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

Hello, and welcome to the DbAccess Global Consumer Conference. I am Paul Trussell, the U.S. retail analyst, and I'm very pleased to be hosting Gap's management team for a fireside chat today. We have with our CEO, Sonia Syngal, as well as CFO, Katrina O'Connell. Sonia and Katrina turned into a -- started their positions in March of 2020, a very unique time to start your current roles, quite the timing. Sonia previously led Old Navy, taking substantial market share during her tenure and also served in global supply chain and international roles. Katrina has also been CFO, like I said -- like I mentioned, since March of 2020, but has 25 years' experience overall at Gap Inc., including Old Navy CFO and Head of Strategy and Innovation. It's a pleasure to welcome you both to this virtual conference. Let's start off about what's been going on this past year, which is certainly quite a bit. Sonia, I'm going to turn it over to you to maybe kick off for some introductory comments.

Great. Thank you, Paul. Hi, everybody. We're pleased to be here today and talk about this incredible company, Gap Inc. It was founded in 1969, and the 52-year-old company was originated through Don and Doris Fisher, a partnership based on equality. They each put in $21,000 of their respective money to found the company. And here we stand today now as the leading apparel fashion business in America at roughly $17 billion of sales prior to COVID. And we cover through our reach about 80% of the market. And so we have the 4 iconic brands: Gap, which was the founding brand; Banana Republic, which originated as the up-cycle brand in the '70s; Old Navy, which was founded as a brand that was intended to provide democracy of style to all families and is now approaching $10 billion in sales; and our most recent and fastest-growing brand, Athleta, which is targeted at the athletic market in the active wear market, and it's a brand that is for women by women. So these 4 iconic American brands are such an honor for Katrina and I to lead. And as Paul mentioned, she now has stepped into the role, I think 2 days before COVID hit in the U.S. So it was quite a start. But in that moment, we had a lot of clarity, having both in insiders, having grown portions of the business over our tenure in a variety of roles, you were able to hit the ground running. And as such, articulated our strategy and announced it to investors a few months later, and we call this the Power Plan 2023. And it's a very simple strategy. It's [ 7 works. ] We grow purpose-led billion-dollar lifestyle brands. And these are all iconic American brands and enabling this North Star is our incredible platform, which is a platform comprised of the technology stack and scaled operations. And then the power of our portfolio, which is these 4 brands that range from a $12 AUR for the Old Navy average unit retail price growth maybe to $20 for Gap, $35 for Banana Republic and north of $50 for Athleta. Let us cover the entire spectrum of apparel. Our long-term financial targets are to deliver low to mid-single-digit annual sales growth with a 10% plus EBIT margin. And we have an operating cash flow of about 10%. And we're very pleased to have just come off of our Q1 results and also our 2021 outlook, which we were able to raise. We raised our outlook for sales, for operating margins, strong cash flow and returning cash to shareholders through dividends. So with that, hopefully, that gives you a brief view into this incredible company. I'm happy to answer any questions you might have, Paul.

Great. And in terms of today's format for the audience, I do have a list of questions that I will be looking to get through, but I do encourage you and invite you to use the chat and to input any questions and answers. We will certainly take some time to go to the audience questions. To start off, what are some of the biggest changes that have been made at the company over the past year? And what should investors know about your top priorities going forward? There's already been quite a number of changes. What should we be looking forward to?

Look, we focused on 5 main priorities. First being our new strategy, our Power Plan, which is the power of our brand, the power of our platform and the power of our portfolio. The second priority was the new culture. We aimed to establish a performance culture, and we did a lot of work around that. We've set much higher expectations for ourselves and for the organization. The third are key management additions. We brought in a new set of technology, a new set of real estate, a new set of growth and a new set of Banana Republic, all come from leaders that have helped us accelerate. And I have 3 criteria for any new leaders and any existing leaders. The first is a proven track record. The second was a leader that was team first for [indiscernible]. And then the third was wanting to create enduring value. So management was the third. The fourth is playing offer. We are planning to win and to grow and to grow top and bottom line as opposed to be a flat business garnering bottom line. And then the fifth is dealing with the hard work that was necessary to set this company up for the next chapter. So the restructuring order, whether it was the real estate or the review of some of our international markets, these are a couple of examples of doing the hard work that was necessary for today's retail environment.

Absolutely. And as you just mentioned, certainly already off to a good start and you were able to raise your guidance with the recent 1Q results. Maybe turning to Katrina. Could you just touch on your ability to raise those margin goals and maybe talk also bigger picture around the multiyear plan around margin opportunity?

