SAN
FRANCISCO, Aug. 24, 2023 /PRNewswire/ -- Gap
Inc. (NYSE: GPS), a portfolio of billion-dollar lifestyle
brands including Old Navy, Gap, Banana Republic, and Athleta, and
the largest specialty apparel company in the U.S., today reported
financial results for its second quarter ended July 29, 2023.
"I have long admired Gap Inc. as a customer, a brand builder,
and most recently, as a Board member. An even greater draw is the
company's storied brands. And I'm excited for the opportunity to
lead the incredible people of Gap Inc. to unlock our full
potential," said Richard Dickson,
President and Chief Executive Officer, Gap Inc. "We're seeing
encouraging signs of progress, as our teams streamline the way we
work so we can focus on growth-driving initiatives – a virtuous
cycle that we'll look to become our norm. This means we have to do
things differently, with a clear focus on redefining our brands'
meaning to consumers, focusing on creativity, designing for
relevance as a pursuit rather than a goal, and leveraging our
remarkable legacy to shape an exciting new future."
"We are pleased to deliver meaningful operating margin expansion
and strong free cash flow during the second quarter driven by
modest market share gains, our significantly improved inventory
position, and our actions to transform the company's operating
model and structure," said Katrina
O'Connell, Executive Vice President and Chief Financial
Officer, Gap Inc. "While we are encouraged by our near-term
progress, we remain mindful of the mixed economic and consumer
environment in which we are operating and continue to plan the
business prudently."
Second Quarter Fiscal 2023 - Financial Results
- Net sales of $3.55 billion, down
8% compared to last year, inclusive of an estimated 1-point foreign
exchange headwind and 2 percentage points of negative impact from
the sale of Gap China.
-
- Comparable sales were down 6%.
- Store sales decreased 7% compared to last year. The company
ended the quarter with 3,456 store locations in over 40 countries,
of which 2,592 were company operated.
- Online sales decreased 11% compared to last year and
represented 33% of total net sales.
- Gross margin of 37.6% increased 310 basis points versus last
year's reported gross margin and increased 160 basis points versus
last year's adjusted gross margin which excluded $58 million in inventory impairment charges.
-
- Merchandise margin increased 410 basis points versus last year
on a reported basis. Compared to last year's adjusted rate,
merchandise margin increased 260 basis points due to lower air
freight expense and improved promotional activity in the quarter,
partially offset by inflationary cost headwinds.
- Rent, occupancy, and depreciation (ROD) deleveraged 100 basis
points versus last year primarily due to lower comparable sales in
the quarter.
- Reported operating income was $106
million; reported operating margin of 3.0%.
- Adjusted operating income, excluding $13
million in restructuring costs, was $119 million; adjusted operating margin of
3.4%.
- The effective tax rate was negative 8.3%. During the quarter,
the company recorded a tax benefit as a result of a transfer
pricing settlement related to its sourcing activities.
- Reported net income of $117
million; reported diluted earnings per share of $0.32.
- Adjusted net income of $127
million, excluding restructuring costs; adjusted diluted
earnings per share of $0.34.
Second Quarter Fiscal 2023 – Balance Sheet and Cash Flow
Highlights
- Ended the quarter with cash and cash equivalents of
$1.4 billion, an increase of 91% from
the prior year.
- Year-to-date net cash from operating activities was
$528 million. Free cash flow, defined
as net cash from operating activities less purchases of property
and equipment, was $329 million.
- Ending inventory of $2.23 billion
was down 29% compared to last year.
- Year-to-date capital expenditures were $199 million.
- Paid second quarter dividend of $0.15 per share, totaling $56 million. The company's Board of Directors
approved third quarter fiscal 2023 dividend of $0.15 per share.
Additional information regarding adjusted gross margin, adjusted
operating income, adjusted operating margin, adjusted net income,
adjusted diluted earnings per share, and free cash flow, all of
which are non-GAAP financial measures, is provided at the end of
this press release along with a reconciliation of these measures
from the most directly comparable GAAP financial measures for the
applicable period.
Second Quarter Fiscal 2023 – Global Brand Results
Old Navy:
- Net sales of $1.96 billion, down
6% compared to last year. Strength in women's tops and woven
bottoms and improved trends in men's and kids were offset by
softness in the active category as well as continued slower demand
from the lower-income consumer.
