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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 28, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number 1-7562
THE GAP, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-1697231
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
Two Folsom Street
San Francisco, California 94105
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (415427-0100

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.05 par valueGPSThe New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes   No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
The number of shares of the registrant’s common stock outstanding as of November 14, 2023 was 370,833,344.



FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements other than those that are purely historical are forward-looking statements. Words such as “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan,” “project,” and similar expressions also identify forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding the following:
the potential impact of global economic conditions on the assumptions and estimates used when preparing the Condensed Consolidated Financial Statements;
the impact of recent accounting pronouncements;
the timing of revenue recognition of upfront payments related to our new credit card program agreements with Barclays and Mastercard;
the timing of recognition in income of unrealized gains and losses from designated cash flow hedges;
the impact of losses due to indemnification obligations on the Condensed Consolidated Financial Statements;
the outcome of proceedings, lawsuits, disputes, and claims, including the impact of such actions on the Condensed Consolidated Financial Statements and our financial results;
our arrangements with third parties to operate stores and websites selling apparel and related products under our brand names;
our plans to rationalize the Gap and Banana Republic store fleet by reducing the number of Gap and Banana Republic stores in North America;
managing inventory to facilitate margin recovery and optimizing our cost structure with operational and financial rigor;
reinvigorating our brands to drive relevance and an engaging omni-channel experience;
creating trend-right product assortments while driving creative excellence and delivering consistent product with storytelling that excites our customers;
rationalizing the Gap and Banana Republic store fleet;
attracting and retaining strong talent in our businesses and functions;
continuing to integrate social and environmental sustainability into business practices to support long-term growth;
our ability to supplement near-term liquidity, if necessary, with the ABL Facility or other available market instruments;
the impact of seasonality and global economic conditions on certain asset and liability accounts as well as cash inflows and outflows;
the ability of our cash flows from our operations, current balances of cash and cash equivalents, the Senior Notes and the ABL Facility, and other available market instruments to support our business operations and liquidity requirements;
the importance of our sustained ability to generate free cash flow, which is a non-GAAP financial measure and is defined and discussed in more detail in Item 2 of Part 1 of this Form 10-Q below;
our dividend policy, including the potential timing and amounts of future dividends;
the impact of reductions in our credit ratings on our interest expense on future borrowings; and
the impact of changes in internal control over financial reporting, including the impact of our restructuring plan on our internal control over financial reporting.
Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, the following:
the overall global economic and geopolitical environment and the impact on consumer spending patterns;
the risk that we fail to maintain, enhance, and protect our brand image and reputation;
the highly competitive nature of our business in the United States and internationally;
the risk that we may be unable to manage or protect our inventory effectively and the resulting impact on our gross margins, sales, and results of operations;
the risk that we fail to manage key executive succession and retention and to continue to attract and retain qualified personnel;
the risk that we or our franchisees may be unsuccessful in gauging apparel trends and changing consumer preferences or responding with sufficient lead time;
the risk that restructuring our business may not generate the intended benefits and projected cost savings to the extent or on the timeline as expected;



the risk that inflationary pressures continue to negatively impact gross margins or that we are unable to pass along price increases;
the risks to our business, including our costs and supply chain, associated with global sourcing and manufacturing;
the risks to our reputation or operations associated with importing merchandise from foreign countries, including failure of our vendors to adhere to our Code of Vendor Conduct;
the risk that trade matters could increase the cost or reduce the supply of apparel available to us;
reductions in income and cash flow from our credit card arrangement related to our private label and co-branded credit cards;
the risk of data or other security breaches or vulnerabilities that may result in increased costs, violations of law, significant legal and financial exposure, and a loss of confidence in our security measures;
the risk that failures of, or updates or changes to, our IT systems may disrupt our operations;
the risk that our franchisees and licensees could impair the value of our brands or fail to make payments for which we are liable;
natural disasters, public health crises, political crises, negative global climate patterns, or other catastrophic events;
acts of terrorism or war, including the conflict between Russia and Ukraine and the conflict in Israel, and the impact on global market stability;
the risk that our investments in customer, digital, and omni-channel shopping initiatives may not deliver the results we anticipate;
engaging in or seeking to engage in strategic transactions that are subject to various risks and uncertainties;
the risk that our efforts to expand internationally may not be successful;
the risk of foreign currency exchange rate fluctuations;
the risk that our comparable sales and margins may experience fluctuations, that the seasonality of our business may experience changes, or that we may fail to meet financial market expectations;
the risk that we or our franchisees may be unsuccessful in identifying, negotiating, and securing new store locations and renewing, modifying, or terminating leases for existing store locations effectively;
the adverse effects of climate change on our operations and those of our franchisees, vendors and other business partners;
the risk that we will not be successful in defending various proceedings, lawsuits, disputes, and claims;
our failure to comply with applicable laws and regulations and changes in the regulatory or administrative landscape;
our failure to satisfy regulations and market expectations related to our ESG initiatives;
the risk that changes in our credit profile or deterioration in market conditions may limit our access to the capital markets;
the risk that our level of indebtedness may impact our ability to operate and expand our business;
the risk that we and our subsidiaries may be unable to meet our obligations under our indebtedness agreements;
the risk that worsening global economic and geopolitical conditions could result in changes to the assumptions and estimates used when preparing the Condensed Consolidated Financial Statements;
the risk that changes in our business structure, our performance or our industry could result in reductions in our pre-tax income or utilization of existing tax carryforwards in future periods, and require additional deferred tax valuation allowances;
the risk that changes in the geographic mix and level of income or losses, the expected or actual outcome of audits, changes in deferred tax valuation allowances, and new legislation could impact our effective tax rate; and
the risk that the adoption of new accounting pronouncements will impact future results.
Additional information regarding factors that could cause results to differ can be found in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023 and our other filings with the U.S. Securities and Exchange Commission.
Future economic and industry trends that could potentially impact net sales and profitability are difficult to predict. These forward-looking statements are based on information as of November 21, 2023. We assume no obligation to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.
We suggest that this document be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended January 28, 2023.