Yes, Paul, of course, happy to discuss that because our primary goal, as Sonia said, is to drive profitable sales growth here at the company. And so we laid out in our plan back in October that we are going to do the hard work, as Sonia said, to restructure the trapped fixed cost in the business while also investing in demand generation to grow the business. And so what we said is that while we ended 2019 at about a 6% operating margin, we have put in place the plans to get to about 10% by 2023. This year, as you know, 2020 was COVID, and so everyone took a step back in COVID. This year, we guided to originally hitting about a 5% operating margin as we recovered from the pandemic. Based on the strength of our first quarter results and how much we've been able to get done in our restructuring program, we actually were able to take up that operating margin guidance to about 6% for this year in order to be well on our path to accelerating towards that 10% operating margin. A couple of thoughts on that. First, we are seeing year-over-year sales growth versus 2019, which was great to see. We grew our sales 8% in the first quarter, driven by strength at Old Navy and Athleta, but also importantly, the return of healthy and cool to our Gap brand where North America, we were able to drive a 9% comp here domestically. And then our Banana Republic business recovering. We were able to do that while expanding our merchandise margins, which is exciting. And then because we are closing a significant number of North America stores, we closed 225 Gap and Banana stores in 2020, and we intend to close another 75. We were able to get about 430 basis points of rod expansion, which really helped drive operating margins up in the quarter. And then lastly, we are investing in marketing. Sonia and I believe that investing in market share growth is important. Our brands need to be healthy and competitive in order to gain market share and customers. And so while we restructure the company, we are also investing in demand generation. But we were able to expand our operating margin versus 2019 in Q1. And again, that gives us confidence that we can get back to about a 6% for this year. And then we have lots in play for our 10% operating margin goal for 2023.

Absolutely. Very helpful. And obviously, inventory management is -- has been a key focus. Sonia, how are you balancing the assortment as you move through the recovery? And have you started to pivot away from kind of casual cozy lounge wear? And how do you think about planning for categories going forward, particularly what's your ability to chase, if needed?

Thanks, Paul. One of the biggest miracles that we developed last year after the pandemic was speed and agility. And a great example of that are our mass business. We went from recognizing a new must-have item and creating a $400 million business pretty much overnight. We went from design to -- in our customers' hands in less than 6 weeks as one example. And so through that speed, one of the things that we have tested about is that our customers will tell us. Our customers will tell us that we will be there ready to respond. And so what we're seeing now and what our customers are telling us now is that it's the power of the hand. She is wanting cozy and casual as well as the cost of dress. She is wanting to stay in and go out. And it's the example of the power at the end. She's one of the shop digital and in stores. And so this is what we are observing now from the customers. And then we're seeing the reemergence of pre-COVID occasion wear at Banana Republic, whether it's high stakes occasion or going out occasions. But she's also wanted to come home and put on her cozy sweatpants and go workout in their active wear. So it's an exciting time. People are looking to express their personal style and also have a range of items that suits their needs now as our families emerge from COVID.

Excellent. So let's walk through the brands. How are you positioning Gap going forward? And please give us some insights into some exciting things on the comp, including the partnership announced with Walmart for Gap Home. Also would love to hear any color on YEEZY, which I think we're all anxiously awaiting.

Listen, I've always said the Gap is 1 of the most iconic brands in the world and arguably the most iconic American apparel brands. And yet we have lost our obsession about creative and cool. So over the last 16 months, the teams have been hard at it, and I give them a lot of credit, which has -- puts -- position Gap where it rightfully belongs. And as a result, we've seen that North America is growing, it's healthy and it's cool. And what that lets us do now is export that brand around the world. We sell in over 50 countries. Gap is globally recognized. And so that is the opportunity for Gap, and it had a core now of building mostly substrate. So the strategic closure plan of shedding real estate that was no longer relevant, digital dominance and being digitally led e-commerce led is proving to be very successful. For 52 years, we have monetized the brand in a very narrow way. We've said, "Oh, we're going to sell product in stores." And then 20 years ago, we said, "Oh, we got to sell products in stores and online." Now what we said is the brand is the asset. And we're going to come up with new and relevant ways through partnerships as well to amplify the reach of the brand. And so when you think about the Walmart deal, which is about expanding Gap authority into lifestyle brands through the home collection or the YEEZY Gap collaboration, which is due to come out, and I think be one of the most anticipated apparel collaborations out there. Those are a couple of examples of how we're breathing a lot of life into Gap. And we're seeing the customers respond, the user engagement in the brands is very. The amount of logo we're seeing at TikTok and the youth culture is growing really, really fast here and around the world. So we're pleased with the momentum and see what these collaborations will do for us.

