The Gap, Inc. (GAP) Earnings Call Transcript & Summary

Greetings, and thank you for joining our 2021 annual meeting of shareholders. I'm Bob Martin, Executive Chairman of the Board, and I'm pleased to welcome you, our shareholders, today. Also joining with us are my fellow directors who I'm honored to introduce to you now. And I believe we've added a graphic for you to follow along. First is Bill Fisher; followed by Bob Fisher, who is also the Chair of our Governance and Sustainability Committee; John Fisher; Tracy Gardner, Chair of the Compensation and Management Development Committee; Isabella Goren, Chair of Audit and our Finance Committee; Amy Miles; Jorge Montoya; Chris O'Neill; Mayo Shattuck; Elizabeth Smith; and Salaam Coleman Smith, who joined our Board this past March, and we're greatly looking forward to her contributions; and then, of course, our Chief Executive Officer, Sonia Syngal. If you'd allow me, I'd like to also recognize our Honorary Lifetime Director, Doris Fisher, whose voice of guidance around our founding principles for this company never grows faint and will forever inspire us. And a special thank you to you, Doris. This Board brings a variety of experiences and backgrounds, including expertise, certainly from retail, but also across section of other industries. This group of directors also represents a vibrant mix of longer tenure as well as newer directors who bring new and fresh perspectives relevant in these ever-changing times. Altogether, their diverse insights, viewpoints and knowledge fuel the effectiveness of our oversight of this great company. Before I hand the meeting over in a few minutes to Julie Gruber, our Chief Legal and Compliance Officer and Corporate Secretary, I would like to express some appropriate appreciation, first, to the directors I just mentioned for their strong contributions over this past challenging year to both Gap Inc., its stakeholders and our shareholders. And I know I speak with the voice of the full Board when I extend the Board's appreciation to the entire Gap Inc. team, led by Sonia Syngal. While we all recognize 2020 was most certainly a challenging year, Sonia and her leadership team remained united in their focus on critical priorities, worked collaboratively to create opportunity in the face of the adversity and again, quickly pivoted the company to offense in order to emerge in a place of strength that we find ourselves today. Last October, management declared a go-forward growth strategy that we call Power Plan 2023, and the team has continued to execute on all cylinders, harnessing the power of our billion-dollar, purpose-led lifestyle brands as well as the power of the unique cultural legacy upon which this company was founded. We think they have done, and continue to do, a remarkable job. Sonia will share more on this with you today, but allow me to add how proud I am of the work underway to scale the power of this company's values, which we know set us apart. Having worked closely with this management team over the past year, all of us on the Board continue to be impressed by their decisive action, deep empathy for the customer and ability to inspire a culture focused on performance. Together, they are clearly creating value for customers, employees, and importantly, you, our shareholders, as they collectively drive a transformation for Gap Inc. On behalf of the Board, we also want to thank our dedicated, innovative and certainly resilient Gap Inc. teams and partners around the world. Let me close now. And as I do, I hope that you will accept our sincere thank you to you, our shareholders, for your continued commitment to Gap and for choosing to be with us today. Again, we are proud of our progress, confident in our path forward and excited for the chapter that's now in front of us. And now I'm pleased to turn it over to Julie. Julie?