THE GAP, INC.
TABLE OF CONTENTS
 
 Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.



PART I – FINANCIAL INFORMATION
Item 1.     Financial Statements.
THE GAP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
($ and shares in millions except par value)October 28,
2023
January 28,
2023
October 29,
2022
ASSETS
Current assets:
Cash and cash equivalents$1,351 $1,215 $679 
Merchandise inventory2,377 2,389 3,043 
Other current assets646 1,013 1,316 
Total current assets4,374 4,617 5,038 
Property and equipment, net of accumulated depreciation of $4,890, $4,837, and $4,957
2,552 2,688 2,788 
Operating lease assets3,200 3,173 3,341 
Other long-term assets926 908 833 
Total assets$11,052 $11,386 $12,000 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$1,433 $1,320 $1,388 
Accrued expenses and other current liabilities1,078 1,219 1,245 
Current portion of operating lease liabilities604 667 691 
Income taxes payable24 50 57 
Total current liabilities3,139 3,256 3,381 
Long-term liabilities:
Revolving credit facility 350 350 
Long-term debt1,488 1,486 1,486 
Long-term operating lease liabilities3,456 3,517 3,673 
Other long-term liabilities 509 544 539 
Total long-term liabilities5,453 5,897 6,048 
Commitments and contingencies (see Note 10)
Stockholders’ equity:
Common stock $0.05 par value
Authorized 2,300 shares for all periods presented; Issued and Outstanding 371, 366, and 365 shares
18 18 18 
Additional paid-in capital93 27 16 
Retained earnings2,291 2,140 2,468 
Accumulated other comprehensive income 58 48 69 
Total stockholders’ equity2,460 2,233 2,571 
Total liabilities and stockholders’ equity$11,052 $11,386 $12,000 
See Accompanying Notes to Condensed Consolidated Financial Statements
1


THE GAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 13 Weeks Ended39 Weeks Ended
($ and shares in millions except per share amounts)October 28,
2023
October 29,
2022
October 28,
2023
October 29,
2022
Net sales$3,767 $4,039 $10,591 $11,373 
Cost of goods sold and occupancy expenses2,211 2,530 6,488 7,438 
Gross profit1,556 1,509 4,103 3,935 
Operating expenses1,306 1,323 3,757 3,974 
Operating income (loss)250 186 346 (39)
Interest expense28 22 66 63 
Interest income(28)(4)(58)(6)
Income (loss) before income taxes250 168 338 (96)
Income tax expense (benefit)32 (114)21 (167)
Net income
$218 $282 $317 $71 
Weighted-average number of shares - basic371 365 369 367 
Weighted-average number of shares - diluted375 366 373 370 
Earnings per share - basic
$0.59 $0.77 $0.86 $0.19 
Earnings per share - diluted
$0.58 $0.77 $0.85 $0.19 
See Accompanying Notes to Condensed Consolidated Financial Statements
2


THE GAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 13 Weeks Ended39 Weeks Ended
($ in millions)October 28,
2023
October 29,
2022
October 28,
2023
October 29,
2022
Net income
$218 $282 $317 $71 
Other comprehensive income, net of tax
Foreign currency translation5 6 1 13 
Change in fair value of derivative financial instruments, net of tax expense of $1, $1, $3, $3
16 31 22 40 
Reclassification adjustment for gains on derivative financial instruments, net of tax benefit of $1, $, $, $
(7)(14)(13)(22)
Other comprehensive income, net of tax
14 23 10 31 
Comprehensive income
$232 $305 $327 $102 
See Accompanying Notes to Condensed Consolidated Financial Statements
3


THE GAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
 Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income
 
($ and shares in millions except per share amounts)SharesAmountTotal
Balance as of July 29, 2023369 $18 $73 $2,128 $44 $2,263 
Net income for the 13 weeks ended October 28, 2023218 218 
Other comprehensive income, net of tax
Foreign currency translation 5 5 
Change in fair value of derivative financial instruments16 16 
Amounts reclassified from accumulated other comprehensive income(7)(7)
Issuance of common stock related to stock options and employee stock purchase plans1  5 5 
Issuance of common stock and withholding tax payments related to vesting of stock units1  (5)(5)
Share-based compensation, net of forfeitures20 20 
Common stock dividends declared and paid ($0.15 per share)
(55)(55)
Balance as of October 28, 2023371 $18 $93 $2,291 $58 $2,460 
Balance as of July 30, 2022364 $18 $ $2,241 $46 $2,305 
Net income for the 13 weeks ended October 29, 2022282 282 
Other comprehensive income, net of tax
Foreign currency translation 6 6 
Change in fair value of derivative financial instruments31 31 
Amounts reclassified from accumulated other comprehensive income(14)(14)
Repurchases and retirement of common stock(2) (12)(12)
Issuance of common stock related to stock options and employee stock purchase plans1  8 8 
Issuance of common stock and withholding tax payments related to vesting of stock units2  (2)(2)
Share-based compensation, net of forfeitures22 22 
Common stock dividends declared and paid ($0.15 per share)
(55)(55)
Balance as of October 29, 2022365 $18 $16 $2,468 $69 $2,571 
    