Absolutely. Very exciting. So Old Navy near and dear to both of your heart and representing over 50% of the company's revenues. Obviously, very successful brand for quite some time. What do you really attribute its success to? And how can this brand sustain that momentum going forward?

Maybe it's a unique brand. And as it's approaching its first $10 billion, as I like to say, it's a pretty young brand, founded in 1994 on a simple premise, right, that democracy of style, all about fun, fashion, family and value. And really, the momentum we're seeing is due to the excellence at the core. The product is truly differentiated. And you're seeing premium product at great value, quick fit, style, quality and price that our customers responding to for [indiscernible]. You're seeing a very broad unification. So whether it's active, which is their fastest-growing segment, active, or it's the dresses and the shorts and t-shirts that are relevant today with a seasonal change. Old Navy is delivering on all cylinders with respect to products. And the way to maintain the momentum and then, of course, worth mentioning the experience, which is their critical experience with 1,500 stores that are large, that are -- I think it's a unique physical experience as you go into know maybe coupled with their digital experience, a profitable value-driven -- a profitable e-commerce business, very profitable in the value space is something the team has built over 21 years. All of that is what's driving Old Navy's momentum. And I'll add to that category extension. So with the launch of intimate that just happened, which has already put Old Navy in the top 20 intimate providers in the U.S. was a very fast launch or the upcoming body positivity and body inclusivity launch in the fall that we anticipate taking extended sizes to all of our stores, we think that's going to be very, very big as well. So product extensions, digital dominance and investments, the experience being highly respectful and aspirational. That's what's driving out maybe momentum, and we expect it to continue.

Absolutely. And I have to ask about Athleta. I mean growth has been phenomenal. Discuss how you have separated from the pack and really carved out your own lane for this brand. And you've also made some unique announcements and partnerships here as well, one of my favorite athletes, Simone Biles. Can you tell us about that? And what does her being associated with this brand, what does that mean for you guys?

So it's a very crowded space, the asset space and they say, where Athleta is uniquely positioned and has honorable authority is that it's a brand designed by women for women. And so we only offer women and girls products. And it is this community that it seeks to -- it's a brand that speaks to engage with its customers in a very fulsome way, in a holistic way. And I think that's why our customers are responding. It's the fastest-growing brand in the portfolio, I think north of 50% growth in Q1 and blew past $1 billion last year. And then the recent partnership with Simone Biles, I think, is fantastic. It's going to raise Athleta's brand awareness, which sits at below 30% only. So it shows you the runway ahead. And we were able to engage with Simone because she got the brand and she wants us as she must be a part of what is special about Athleta. So I talked to her last night at the World Championship for Gymnastics America, she did so well, and she's the perfect ambassador for us and will support her as well as she aims to disrupt the gymnastics world. So a great example of where Athleta really builds strong community. And then, of course, enables [indiscernible] product experience is special and differentiated. So as you walk into Athleta's store or if you go on the website, what you'll see is that it speaks to all within, everybody is welcomed and appreciated. And that is, I think, what our customers are responding to, and the product is just fantastic.

That's great. And we definitely look forward to seeing her continue to perform and bring in some gold metals. Katrina, tell us how you think about that balancing act around making investments into these brands, into technology and innovation versus that flow-through and showcasing improved profitability for shareholders. And also, as we think about capital allocation, what are your priorities for the cash, right, as we think about paying down debt, dividends, buybacks and M&A?