Thank you, Bobby, for calling the annual meeting of shareholders of The Gap, Inc. to order. Good morning, and welcome, everyone. Today's meeting will be recorded and available on gapinc.com. The rules of this meeting can be found at the bottom of the virtual meeting page. We're holding this meeting pursuant to the notice mailed to all shareholders of record as of March 15, 2021. As Bobby mentioned, after the formal portion of the meeting, we will hear from Sonia, and then we'll answer questions from our shareholders. Please note that there's a 2-minute limit for each person addressing the meeting. [Operator Instructions] Derek Standifer of Deloitte & Touche LLP, our independent registered public accounting firm, is also available to respond to shareholder questions as appropriate. Please note that only shareholders may ask questions at this meeting. We have received an affidavit of mailing from Broadridge Financial Solutions, establishing that notice of this annual meeting of shareholders of Gap Inc. has been duly given as required and outlined in the company's amended and restated bylaws. The affidavit will be filed with the minutes of this meeting. Trish Hodson, on behalf of Broadridge Financial Solutions, is with us today and acting as the inspector of elections for this meeting. Trish informs me the count of the shares represented by proxy shows that we have a quorum to conduct business at this meeting. We will now proceed with the 5 items of business before this meeting. The first proposal is the election as directors of the 13 director nominees named in the proxy statement for this meeting. The second proposal is the ratification of the selection of Deloitte & Touche LLP as the company's independent registered public accounting firm for the fiscal year ending January 29, 2022. The third proposal is an advisory vote to approve the overall compensation of the company's named executive officers. The fourth proposal is the approval of the amendment and restatement of The Gap, Inc. Employee Stock Purchase Plan. The fifth proposal is the approval of the amendment and restatement of The Gap, Inc. 2016 Long-Term Incentive Plan. That was the final proposal for today's meeting. The polls for the 5 proposals before the meeting are now open. [Voting]

The polls for each proposal before the meeting are now closed, and the inspector of election has recorded the results of the voting. The results are as follows: the 13 nominees for director named in the proxy statement for this meeting have been elected; the selection of Deloitte & Touche LLP as the company's independent registered public accounting firm for the fiscal year ending January 29, 2022, has been ratified; the overall compensation of the company's named executive officers has been approved on an advisory basis. The amendment and restatement of The Gap, Inc. Employee Stock Purchase Plan has been approved; the amendment and restatement of The Gap, Inc. 2016 Long-Term Incentive Plan has been approved. The final report of the inspector of elections will be filed with the minutes of the meeting, and the vote results will be filed with the SEC on a Form 8-K. This concludes the formal portion of the meeting. The annual shareholders' meeting is now adjourned. In a few moments, we will hear from Sonia. Before I hand the meeting over to Sonia, I want to address some administrative matters. The information shared today may contain forward-looking statements. There are important factors that could cause our actual results to differ from those forward-looking statements. Information regarding factors that could cause results to differ can be found in the company's annual report on Form 10-K for the fiscal year ending January 30, 2021, which is available on gapinc.com. As a reminder, questions will be answered at the end of Sonia's presentation. I would now like to welcome Sonia Syngal, President and CEO of Gap Inc.