See Accompanying Notes to Condensed Consolidated Financial Statements





4


THE GAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income
($ and shares in millions except per share amounts)SharesAmountTotal
Balance as of January 28, 2023366 $18 $27 $2,140 $48 $2,233 
Net income for the 39 weeks ended October 28, 2023317317 
Other comprehensive income, net of tax

Foreign currency translation1 1 
Change in fair value of derivative financial instruments22 22 
Amounts reclassified from accumulated other comprehensive income(13)(13)
Issuance of common stock related to stock options and employee stock purchase plans2  18 18 
Issuance of common stock and withholding tax payments related to vesting of stock units3  (16)(16)
Share-based compensation, net of forfeitures64 64 
Common stock dividends declared and paid ($0.45 per share)
(166)(166)
Balance as of October 28, 2023371$18 $93 $2,291 $58 $2,460 
Balance as of January 29, 2022371 $19 $43 $2,622 $38 $2,722 
Net income for the 39 weeks ended October 29, 202271 71 
Other comprehensive income, net of tax
Foreign currency translation13 13 
Change in fair value of derivative financial instruments40 40 
Amounts reclassified from accumulated other comprehensive income(22)(22)
Repurchases and retirement of common stock(11)(1)(63)(59)(123)
Issuance of common stock related to stock options and employee stock purchase plans2  23 23 
Issuance of common stock and withholding tax payments related to vesting of stock units3  (17)(17)
Share-based compensation, net of forfeitures30 30 
Common stock dividends declared and paid ($0.45 per share)
(166)(166)
Balance as of October 29, 2022365 $18 $16 $2,468 $69 $2,571 
See Accompanying Notes to Condensed Consolidated Financial Statements
5


THE GAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 39 Weeks Ended
($ in millions)October 28,
2023
October 29,
2022
Cash flows from operating activities:
Net income
$317 $71 
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization394 402 
Share-based compensation64 28 
Impairment of operating lease assets 16 
Impairment of store assets2 10 
Amortization of debt issuance costs3 5 
Non-cash and other items36 (8)
Loss on divestiture activity 35 
Gain on sale of building(47)(83)
Deferred income taxes(27)32 
Changes in operating assets and liabilities:
Merchandise inventory(5)(78)
Other current assets and other long-term assets81 (34)
Accounts payable133 (503)
Accrued expenses and other current liabilities(11)(123)
Income taxes payable, net of receivables and other tax-related items50 216 
Other long-term liabilities(11)(7)
Operating lease assets and liabilities, net(147)(91)
Net cash provided by (used for) operating activities832 (112)
Cash flows from investing activities:
Purchases of property and equipment(288)(577)
Net proceeds from sale of buildings
76 458 
Net proceeds from divestiture activity9  
Net cash used for investing activities
(203)(119)
Cash flows from financing activities:
Proceeds from revolving credit facility 350 
Repayments of revolving credit facility(350) 
Payments for debt issuance costs (6)
Proceeds from issuances under share-based compensation plans18 23 
Withholding tax payments related to vesting of stock units(16)(17)
Repurchases of common stock (123)
Cash dividends paid(166)(166)
Other(2)(1)
Net cash provided by (used for) financing activities(516)60 
Effect of foreign exchange rate fluctuations on cash, cash equivalents, and restricted cash(7)(25)
Net increase (decrease) in cash, cash equivalents, and restricted cash106 (196)
Cash, cash equivalents, and restricted cash at beginning of period1,273 902 
Cash, cash equivalents, and restricted cash at end of period$1,379 $706 
Supplemental disclosure of cash flow information:
Cash paid for interest during the period$72 $70 
Cash paid for income taxes during the period, net of refunds$(1)$(407)
See Accompanying Notes to Condensed Consolidated Financial Statements
6