Yes, Paul. So first of all, when it comes to investments in the business versus operating margin expansion, what I would say is it's an "and." So we're doing 2 things in the business. Step 1 is we are driving down the fixed operating cost in the business. That's going to come through the North America store closures that we're doing, which will pull out unprofitable sales. It will pull out rent and occupancy costs, it will pull out stores expenses and allow us to actually have costs in the business that are really driving revenue and profit. And in addition to that, we're going to be setting up a process where we're focused on digitizing the operations of the company so that we can further drive down the operating cost in the company. That's critical to me and Sonia is to get the fat out of the system that is not driving profit, but instead it's just trapping costs. But we also believe that it's critical that our 4 purpose-driven lifestyle brands have the investment they need to be able to acquire customers. So whether that's in the form of partnerships or whether it's the launch of our loyalty program. We're actually launching our first multi-tender loyalty program in July, which is hard to believe for a company our size that we have a robust credit card program, but we don't have an integrated loyalty program, and we know the value that can create for customers by driving frequency and average transactions. And in addition to that, we're investing in the digital capabilities. As Sonia said, we're digitally dominant. We've been able to close to double the business. Our digital business is over $6 billion in sales. The #2 apparel U.S. e-commerce business, it's truly a competitive advantage. And so investments in all those allow us to compete to win. And so our balance is about driving the virtuous cycle to grow sales profitably through driving down fixed costs and investing in demand generation. And then on the capital side, again, one thing Sonia and I are doing is ensuring that our capital is really focused on ROIC. Historically, capital has been in the 4% of sales range, which is fine, but it's really been focused more on international sales growth as well as store sales growth, none of which has returned in the way that we see fit. And so as we look to partner international businesses and close stores, we're pivoting our CapEx into demand-driving customer loyalty, technology and digital, those types of investments that we think will drive higher returns. Our order of operations when it comes to cash flow and investing in the business is, first, we'll invest somewhere around 5% of sales in CapEx to the degree we can get good returns. We just reinstituted our dividend, which we're happy to get back to. It's been a large part of our returning cash to shareholders. And we're doing a modest share repurchase program. We don't do much of it, but enough to offset dilution. And then, of course, as you mentioned, Paul, back during the crisis last year, we did go out and tap the liquidity markets to ensure we have the cash, not only to navigate the crisis but to lean into really winning and accelerating the business. That said, we are going to look to eventually restructure that debt to get down to a much better capital structure for the company. Right now, the bonds are trading at a premium. And so it doesn't make economic sense, but we are close to that and really have a high commitment to getting back to the capital structure that long term, we think benefits the company.

Certainly. And maybe to follow up on that question to maybe both of you would be maybe talk a little bit more around the evolution, right, of the role of the store. And as your digital business grows robustly, how should we think about the impact that has to the company's profitability?

Listen, I think stores matter and e-commerce matters. And what we are uniquely positioned to have is dominance because of the intersection of both. The fact that the customers shop back and forth and are most valuable to belong -- with the biggest lifetime value are those customers where the customers shop online, shop in stores and are part of our loyalty program. And we're manically focused on expanding that cohort, those loyalists. What I would say about stores is the feelings matter. Customers are not going to come to stores if they're in bad real estates that is declining for the store experience itself isn't inspiring. And so we've been on a march to ensure that for all of our brands, our stores are relevant. Gap, for example, has completed more than half the models in North America. And now when you walk into the Gap stores, it's light, it's bright, it's happy. Old Navy as well is on a remodel path. Banana Republic is a good high quality for the stores also is going through a light refresh. And Athleta is a fairly new fleet. And yet what you'll see in Athleta is a mannequin platform in a physical environment that really pans out in the factory. So I would say that we're quite intentional about our stores and then the technology enablement of our stores connected to our digital [ fellows. ] We know the customer starts her journey largely on a phone and then finds her way through the various paths that she chooses, whether it's a buy online, picking up in store, whether it's trying on in your store, whether it's shopping online at her convenience, whether it's virtual styling with the new capabilities we've offered. Our whole objective is that our customers can engage with these brands however it suits them, and we will be ready with that.

And then, Paul, on the profitability of online -- sorry, are you -- sorry. On the profitability of online, what I would say is -- there's a lag, I'm sorry. On the profitability for online, what I would say is, as Sonia has said during this call, the good news is that online has been an and for us. And so as our stores have reopened, here in the U.S. in particular, we're seeing our digital dominance continue and customers really shop both channels, as Sonia said. And so we are getting that nice intersection of a multichannel experience for our customers. And we're using our competitive advantage of our leveraged supply chain in order to be able to drive an efficient cost structure associated with those digital sales.

Perfect. At this time, I would like to invite the audience to use the question-and-answer box to go ahead and type in any topics that you would like to follow up on, and we'll be happy to get to that. In the meantime, I do want to ask about the loyalty program. What's new? What's different? You've also kind of announced a new partner for the credit card program. Why did you decide to make this change?