Thank you, Julie and Bobby, and thank you to our shareholders for joining us today. When we gathered at last year's meeting, I was 2 months into my role, and we had just begun to reopen our North America fleet of stores and bring back our furloughed employees. I shared with you then how we were managing through the pandemic and my beliefs in Gap Inc.'s future. Today, a year later, we have leveraged the crisis not only as an opportunity to survive but to work and think differently. We emerged with the clarity and conviction of what our path forward needed to look like. As Bobby mentioned in his remarks, last year, we crystallized a strategy that leads with our competitive strength, addresses areas where we have previously lacked focus and execution and enabled us to build towards growth. Power Plan 2023 is our 3-year vision to: grow purpose-led, billion-dollar lifestyle brand that shape people's way of life; deliver consistent growth through omni dominance in North America; and partner to extend our reach to new customers. By unlocking the performance and growth mindset, we will capitalize on our unmatched customer reach and addressable market, we will leverage our omni capabilities and scaled operations, and we will extend our engineered approach to cost and growth. Through the power of our brands, our portfolio and our platform, we are unlocking our unique superpowers in a way that only we can, differentiating Gap Inc. in the marketplace. As the largest clothing company in America with 183 million known customers globally and over half of them loyalists, our brands create for all ages, all bodies, all socioeconomic brackets, all moments and all use occasions. And with over 50 years of experience in physical retail and over 20 years of digital retail, our omni advantage at our scale is in tune with how the consumer is shopping today. In an unprecedented year, we moved to offense with purpose-led marketing, strength in relevant product categories and a digitally dominant approach. We closed fiscal year 2020 having gained meaningful market share quarter-over-quarter, grew our online business to $6 billion, and we expanded our reach. Our market share performance was a strong indicator that our actions are taking hold. And while our business is faced and will always face macro factors that present us with headwinds, we now have a strategic playbook to navigate changes ahead. And this year, we are focused on our stated goal of returning to profitable growth. Last year, we also articulated our purpose, our North Star, Inclusive, By Design. From day 1, we have been guided by the belief that our business can and should be a force for good. Our brands stand for something, and each has a distinct point of view, rooted in value, relevant products and unbeatable experiences that inspire our customers. And the current landscape that our customers have continually reinforced, now more than ever, is that they want to wear their value. The brand name on their clothing label matters. It is deeply personal. And as we build to the future, we are shaping a bold performance culture tied to our core values to execute against our strategic plan. For us, success isn't just delivering results, it's how we deliver. From our tools, resources and leadership model, we're establishing the right practices that are relevant for today's business and designed to drive accountability and performance across all levels in the organization, from hiring, development, managing performance and allocating rewards. Our team of more than 100,000 strong serve as the fuel for our forward momentum, and I and my leadership team have deep responsibility to unleash the potential that has long been trapped inside this great company. Imagine the growth we will achieve as a collective when we align to a culture of performance guiding the way. We are working harder than ever to make our business more sustainable by setting bold goals, designing new programs and partnering with others to change our industry for the better. Along with our employees, we are committed to fostering a culture of belonging inside Gap Inc. and beyond our walls because our journey towards full equality and inclusivity is never quite complete. Our path to becoming the most inclusive company in the world -- we created an action plan focused on 3 areas: employee belonging, customer belonging and community belonging. To deliver these 2025 commitments, we have mobilized teams against critical programs that enable us to create products and experiences for all, with all. In June, we will release our first year progress report on this work. We also see sustainability work through an inclusion lens. Doing what's right for our employees, communities and our planet is part of our DNA. And through our size and network of partners, we can achieve impact at scale. Every day, we source and make products in a way that helps protect and restore our environment and the natural resources that we all rely on. Yet we know that social and environmental impact do not fall equally. Through our business practices and the inflows of our brands, we are unleashing the power in inclusion to change lives and the world for the better today and for future generations. Building on our legacy of empowerment programs for women and young people entering the job court, elevating those who make our business possible, we are focused on enabling equality and access to opportunity. Whether it's providing critical career skills through mentoring and on-the-job training in our stores or setting aggressive climate targets for our operations and supply chain or ensuring that the communities connected to our manufacturing footprint have access to clean water now and for generations to come, our signature programs and long-standing partnerships around the world are creating transformative change inside and outside our company. In our 52 years of doing more than selling clothes, responsible business practices have been embedded in our company operations, just as our co-founders, Doris and Don Fisher, envisioned. While this work is not new for us, we're now embarking on a journey to better engage our investor community on our accomplishments and path forward. As we scale, we're capturing these efforts through an environmental, social and governance work, an ESG framework. We know this tool is becoming increasingly important to our investors, and we see it as a way to communicate data-driven results of our programs and practices. As I look ahead, I want to thank our shareholders, our customers, our Board and the management team who lead our employees around the world for their support and loyalty to this great company. As we write the next chapter for Gap Inc., we will work together to execute against our strategy with clarity of direction, infusing creative soul into every product and experience and applying curiosity and determination to seize the tremendous opportunity ahead. With that, I'd like to hand it back to Julie.

Thank you, Sonia. Now we will open the meeting up to questions. Are there any questions? Seeing there are no questions, on behalf of management and the Board, thank you for coming today. The meeting has now concluded.

Thank you for joining us. This meeting has concluded.