Music leverage always been synonymous with Gap. We’ve teamed up with Grammy Award winner Tyla and the recent BRIT award winner Jungle and created a credible storytelling campaign that’s culturally relevant and resonating. And my last point, particularly in the marketing, metrics that matter places like TikTok and Instagram are new platforms for Gap in the context of being more relevant to our consumer. Linen Moves is currently Gap brand’s highest-performing video on both of these platforms ever. So early days, we are encouraged with the momentum that we’re seeing. The playbook is in action and there’ll be a lot more to come.
Robert Drbul: Great, thank you very much.
Operator: Your next question comes from the line of Ike Boruchow from Wells Fargo. Please go ahead.
Ike Boruchow: Hey, everyone. Congrats on the quarter. Two questions. Richard, maybe first for you, I hate to put you in a tough spot, but there’s — let’s leave Athleta and Banana alone, ongoing outperformance I think was words for the guidance for Old Navy and Gap. If you have to look at both of those brands, which one do you feel like you have your arms around the best in terms of branding, marketing, and sustainable — sustainability of positive comps? And then just the follow-up question would be for Katrina. I think based on your guidance, you around 4.5%, 5% margin, if we kind of go back pre-COVID, you were kind of consistently in the high-single-digits. How are we thinking about multi-year, the building and the foundation that you guys are doing if you can sustain low-single-digit growth? How should we think about the ultimate margin structure of the company over time?
Richard Dickson: Thanks, Ike. Well, first off, I’d say my arms are everywhere in the context of what we’re trying to achieve here. And I think, again, speaking for the quarter results, we exceeded expectations on both top- and bottom-line, gaining market shares and the strength was really driven by the two largest brands in our portfolio, Old Navy and Gap. And more specifically, Old Navy, it’s the largest brand in our portfolio and we’ve been working on re-asserting the brand’s authority as the number two apparel brand in the country. We have a strong retail presence. We have over 1,200 stores and an incredible online presence, which I would encourage you to take a look at today in the context of its clarity and new relevant persona.
We did have a strong quarter. Our sales were up 6% with comps up 2%. We gained share in all segments, but we did particularly well in women’s, which we dialed up from a marketing perspective, and I will say the team has done a great job driving the financial and operational rigor, and Old Navy is really starting to see early signs of that brand reinvigoration. In particular, we know Old Navy has a reference reinforcing style authority, but with more clarity on price and quality, both in stores and online, and again, we’re very encouraged with those early results, and the consistency that we expect to have throughout the year in 2024 as we build upon that discipline. I talked about Gap in the previous question, but similar. We’ve had a great quarter with Gap and year.
We’re very happy with the positive comps and we’ve been working to reignite Gap, and drawing on what made this brand so special in the first place. And ultimately, I think this campaign that you’re seeing in market today, again, go online, take a look, I think it’s a great example of the playbook in action and Gap having a voice and culture again, taking an idea in our storytelling and amplify in a way that only Gap can.
Katrina O’Connell: And then, Ike, to talk more specifically to the margin structure, I would say, I do see a path to delivering operating margin expansion in the long term. We have work to do to get back to historical levels. I think, first and foremost, this business leverages nicely when we get the top-line moving and it hasn’t been growing regularly, and that’s really what the brand reinvigoration work that Richard has been referencing is all about, getting our business back to relevance and revenue and driving the top-line, that unto itself will drive operating merchant expansion. And in the meantime, we’ve been through several years of transformation, partnering international market, closing our unprofitable stores, divesting of smaller brands, all that reduced the fixed cost base.
And then recently, we’ve been doing other cost actions, all of which — that discipline has taken out about $550 million of cost and that led to this cost structure that leverages so nicely on sales growth. And we just talked about it, we’ll consistently evaluate the cost structure to identify additional opportunities. So, again, to sort of end where I started, there is a path to delivering operating margin expansion in long term as we get back to delivering consistent sales growth.
Ike Boruchow: Thanks so much.
Richard Dickson: Thanks, Ike.
Operator: Your next question comes from the line of Matthew Boss from J.P. Morgan. Please go ahead.
Matthew Boss: Thanks, and congrats on a nice quarter.
Richard Dickson: Thank you.
Matthew Boss: So, Richard, could you elaborate on the market share gains that you cited that you’re seeing at Old Navy and the Gap if you break down maybe by some of the destination categories for each of those brands? And any change in momentum that you’re seeing at Old Navy or Gap as we think about early spring and some of the maybe early trends? And then, Katrina, so you’re coming off 500 basis points of merchandise margin expansion, inventories are down mid-teens, I guess how best to think about the magnitude of merchandise margin opportunity in 2024 just considering some of the product cost tailwinds and maybe your view on the promotional landscape?