Yes. Our Head of Technology and Digital has a large experience in this space, and we took the opportunity to fully assess the market and decided to go with Barclays and MasterCard. There's a lot of alignment there. We will be beginning in May 2022 with them. And Barclays' technology investments suits our technology investment. And we think that the customer centricity around solutions is where we'll see differentiation. They're going to be the exclusive issuer for our co-branded card and for the PLCC program. And what's going to be different about our program? First of all, we have 188 million known customers and 52 million active customers. So the potential reach for this loyalty program is massive. And what we'll offer to those customers is enhanced reward that has to do with a whole sort of services and needs that we know our customers are looking for. So I think that, historically, we've had a separate multi-tender royalty and card program. Now to have them be integrated is going to be very exciting. And we know -- I mean, this is not rocket science, right? This has been a proven enhancement to business of our scale. So we're excited about what's going to come. And for it to be tender agnostic, for us to integrate with options like Afterpay and PayPal, which now already are about 20% of our e-commerce business. And so it's all about, again, that personalized experience with our brand, served up through the [ MTL ] program. And we're excited about that, one of our top initiatives this year soon to come in a couple of months.

Also just from a thematic standpoint, the sector has kind of -- there's been a shift and there's a lot of conversation around denim cycle now. Is this something that you have seen? And what would you say from the standpoint of silhouettes that are really resonating with the customer today?

Yes. Listen, we have a lot of authority in denim them. The company started because our founder couldn't find a pair of jeans that fit him. So it's near and dear to our heart, and we're the #1 denim brand between Old Navy and Gap for our kids business and a growing market share business in the adult space as well. What we're seeing is that, certainly, the leg shapes have changed. And 2 years ago, what was 90% a skinny silhouette has shifted to more like 50%. And we're seeing a lot more fashion, a lot more range, whether it's boyfriend or straight or wide leg. I think people are expressing -- or high-rise or ultra high-rise. The -- with -- the leg shape has changed and the rise has changed. And by the way, when that happens, Paul, that halos to the top business. So we're seeing the outfit completely change. And denim cycles happen like, dare I say, once a decade. The last big one was maybe the color denim cycle at the -- about 2010, '11. So it's a really big deal for us. And if you couple that fashion shift with our dominance and knowledge on comfort, we think that's where we win. So whether it's the 4-way stretch or the control waistband or solving for a great fit for everybody shape, from 00 to 3XL or 4XL, that is really where our sweet spot is. So excited for this, excited what we're seeing. We've seen the market share gains in the last 6 months. And we expect that, again, to continue. Particularly with everyone's body having changed a little bit during COVID, there were the maniacal exercisers and there were the not-so-maniacal exercisers. And kids have grown. So everyone's body has changed, and everyone is buying their new pair of jeans, and that's predictably across the all-important fall fashion season.

Indeed. And certainly, we're obviously getting out and about a little bit more of late and a lot of returning to work and weddings and everything coming up. Maybe just talk about how you're positioning Banana Republic going forward and what investors really should know about the priorities and goals of that brand.

The Banana Republic before COVID was a very nice multibillion-dollar, profitable -- highly profitable business and growing. And so COVID hit, right? And particularly in North America, a very big impact as people stayed inside and the need for wear to work or high occasion wear was in the back burner as well as the cities impact especially. What we're seeing now, though, is a very nice reengagement. And starting with spring, We did introduce the BR sport line and the comfort line and the intimate line, which helped drive sales during COVID, and we expect those lines to continue to position the reembrace of wear-to-work of structured pants, of high occasion dressing, all of those are coming back. And then couple that with some of the excitements that Banana Public is offering. We did a collaboration with Steph Curry, as an example, that sold out in less than a week. They've been very created with their store experience and their windows and have stopped traffic in New York City with that. So the team is getting there, I think, in their energy and the momentum, and we're excited to see what's coming.

So we have a question here from the audience, and it's inquiring about the pace of recovery in Europe and what you're seeing there versus the U.S. Any particular categories that stand out that may be resonating with one consumer versus the other? Also, since we are on this topic, maybe this would be a good time as well to maybe just touch on your strategic review overall of the European business.

