00:00I want to just start with what went wrong with respect to the disappointing earnings and
00:05specifically how hard it is to get certain fashion calls right. Yeah, Lisa, it's a great
00:10question, but I want to zoom out. First of all, we actually delivered progress this quarter and
00:16we delivered it against several key metrics. Important to recognize this is our ninth
00:20consecutive quarter of positive comparable sales. Three out of our four brands are growing.
00:26Comps were up 2% and that's building on 2% comp growth from last year. We outperformed our gross
00:33margin outlook by 30 basis points. We won across all income cohorts, gained share as our value
00:39proposition across the board continues to resonate. And we returned $450 million in cash to shareholders
00:46through dividends and share repurchases. As you call out, performance at the brand level was varied.
00:53First, standout quarter at Gap Brand up double digit, 10% on top of 5% last year. Old Navy
01:02delivered growth up 1% comp on top of last year's 3% growth. Now that also marks the brand's
01:10sixth
01:10consecutive quarter of positive comps. We've been pursuing categories like denim, active, kids and
01:17baby. All which posted growth versus last year. And they continue to build relevance with our customers.
01:23Seasonal categories have gotten off to a weaker start in particular dresses where we just did not
01:29have the right fashion and value equation. We actually over invested some sales and inventory
01:35and didn't necessarily correctly anticipate what ended up to be a decline in the dress market
01:41where our dress assortment actually did resonate was in occasion dressing, which has more specific
01:48end use like weddings and Easter. We've seen a change in customer acceptance of dresses during key
01:54peak moments. So summer stock up instead shifting more to versatile categories and styles that can be
02:00worn. Let's call it year round. As we get, as we get through the seasonal dynamic, we're looking forward
02:07obviously to the back half and I'm very confident in our ability to drive improvement.
02:11You know, it's really notable, Richard, that both you and American Eagle came out, reported certain
02:16pockets of disappointment amid otherwise robust performance and talked about how it wasn't because
02:21the consumer demand wasn't there. It was because of specific missteps. Is there something about the
02:26environment right now that makes it harder to get these things right? Because two different companies
02:30called out something similar in terms of style issues, fashion issues. Is it a moment or is it just the
02:36fashion industry? Look, I probably think it's both, but both. I mean, the fashion industry is a dynamic
02:42industry. To your point, we are seeing consistency and strength in consumer behavior. But ultimately,
02:49you know, this is a dialogue with consumers that you have to follow and ultimately drive. And in this
02:54particular case, again, when you back up and you look at our whole portfolio, gain share, consistency in
03:00growth, nine consecutive quarters, three out of four brands growing, growth across all income
03:06cohorts, very specific call out on a category that, by the way, as we enter the second half is very
03:13small. And so, again, you know, this was to some extent, you know, the dynamic business that we're in
03:21softness in the women's dress business. But ultimately, we believe as a portfolio, we've got,
03:26you know, great room and a great back half ahead of us. Why do you think then that investors don't
03:31seem to
03:32be feeling that this morning? You see shares lower by more than 16 percent year to date.
03:37Shares are also lower by a similar amount. Why aren't they reflecting the strength that you're
03:42talking about? Look, we feel very confident in where we're at and where we're going. We see great
03:48strength at the Gap brand, which, again, is it is incredible double digit growth. We've got now
03:54continued growth at Banana Republic. We just reported our fourth consecutive quarter. Old Navy did deliver one
04:01percent comp. And while we expect sales to deliver flat to one percent now, low single digits in the
04:09Q2 and then moderated growth in the second half, with the seasonal categories off to a weaker start
04:16in particular dresses, we are obviously on balance, taking a more moderated view of the total year.
04:24We are also holding our operating margin outlook. Our gross margin outlook is unchanged at flat to up
04:31slightly. We're continuing to maintain cost disciplines with SG&A as a rate to sales that's
04:36flat. And despite the lower sales outlook, which, by the way, still represents growth, we're raising
04:42our earnings outlook from two dollars and thirty cents to two dollars and forty cents, which reflects
04:47eleven percent growth year over year at the midpoint. And while this is our outlook currently on the top
04:54line, we aspire to outperform it as the brands strive for continuous improvement. This is a long game.
04:59The company's in a healthy space and we're excited about what we have ahead. Richard, I am curious how
05:04much upside there is potentially if you do get some of those those tariff rebates that a lot of people
05:10were talking about. Are you expecting that to potentially lead to an upside surprise?
05:16You know, we are you know, we're an importer of record, so we qualify for a refund. That said, we
05:23use the
05:23reconciliation method, which has currently been excluded from phase one. We've been encouraged by
05:29the progress that has been made for phase one applicants in our industry. However, without being
05:35included in phase one, the situation does remain fluid as to when and what amount of refund will
05:41ultimately be realized. Therefore, we're not providing a quantification at this point. We haven't assumed any
05:49benefit in our outlook. But of course, you know, we anticipate that we'll share more as things become
05:54more tangible. So, Richard, just before I let you go, the takeaway here is that casual dresses for the
06:01summer, not really in anymore. Is that sort of not what's going on that said we're going to be in
06:05jeans?
06:06I think we overweighted our expectation of the dress category. Dresses are still an important category.
06:13People are still wearing dresses. What we do see is it's just more occasion based, whereas we drove
06:19more of that everyday dressing in mind. And we did see a shift. And so dresses are still important.
06:26We've got this. We're doing our best to move through the seasonal product. And again, as we move into the
06:32back half and the seasonal seasonal products are behind us, we think we've got great programs in place
06:37to drive growth.
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