THE GAP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Accounting Policies
Basis of Presentation
In the opinion of The Gap, Inc. (the “Company,” “we,” and “our”) management, the accompanying unaudited Condensed Consolidated Financial Statements contain all normal and recurring adjustments (except as otherwise disclosed) considered necessary to present fairly our financial position, results of operations, comprehensive income, stockholders' equity, and cash flows as of October 28, 2023 and October 29, 2022 and for all periods presented. The Condensed Consolidated Balance Sheet as of January 28, 2023 has been derived from our audited financial statements.
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted from these interim financial statements, although the Company believes that the disclosures made are adequate to make the information not misleading. We suggest that you read these Condensed Consolidated Financial Statements in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023.
The results of operations for the 13 and 39 weeks ended October 28, 2023 are not necessarily indicative of the operating results that may be expected for the 53-week period ending February 3, 2024.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Additionally, these estimates and assumptions may change as a result of the impact of global economic conditions such as the uncertainty regarding global inflationary pressures, acts of terrorism or war, global credit and banking markets, and new legislation. We will continue to consider the impact of the global economic conditions on the assumptions and estimates used when preparing these Condensed Consolidated Financial Statements including inventory valuation, income taxes and valuation allowances, sales return and bad debt allowances, deferred revenue, and the impairment of long-lived assets. If the global economic conditions worsen beyond what is currently estimated by management, such future changes may have an adverse impact on the Company's results of operations and financial position.
Restricted Cash
As of October 28, 2023, restricted cash primarily included consideration that serves as collateral for our insurance obligations and certain other obligations occurring in the normal course of business. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within our Condensed Consolidated Balance Sheets to the total shown on our Condensed Consolidated Statements of Cash Flows:
($ in millions)October 28,
2023
January 28,
2023
October 29,
2022
Cash and cash equivalents, per Condensed Consolidated Balance Sheets$1,351 $1,215 $679 
Restricted cash included in other current assets 32 1 
Restricted cash included in other long-term assets28 26 26 
Total cash, cash equivalents, and restricted cash, per Condensed Consolidated Statements of Cash Flows$1,379 $1,273 $706 
Accounting Pronouncements
Except as noted below, the Company has considered all recent accounting pronouncements and concluded that there are no recent accounting pronouncements that may have a material impact on our Condensed Consolidated Financial Statements and disclosures, based on current information.
ASU No. 2022-04, Disclosure of Supplier Finance Program Obligations
In September 2022, the Financial Accounting Standards Board issued accounting standards update ("ASU") No. 2022-04, Disclosure of Supplier Finance Program Obligations. The ASU is intended to enhance the transparency of the use of supplier finance programs by requiring that the buyers in those programs provide additional disclosures about the program’s nature and potential magnitude, including a rollforward of the obligations and activity during the period. The ASU is effective retrospectively for fiscal years and interim periods within those years beginning after December 15, 2022, except for the rollforward information, which is effective prospectively for fiscal years beginning after December 15, 2023. The ASU does not affect the recognition, measurement, or financial statement presentation of supplier finance program obligations. We adopted this ASU on January 29, 2023. See Note 13 of Notes to Condensed Consolidated Financial Statements for information regarding our supply chain finance program.
Note 2. Revenue
Disaggregation of Net Sales
We disaggregate our net sales by channel and also by brand and region. Net sales by region are allocated based on the location of the store where the customer paid for and received the merchandise or the distribution center or store from which the products were shipped.
Net sales disaggregated by channel are as follows:
13 Weeks Ended39 Weeks Ended
($ in millions)October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Store and franchise sales$2,331 $2,478 $6,771 $7,168 
Online sales (1)1,436 1,561 3,820 4,205 
Total net sales$3,767 $4,039 $10,591 $11,373 
__________
(1)Online sales primarily include sales originating from our online channel including those that are picked up or shipped from stores and net sales from revenue-generating strategic initiatives.

7


Net sales disaggregated by brand and region are as follows:
($ in millions)Old Navy GlobalGap GlobalBanana Republic GlobalAthleta GlobalOther (2)Total
13 Weeks Ended October 28, 2023
U.S. (1)$1,917 $664 $398 $267 $15 $3,261 
Canada193 96 42 10  341 
Europe 29 1   30 
Asia1 71 12   84 
Other regions15 27 7 2  51 
Total$2,126 $887 $460 $279 $15 $3,767 
($ in millions)Old Navy GlobalGap GlobalBanana Republic GlobalAthleta GlobalOther (2)Total
13 Weeks Ended October 29, 2022
U.S. (1)$1,936 $690 $448 $326 $4 $3,404 
Canada184 95 47 7  333 
Europe1 58 1 1  61 
Asia 143 14   157 
Other regions16 55 7 6  84 
Total$2,137 $1,041 $517 $340 $4 $4,039 
($ in millions)Old Navy GlobalGap GlobalBanana Republic GlobalAthleta GlobalOther (2)Total
39 Weeks Ended October 28, 2023
U.S. (1)$5,353 $1,702 $1,187 $903 $29 $9,174 
Canada503 233 122 33  891 
Europe1 87 2 1  91 
Asia2 225 40   267 
Other regions56 87 21 4  168 
Total$5,915 $2,334 $1,372 $941 $29 $10,591 
($ in millions)Old Navy GlobalGap GlobalBanana Republic GlobalAthleta GlobalOther (2)Total
39 Weeks Ended October 29, 2022
U.S. (1)$5,489 $1,752 $1,324 $1,005 $10 $9,580 
Canada514 241 143 23  921 
Europe2 163 4 3  172 
Asia1 425 48   474 
Other regions62 132 19 13  226 
Total$6,068 $2,713 $1,538 $1,044 $10 $11,373 
__________
(1)U.S. includes the United States and Puerto Rico.
(2)Primarily consists of net sales from revenue-generating strategic initiatives.
Deferred Revenue
We defer revenue when cash payments are received in advance of performance for unsatisfied obligations related to our gift cards, licensing agreements, outstanding loyalty points, and reimbursements of loyalty program discounts associated with our credit card agreement. For the 13 weeks ended October 28, 2023, the opening balance of deferred revenue for these obligations was $327 million, of which $119 million was recognized as revenue during the period. For the 39 weeks ended October 28, 2023, the opening balance of deferred revenue for these obligations was $354 million, of which $227 million was recognized as revenue during the period. The closing balance of deferred revenue for these obligations was $315 million as of October 28, 2023.
8


