The Gap, Inc. (NYSE:GPS) Q3 2019 Earnings Conference Call - Final Transcript

Nov 21, 2019 • 05:00 pm ET

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The Gap, Inc. (NYSE:GPS) Q3 2019 Earnings Conference Call - Final Transcript

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Executive
Robert J. Fisher

will be responsible for brand leadership. Teri will add over operational oversight to her role and our Global General Counsel, Julie Gruber, will consolidate administrative oversight.

We are fortunate to have a strong bench of talented leaders supporting me in driving operational excellence and greater efficiency that will help position us for improved profitability. To that end, the Board and I continue to believe in the strategic rationale of the separation and the benefits it is expected to provide.

First, the focus provided by separation will enable both Gap Inc. and Old Navy to better serve their two distinct customer sets, each with an operating model tailored to their respective business needs. Old Navy is competing with companies that have a singular focus on winning in the value space. We need Sonia and her team to have that same focus.

Second, the separation will be a catalyst to drive improved cost and efficiency as we rebuild the organizational structure and operating models for both companies. Both companies will benefit from this, but new Gap Inc. in particular, we have renewed urgency and catalyst to reinvent how it operates.

Third, and perhaps most importantly, the separation will better empower each company to fully embark upon its unique path for growth and in the case of our matured big brands path towards enhanced profitability. This empowerment will come with the increased accountability of a stand-alone public company and the employees will benefit from the direct alignment of their performance to the value creation it creates.

As we move forward with the work to prepare for separation, we remain confident in the value creation opportunities it presents, inclusive of our current view of the business and the expected cost of the transaction. We plan to take the necessary time needed to make sure that both companies are positioned for success and we are committed to providing transparency at every step of the way.

Lastly, I'm sure that you will have several questions around our search for a permanent CEO. So I will quickly address them now. It has been only two weeks since our announcement, so I will not be providing any specific search criteria updates today. I will share that we plan to move with urgency but also thoughtfully, considering both internal and external candidates to ensure that we find the most qualified person for this role. As the Board evaluates potential successors, our focus will be on strong leadership candidates with operational excellence that can lead a creative organization with greater efficiency, speed and profitability.

With that, I'd like to turn it over to Teri.

Executive
Teri List-Stoll

Thanks, Bob. As we shared few weeks ago, Q3 was a challenging quarter. The traffic trends remained soft across our brands, along with continued product acceptance challenges, particularly at Old Navy. I'll start with an overview of performance by brand before getting into the specifics of the quarter. Starting with Old Navy, while we're not pleased with our performance, we entered the quarter knowing we would