Yes. I mean I think the benefit of having our business' 88% sales in the U.S. with another 7% in Canada is that our international businesses today have been relatively small and, therefore, low impact on the sales recovery. And Europe has lagged store opening from the U.S. by about a year. So the U.S. stores reopened late May. We're now, just now, I think a few weeks ago, saw all of our European stores open. That being said, our e-commerce business has been strong in Europe as well as our partnerships with [indiscernible], et cetera, where we sell. So in terms of product preference, I'd say that global style is global style. Youthful energy and youthful preference is the same. I see young kids wearing Gap logo as they're heading back to school with friends. And so there's a lot of love for Gap brand in particular, which is so iconic. And then in the U.K, we have in John Lewis, Athleta and Banana Republic, and it's been very, very well received. So as we think about partner to amplify, that gives us confidence to leverage what we know is a good business opportunity for us in Europe and in Asia through the right partners. So our strategic review is ongoing. As you know, we're in core markets in Europe. And due to COVID and different regulations by country, it's just taking a little bit of time. But we're on track for this year to complete that and to find the right way to leverage, the right approach to capitalizing on the iconic plans in Europe.

Great. ESG is certainly a topic top of mind for many. What would you like investors to know that Gap, Inc. is doing on this front?

We take this very, very seriously. And from our founders, there was always a saying in the company, which is we do more than sell clothes. And our values have been very much just live and core for the company from the beginning. And we're proud of all of our first. We were first -- we were the first company, first Fortune 500 company, to be validated as equal pay for man and women at every level, in every job code and in every country, as an example. This last quarter, in Q1, we were the first company to require all of our suppliers to pay their workers electronically, which we know -- that's 2.5 million workers, which we know is critical path to financial freedom in the value chain. So these are examples where we've been proud to be first. Lastly, Fortune magazine cited us as 1 of the top 5 companies in diversity in America. So whether it's the environment, which we play a leading role, and often we're in a top 10 list of the most sustainable companies. And as you may know, we joined the Fashion Pact as a founding member. The Fashion Pact is primarily a European coalition across companies that is focused on minimizing the impact of fashion on the planet. And we're proud to be a founding member. We're proud to be working with those goals to reduce plastic, to reduce water consumption. And in fact, year-over-year, we've reduced our virgin plastic usage by about 11%, and we expect that to continue with some of our recent announcements, such as Old Navy eliminating plastic bags by 2023. And so the work never ends on the ESG front, whether it's around the quality and inclusivity, which is the north star of the company. Our north star is that we are inclusive by design. And so diversity and inclusion is big, impact in our communities is big, and then impact on the plan is something that is top of mind for us. And we think that a big part of why people buy clothing is to show up their personal styles and also represent their values. And we think those things are synonymous. We aim to have those go hand-in-hand, whether it's 100% organic collection for that teen launch that they did last year that -- all that product is 100% organic, and we know how important that is to teens, or whether it's the fact that our -- many stores employ underserved youth in America. And we're a big, big driver of enabling the boys and girls clubs used to work in our stores. These are examples that -- we do this because it's the right thing to do, but we also know that our customers -- it matters to our customers.

And maybe staying on the investor front, and we can use this question to close, so maybe Sonia and Katrina, if you want to chime in on this. What should investors really know and understand about Gap, Inc. today? And what is it that they should really be spending time to focus on to better understand this new business model, this new set of priorities and how you are driving this business to a new long range in terms of your targets and goals?

Katrina, do you want to start, and then I can finish up?

Yes. I'm happy to start. I think what Sonia and I are focused on, which I hope you've heard today, is a maniacal focus on growing our 4 purpose-driven lifestyle brands but with a focus on profitability that allows us to continue to balance top line growth as well as EBIT margin expansion, And that's going to come from what we've talked about today, which is just the need to restructure the fixed cost in this company but also really invest in what matters to our customers and our brands. And we are committed to that. As we said, we've laid out a path to low single-digit sales growth over the next few years while expanding our EBIT margin to 10%. And our ability to raise guidance this year accelerates our path towards that. And our brands are competing well in gaining market share. So we feel like the proof points have begun, and we're on our path to hitting this business model that we feel quite good about.

Katrina, I couldn't have said it any better. Look, we have an enviable portfolio of iconic American brands. We're the largest player in America, both scale and operations and technology, is a huge advantage -- a bigger advantage than it's ever been. And we're playing to win with an emphasis on a culture of performance and a priority of executing and a passion for this business. Katrina and I are both insiders, and we stayed and we are drivers of this passion for the long-term value of this company. And so I'd say that's what I would leave you with. We wake up every day excited to, I think, run to work and see what we can make happen. And there's a lot of excitement every day in what is unfolding within this great, iconic American company.

Well, great. We will leave it there. Thank you so much for your time, Sonia and Katrina. This will conclude our fireside chat with Gap, Inc. Thank you, everyone.

Thanks, Paul.

Bye, Paul.