For the 13 weeks ended October 29, 2022, the opening balance of deferred revenue for these obligations was $321 million, of which $119 million was recognized as revenue during the period. For the 39 weeks ended October 29, 2022, the opening balance of deferred revenue for these obligations was $345 million, of which $212 million was recognized as revenue during the period. The closing balance of deferred revenue for these obligations was $323 million as of October 29, 2022.
In April 2021, the Company entered into agreements with Barclays and Mastercard relating to a new long-term credit card program. In May 2022, the Company launched the new credit card program with Barclays and Mastercard and accordingly, our prior credit card program with Synchrony Financial was discontinued. The Company received an upfront payment of $60 million related to the new agreements prior to the program launch, which is being recognized as revenue over the term of the agreements.
9


Note 3. Restructuring
On April 25, 2023, the Company's management committed to a restructuring plan (the "Plan") as part of the Company's previously announced efforts to simplify and optimize its operating model and structure. The Plan includes a reduction in workforce of approximately 1,800 employees, primarily in headquarters locations. The actions associated with the reduction of the Company's workforce under the Plan have been substantially completed.
In connection with the Plan, the Company incurred $5 million and $93 million in pre-tax restructuring costs during the 13 and 39 weeks ended October 28, 2023, respectively. The costs incurred in connection with the Plan are as follows:
13 Weeks Ended
October 28, 2023
39 Weeks Ended
October 28, 2023
($ in millions)Cost of Goods Sold and Occupancy ExpensesOperating ExpensesTotal CostsCost of Goods Sold and Occupancy ExpensesOperating ExpensesTotal Costs
Employee-related costs$ $(1)$(1)$4 $60 $64 
Consulting and other associated costs 6 6  29 29 
Total restructuring costs$ $5 $5 $4 $89 $93 
The following table summarizes restructuring costs that will be settled with cash payments and the related liability balances as of October 28, 2023, which are primarily included in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheet:
($ in millions)Employee-Related CostsConsulting and Other Associated CostsTotal
Balance at January 28, 2023$ $ $ 
13 Weeks Ended April 29, 2023
Provision62 13 75 
Cash payments (10)(10)
Balance at April 29, 202362 3 65 
13 Weeks Ended July 29, 2023
Provision3 10 13 
Cash payments(45)(7)(52)
Balance at July 29, 202320 6 26 
13 Weeks Ended October 28, 2023
Provision 6 6 
Adjustments(1) (1)
Cash payments(11)(12)(23)
Balance at October 28, 2023$8 $ $8 
Note 4. Income Taxes
The effective income tax rate was 12.8 percent for the 13 weeks ended October 28, 2023, compared with negative 67.9 percent for the 13 weeks ended October 29, 2022. The change in the effective tax rate for the 13 weeks ended October 28, 2023 compared with the 13 weeks ended October 29, 2022 is primarily due to changes in the amount and jurisdictional mix of pre-tax earnings, the cumulative impact of a change in the Company's estimated annual effective tax rate recognized in the prior year, and a current year tax benefit from the impact of foreign valuation allowances.
The effective income tax rate was 6.2 percent for the 39 weeks ended October 28, 2023, compared with 174.0 percent for the 39 weeks ended October 29, 2022. The change in the effective tax rate for the 39 weeks ended October 28, 2023 compared with the 39 weeks ended October 29, 2022 is primarily due to changes in the amount and jurisdictional mix of pre-tax earnings, the cumulative impact of a change in the Company's estimated annual effective tax rate recognized in the prior year, and current year tax benefits from the impact of valuation allowances and a U.S. transfer pricing settlement related to our sourcing activities.
10


