line how plan you. that, the you a you've mentioned order these line magnitude, quantify already and Can top seeing you just you of magnitude remodels to top of in kind bunch do of remodels what order maybe lift Art, you're many XXXX?

Arthur L. Peck

don't expense, is numbers a And have of CapEx returns right relatively quite can the in you I the done now. which I good. than is XXXX. modest, me What that the say, in or we've terms the tell Well, I is more handful, on of would front honestly

us that. allows put right the to But down. I'm this number I sorry now, Lindsay. about it know So exact don't

Teri L. List-Stoll

Yes.

but of Gap we'll of a the XXX approaches XXXX, Over and similar Old course Banana. Navy, remodels at north couple have completed, of largely

Lindsay Drucker Mann

you so Thank much. Great.

Arthur L. Peck

Yes.

Operator

question And Group. from Telsey Telsey our next comes Advisory Dana with

Dana Lauren Telsey

afternoon, Good everyone.

impressive, on be into Gap in about with Navy the to it is learnings what think what division Just needs does how it from to their speed, to for performance high-teens happen? it brands? inventory incorporated you gross perhaps As happen does comps improve a terms of mean in margin? When denim? in faster? thing, second the you. quickly different very Is get denim Thank Navy, the Old in which can different and And pace Old the the

Arthur L. Peck

delivered more about you, quite rapidly. ask I Dana, question speed nobody There's than you to and expected would've that

congratulations. So

Dana Lauren Telsey

you. Thank you. Thank

Arthur L. Peck

The probably know makes category, because a I by frustrate and there category one by here responses my answer is confuse, any brand simply because This averages to is that continue brand. this on sense. isn't it macro

into places into can vendors then the design in fast vessel and DCs to store. our logistics whether on out are process and port our getting not and constrained associated our and cutting it frankly, how DCs on by we it, of a it and into our rail As now our truck and be, but we or, or by on it's selling, with getting

to it And, call, takes make of look XD from of minutes on a a a but some opportunity denim, of on we at it releasing to to obviously having why ongoing standpoint actually a an minutes, front our This in to we're lot I a the see nine in said a we're again, whatever, I'm to predicting categories, going longer starting the would takes some highlight continue printing is not stores of chip not it's here. endpoint. There's I denim ways these So that week, on And an the pair today in nine jeans. of continued in off these journey. things. to day, PO be customer.

brands offices rationalized across washed the now, differently, company. destruction, all now to we and can base sharing our the we sourcing are before, organization a quite competing denim have better leveraging as focus As a to of share leveraging, to ever than today versus treatment, differently, et offices starting some vendors We've of are a key around category-based world. In across key but company cloths knits variety significantly I've having what are I've honestly. treated mentioned the we seen, that this laser be cetera. cases or some converted

denim, happened et those reason we've saw leveraging in we're cetera. opportunity reasons. practices know is which responsive. are XX% continuing share. And been us I a a comp. doing. and for also there's of again, because happened lot But for on part good comp as In a have Old so, and then, cetera, big they XX% we And Gap We're we're obviously, sharing Gap, Gap back numbers. of et got fit, margin nice of well, best women's quality, they front forth. to good the increasingly on also gross again, And really of and in And Navy trend, that terms And,

Dana Lauren Telsey

Thank you.

Operator

Mark last our And Robert come with Baird question Company. Altschwager W. will from &

Mark R. Altschwager

in Good Great. Thanks afternoon. me squeezing for here.

the of level stores? of hoping performance or a the little division non-outlet more lines to mall I the growth versus on on your on specifically granularity to you of So versus willing the any share? focusing bit off-mall outlet you're And could speak channel, was whatever takeaways by

Teri L. List-Stoll

Yes. of would you willing a share is probably granularity The level like. than we're lot to less

Arthur L. Peck

from would be take you willing us. to Than

Teri L. List-Stoll

down non-mall don't We performance. kinds to get mall, of

more and are have struggling we of some specialty more. there's of our the no in some stores those properties, mall-based think question of I

probably in any as a we don't mall know go that. those more I I'd are the So concentrated further base. But those, rationalize little than

Arthur L. Peck

Yes.

Mark R. Altschwager

holiday. heading wondered maybe the Great. Thanks. you. in for and weather we're apparel and from just maybe decent November. close the Art, talk to I And traffic tougher just about lapping if a broader you consumers at can into how helping margin, you're some seems election But it environment out. mean, softball to viewing shape, the last

but telling You've the you things ball your Gap is spoken the wondering industry? crystal a on, about for that is just lot focused what Thanks. broader controllable

Arthur L. Peck

of in believe happening on is, the industry, those we've I all, all to and product broader speeding a of innovating, we first happening that have to place I and all of we that mean, now. been doing, there advantages that are back pipeline, right things our win consolidation in the that the work the and there poised delivering taking continue of is us, are performance, all that up front

quarter gain regardless And this drive everybody view got and the that so, business now. frankly, that I of of leaders an is down And all sort making focused share. we important. expectation, into carry my heads consumer on market sentiment think, opportunity of my that's, businesses is And of to QX. we've right and momentum almost all growth I really this happen as My

Mark R. Altschwager

Great. holiday. luck Best over of

Teri L. List-Stoll

Thank you.

Operator

for today's you concludes Thank your that call. participation. And

You may now disconnect.

The Gap, Inc. (GAP) 16 Nov 172017 Q3 Earnings call transcript