Note 5. Debt and Credit Facilities
Long-term debt recorded on the Condensed Consolidated Balance Sheets consists of the following:
($ in millions)October 28,
2023
January 28,
2023
October 29,
2022
2029 Notes$750 $750 $750 
2031 Notes750 750 750 
Less: Unamortized debt issuance costs(12)(14)(14)
Total long-term debt$1,488 $1,486 $1,486 
The scheduled maturity of the Senior Notes is as follows:
Scheduled Maturity ($ in millions)PrincipalInterest RateInterest Payments
October 1, 2029 (1)$750 3.625 %Semi-Annual
October 1, 2031 (2)750 3.875 %Semi-Annual
Total issuance$1,500 
__________
(1)Includes an option to redeem the 2029 Notes, in whole or in part at any time, subject to a make-whole premium, prior to October 1, 2024. On or after October 1, 2024, includes an option to redeem the 2029 Notes, in whole or in part at any time, at stated redemption prices.
(2)Includes an option to redeem the 2031 Notes, in whole or in part at any time, subject to a make-whole premium, prior to October 1, 2026. On or after October 1, 2026, includes an option to redeem the 2031 Notes, in whole or in part at any time, at stated redemption prices.
On September 27, 2021, we completed the issuance of $1.5 billion aggregate principal amount of 3.625 percent senior notes due 2029 (“2029 Notes”) and 3.875 percent senior notes due 2031 (“2031 Notes”) (the 2029 Notes and the 2031 Notes, collectively, the “Senior Notes”). As of October 28, 2023, the aggregate estimated fair value of the Senior Notes was $1.10 billion and was based on the quoted market prices for each of the Senior Notes (level 1 inputs) as of the last business day of the fiscal quarter. The aggregate principal amount of the Senior Notes is recorded in long-term debt on the Condensed Consolidated Balance Sheets, net of the unamortized debt issuance costs.
On May 7, 2020, we entered into a senior secured asset-based revolving credit agreement (the "ABL Facility"), which was previously scheduled to expire in May 2023. On July 13, 2022, we entered into an amendment and restatement of the ABL Facility. Among other changes, the amendment and restatement extended the maturity of the ABL Facility to July 2027, increased the borrowing capacity from $1.8675 billion to $2.2 billion, modified the reference rate from the London Interbank Offered Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR"), and reduced the applicable interest rate margin. Following the amendment and restatement, the ABL Facility generally bears interest at a per annum rate based on SOFR (subject to a zero floor) plus a margin, depending on borrowing base availability. The ABL Facility is available for working capital, capital expenditures, and other general corporate purposes.
As of January 28, 2023 and October 29, 2022, the Company's outstanding borrowing under the ABL Facility was $350 million and was recorded in long-term liabilities on the Condensed Consolidated Balance Sheet. In the second quarter of fiscal 2023, the Company repaid an aggregate of $200 million to reduce the outstanding borrowing under the ABL Facility to $150 million as of July 29, 2023. During the 13 weeks ended October 28, 2023, the Company repaid the remaining $150 million outstanding borrowing under the ABL Facility. There were no borrowings under the ABL Facility as of October 28, 2023.
We also have the ability to issue letters of credit on our ABL Facility. As of October 28, 2023, we had $49 million in standby letters of credit issued under the ABL Facility.
Note 6. Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis. The Company categorizes financial assets and liabilities recorded at fair value based upon a three-level hierarchy that considers the related valuation techniques.
There were no material purchases, sales, issuances, or settlements related to recurring level 3 measurements for the 13 and 39 weeks ended October 28, 2023 or October 29, 2022.
11


Financial assets and liabilities measured at fair value on a recurring basis and cash equivalents held at amortized cost are as follows:
  Fair Value Measurements at Reporting Date Using
($ in millions)October 28, 2023Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Cash equivalents$1 $ $1 $ 
Derivative financial instruments34  34  
Deferred compensation plan assets31 31   
Other assets4   4 
Total$70 $31 $35 $4 
Liabilities:
Derivative financial instruments$ $ $ $ 
  Fair Value Measurements at Reporting Date Using
($ in millions)January 28, 2023Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Cash equivalents$15 $ $15 $ 
Derivative financial instruments11  11  
Deferred compensation plan assets34 34   
Other assets4   4 
Total$64 $34 $26 $4 
Liabilities:
Derivative financial instruments$20 $ $20 $ 
  Fair Value Measurements at Reporting Date Using
($ in millions)October 29, 2022Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Cash equivalents$19 $ $19 $ 
Derivative financial instruments46  46  
Deferred compensation plan assets37 37   
Other assets4   4 
Total$106 $37 $65 $4 
Liabilities:
Derivative financial instruments$2 $ $2 $ 
We have highly liquid fixed and variable income investments classified as cash equivalents. We value these investments at their original purchase prices plus interest that has accrued at the stated rate. Our cash equivalents are placed primarily in time deposits.
Derivative financial instruments primarily include foreign exchange forward contracts. See Note 7 of Notes to Condensed Consolidated Financial Statements for information regarding currencies hedged against the U.S. dollar.
12


We maintain the Gap, Inc. Deferred Compensation Plan (“DCP”), which allows eligible employees to defer base compensation and bonus up to a maximum percentage, and non-employee directors to defer receipt of a portion of their Board fees. Plan investments are directed by participants and are recorded at market value and designated for the DCP. The fair value of the Company’s DCP assets is determined based on quoted market prices, and the assets are recorded in other long-term assets on the Condensed Consolidated Balance Sheets.
Nonfinancial Assets
We review the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The fair value of the long-lived assets is determined using level 3 inputs and based on discounted future cash flows of the asset or asset group using a discount rate commensurate with the risk. The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets, which for our retail stores is at the store level.
There were no material impairment charges recorded for long-lived assets during the 13 and 39 weeks ended October 28, 2023.
During the 39 weeks ended October 29, 2022, the Company recorded impairment of store assets of $10 million and impairment of operating lease assets of $16 million. The impairment of the store assets reduced the carrying amount of the applicable long-lived assets of $12 million to their estimated fair value of $2 million. The impairment of operating lease assets reduced the carrying amount of the applicable long-lived assets of $62 million to their estimated fair value of $46 million. The impairment charges were recorded in operating expenses on the Condensed Consolidated Statement of Operations.
We review the carrying amount of goodwill and other indefinite-lived intangible assets for impairment annually and whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount may not be recoverable.
There were no impairment charges recorded for goodwill or other indefinite-lived intangible assets for the 13 and 39 weeks ended October 28, 2023 or October 29, 2022.
Note 7. Derivative Financial Instruments
We operate in foreign countries, which exposes us to market risk associated with foreign currency exchange rate fluctuations. We use derivative financial instruments to manage our exposure to foreign currency exchange rate risk and do not enter into derivative financial contracts for trading purposes. Consistent with our risk management guidelines, we hedge a portion of our transactions related to merchandise purchases for foreign operations and certain intercompany transactions using foreign exchange forward contracts. These contracts are entered into with large, reputable financial institutions that are monitored for counterparty risk. The currencies hedged against changes in the U.S. dollar are the Canadian dollar, Japanese yen, British pound, Mexican peso, New Taiwan dollar, and Euro. Cash flows from derivative financial instruments are classified as cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows.
Derivative financial instruments are recorded at fair value on the Condensed Consolidated Balance Sheets as other current assets, other long-term assets, accrued expenses and other current liabilities, or other long-term liabilities.
Cash Flow Hedges
We designate foreign exchange forward contracts used to hedge forecasted merchandise purchases and related costs denominated in U.S. dollars made by our international subsidiaries whose functional currencies are their local currencies as cash flow hedges. The foreign exchange forward contracts entered into to hedge forecasted merchandise purchases and related costs generally have terms of up to 24 months. The effective portion of the gain or loss on the derivative financial instruments is reported as a component of other comprehensive income and is recognized into net income during the period in which the underlying transaction impacts the Condensed Consolidated Statements of Operations.
Other Derivatives Not Designated as Hedging Instruments
We use foreign exchange forward contracts to hedge our market risk exposure associated with foreign currency exchange rate fluctuations for certain intercompany balances denominated in currencies other than the functional currency of the entity with the intercompany balance. The gain or loss on the derivative financial instruments that represent economic hedges, as well as the remeasurement impact of the underlying intercompany balances, is recorded in operating expenses on the Condensed Consolidated Statements of Operations in the same period and generally offset each other.
13


Outstanding Notional Amounts
We had foreign exchange forward contracts outstanding in the following notional amounts:
($ in millions)October 28,
2023
January 28,
2023
October 29,
2022
Derivatives designated as cash flow hedges$357 $441 $491 
Derivatives not designated as hedging instruments526 645 583 
Total$883 $1,086 $1,074 
Quantitative Disclosures about Derivative Financial Instruments
The fair values of foreign exchange forward contracts are as follows:
($ in millions)October 28,
2023
January 28,
2023
October 29,
2022
Derivatives designated as cash flow hedges:
Other current assets$13 $9 $25 
Other long-term assets2  4 
Accrued expenses and other current liabilities 5  
Other long-term liabilities   
Derivatives not designated as hedging instruments:
Other current assets19 2 17 
Accrued expenses and other current liabilities 15 2 
Total derivatives in an asset position$34 $11 $46 
Total derivatives in a liability position$ $20 $2 
The majority of the unrealized gains and losses from designated cash flow hedges as of October 28, 2023 will be recognized in income within the next 12 months at the then-current values, which may differ from the fair values as of October 28, 2023 shown above.
Our foreign exchange forward contracts are subject to master netting arrangements with each of our counterparties and such arrangements are enforceable in the event of default or early termination of the contract. We do not elect to offset the fair values of our derivative financial instruments on the Condensed Consolidated Balance Sheets, and as such, the fair values shown above represent gross amounts. The amounts subject to enforceable master netting arrangements were not material for all periods presented.
See Note 6 of Notes to Condensed Consolidated Financial Statements for disclosures on the fair value measurements of our derivative financial instruments.
The pre-tax amounts recognized in net income related to derivative instruments are as follows:
Location and Amount of Gain
Recognized in Net Income
13 Weeks Ended
October 28, 2023
13 Weeks Ended
October 29, 2022
($ in millions)Cost of goods sold and occupancy expensesOperating expensesCost of goods sold and occupancy expensesOperating expenses
Total amount of expense line items presented in the Condensed Consolidated Statements of Operations in which the effects of derivatives are recorded$2,211 $1,306 $2,530 $1,323 
Gain recognized in net income
Derivatives designated as cash flow hedges (6) (14) 
Derivatives not designated as hedging instruments (27) (51)
Total gain recognized in net income
$(6)$(27)$(14)$(51)
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Location and Amount of Gain
Recognized in Net Income
39 Weeks Ended
October 28, 2023
39 Weeks Ended
October 29, 2022
($ in millions)Cost of goods sold and occupancy expenseOperating expensesCost of goods sold and occupancy expenseOperating expenses
Total amount of expense line items presented in the Condensed Consolidated Statements of Operations in which the effects of derivatives are recorded$6,488 $3,757 $7,438 $3,974 
Gain recognized in net income
Derivatives designated as cash flow hedges (13) (22) 
Derivatives not designated as hedging instruments (25) (80)
Total gain recognized in net income
$(13)$(25)$(22)$(80)
Note 8. Share Repurchases
Share repurchase activity is as follows:
 13 Weeks Ended39 Weeks Ended
($ and shares in millions except average per share cost)October 28,
2023
October 29,
2022
October 28,
2023
October 29,
2022
Number of shares repurchased (1) 1.2  10.6 
Total cost$ $12 $ $123 
Average per share cost including commissions $ $10.20 $ $11.59 
_________
(1)Excludes shares withheld to settle employee statutory tax withholding related to the vesting of stock units.
In February 2019, the Company's Board of Directors (the "Board") approved a $1.0 billion share repurchase authorization (the "February 2019 repurchase program"). The February 2019 repurchase program had $476 million remaining as of October 28, 2023. All common stock repurchased is immediately retired.
Note 9. Earnings Per Share
Weighted-average number of shares used for earnings per share is as follows:
 13 Weeks Ended39 Weeks Ended
(shares in millions)October 28,
2023
October 29,
2022
October 28,
2023
October 29,
2022
Weighted-average number of shares - basic371 365 369 367 
Common stock equivalents
4 1 4 3 
Weighted-average number of shares - diluted375 366 373 370 
The anti-dilutive shares related to stock options and other stock awards excluded from the computation of weighted-average number of shares – diluted were 5 million and 14 million for the 13 weeks ended October 28, 2023 and October 29, 2022, respectively, and 6 million and 14 million for the 39 weeks ended October 28, 2023 and October 29, 2022, respectively, as their inclusion would have an anti-dilutive effect on earnings per share.
15


Note 10. Commitments and Contingencies
We are a party to a variety of contractual agreements under which we may be obligated to indemnify the other party for certain matters. These contracts primarily relate to our commercial contracts, operating leases, trademarks, intellectual property, financial agreements, and various other agreements. Under these contracts, we may provide certain routine indemnifications relating to representations and warranties (e.g., ownership of assets, environmental or tax indemnifications), or personal injury matters. The terms of these indemnifications range in duration and may not be explicitly defined. Generally, the maximum obligation under such indemnifications is not explicitly stated, and as a result, the overall amount of these obligations cannot be reasonably estimated. Historically, we have not made significant payments for these indemnifications. We believe that if we were to incur a loss in any of these matters, the loss would not have a material effect on our Condensed Consolidated Financial Statements taken as a whole.
As a multinational company, we are subject to various proceedings, lawsuits, disputes, and claims ("Actions") arising in the ordinary course of our business. Many of these Actions raise complex factual and legal issues and are subject to uncertainties. As of October 28, 2023, Actions filed against us included commercial, intellectual property, customer, employment, securities, and data privacy claims, including class action lawsuits. The plaintiffs in some Actions seek unspecified damages or injunctive relief, or both. Actions are in various procedural stages and some are covered in part by insurance. As of October 28, 2023, January 28, 2023, and October 29, 2022, we recorded a liability for an estimated loss if the outcome of an Action is expected to result in a loss that is considered probable and reasonably estimable. The liability recorded was not material for any individual Action or in total for all periods presented. Subsequent to October 28, 2023, and through the filing date of this Quarterly Report on Form 10-Q, no information has become available that indicates a change is required that would be material to our Condensed Consolidated Financial Statements taken as a whole.
We cannot predict with assurance the outcome of Actions brought against us. However, we do not believe that the outcome of any current Action would have a material effect on our Condensed Consolidated Financial Statements taken as a whole.
Note 11. Segment Information
We identify our operating segments according to how our business activities are managed and evaluated. As of October 28, 2023, our operating segments included: Old Navy Global, Gap Global, Banana Republic Global, and Athleta Global. Each operating segment has a brand president who is responsible for various geographies and channels. Each of our brands serves customer demand through stores and online channels, leveraging our omni-channel capabilities that allow customers to shop seamlessly across all of our brands. We have determined that each of our operating segments share similar economic and other qualitative characteristics, and therefore the results of our operating segments are aggregated into one reportable segment as of October 28, 2023. We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our reportable segments.
See Note 2 of Notes to Condensed Consolidated Financial Statements for disaggregation of revenue by channel and by brand and region.
Note 12. Divestitures
On February 1, 2022, we completed the transition of our Gap Italy operations to a third party, OVS S.p.A. ("OVS"), to operate Gap Italy stores as a franchise partner. We completed the transition of our United Kingdom and Ireland online operations to a franchise partner through a joint venture with Next Plc on August 10, 2022. The impacts from these transactions upon divestiture were not material to our results of operations for the 39 weeks ended October 29, 2022.
We sold our distribution center in Rugby, England for $125 million on September 30, 2022. As a result of this transaction, the Company recognized a pre-tax gain on sale of $83 million within operating expenses on the Condensed Consolidated Statement of Operations during the 13 weeks ended October 29, 2022.
We also completed the transition of our Old Navy Mexico operations to a third party, Grupo Axo, to operate Old Navy Mexico stores as a franchise partner, on August 1, 2022. As a result of this transaction, the Company recognized a pre-tax loss of $35 million in the second quarter of fiscal 2022 when the assets were reclassified as held for sale. The pre-tax loss was recognized within operating expenses on the Condensed Consolidated Statement of Operations.
On November 7, 2022, we signed agreements to transition our Gap China and Gap Taiwan ("Gap Greater China") operations to a third party, Baozun Inc. ("Baozun"), to operate Gap Greater China stores and the in-market website as a franchise partner, subject to regulatory approvals and closing conditions. On January 31, 2023, the Gap China transaction closed with Baozun. The impact upon divestiture was not material to our results of operations for the 39 weeks ended October 28, 2023. The Gap Taiwan operations will continue to operate as usual until regulatory approvals and closing conditions are met.
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Note 13. Supply Chain Finance Program
Our voluntary supply chain finance ("SCF") program provides certain suppliers with the opportunity to sell their receivables due from us to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. We are not a party to the agreements between our suppliers and the financial institutions and our payment terms are not impacted by whether a supplier participates in the SCF program.
We may agree to side letters with participating financial institutions related to the SCF program that require us to transfer a certain amount of cash to be used as collateral for our payment obligations in a specified period. These collateral amounts, if applicable, are classified as restricted cash on