- Comparable sales were down 6%.
Gap:
- Net sales of $755 million, down
14% compared to last year. Excluding the negative impact from the
sale of Gap China, the shutdown of Yeezy Gap and foreign exchange
headwinds, net sales were down 4% versus last year. Sales were
driven by continued strength in the women's category offset by
strategic store closures in North
America.
- Comparable sales were down 1%.
Banana Republic:
- Net sales of $480 million, down
11% compared to last year. While Banana Republic maintained market
share in the quarter, sales growth remains impacted in the
short-term as the brand laps the outsized growth last year driven
by the shift in consumer preferences.
- Comparable sales were down 8%.
Athleta:
- Net sales of $341 million, down
1% compared to last year. While sales continue to be impacted by
product acceptance challenges, the brand has taken near-term
actions to improve product presentation and creative to better
align with Athleta's performance DNA.
- Comparable sales were down 7%.
Fiscal 2023 Outlook
"As we look toward the long-term, we believe our focus on
unlocking the value of our important and iconic brands coupled with
the transformative actions we are taking to improve our operating
structure will position Gap Inc. back on its path towards
delivering sustainable, profitable growth and value for our
shareholders," said Katrina
O'Connell, Executive Vice President and Chief Financial
Officer, Gap Inc.
The company's outlook takes into consideration the continued
uncertain consumer and macro environment.
The company is estimating that third quarter net sales could
decrease in the low double-digit range compared to last year's net
sales of $4.04 billion. As a
reminder, the sale of Gap China to Baozun Inc. closed on
January 31, 2023. Third quarter 2022
net sales included approximately $70
million in sales for Gap China.
The company anticipates that fiscal 2023 net sales could
decrease in the mid-single digit range compared to last year's net
sales of $15.6 billion. As a
reminder, fiscal 2022 net sales included approximately $300 million in sales for Gap China. Fiscal 2023
will include a 53rd week estimated to positively impact net sales
by $150 million.
The company continues to expect gross margin expansion for
fiscal 2023. At the estimated level of sales described above, the
company is planning adjusted operating expenses of approximately
$1.3 billion in the third quarter and
approximately $5.15 billion for
fiscal 2023.
The company continues to expect fiscal 2023 capital expenditures
in the range of $500 million to
$525 million.
Webcast and Conference Call Information
Emily Gacka, Director of Investor
Relations at Gap Inc., will host a conference call to review the
company's second quarter fiscal 2023 results beginning at
approximately 2:00 p.m. Pacific Time
today. Ms. Gacka will be joined by Executive Chair Bob Martin, Chief Executive Officer Richard Dickson and Chief Financial Officer
Katrina O'Connell.
A live webcast of the conference call will be available online
at investors.gapinc.com. A replay of the webcast will be available
at the same location.
Non-GAAP Disclosure
This press release and related conference call include financial
measures that have not been calculated in accordance
with U.S. generally accepted accounting principles (GAAP)
and are therefore referred to as non-GAAP financial measures. The
non-GAAP measures described below are intended to provide investors
with additional useful information about the company's financial
performance, to enhance the overall understanding of its past
performance and future prospects and to allow for greater
transparency with respect to important metrics used by management
for financial and operating decision-making. The company presents
these non-GAAP financial measures to assist investors in seeing its
financial performance from management's view and because it
believes they provide an additional tool for investors to use in
computing the company's core financial performance over multiple
periods with other companies in its industry. Additional
information regarding the intended use of each non-GAAP measure
included in this press release and related conference call is
provided in the tables to this press release.
The non-GAAP measures included in this press release and related
conference call are adjusted gross margin, adjusted operating
expenses/adjusted SG&A, adjusted operating income, adjusted
operating margin, adjusted net income, adjusted diluted earnings
per share, and free cash flow, as well as expected adjusted
operating expenses/adjusted SG&A. These non-GAAP measures
exclude the impact of certain items that are set forth in the
tables to this press release. A reconciliation of expected adjusted
operating expenses/adjusted SG&A is not provided, in reliance
on the exception provided under Item 10(e)(1)(i)(B) of Regulation
S-K, because a comparable GAAP measure is not reasonably accessible
or reliable due to the inherent difficulty in forecasting and
quantifying measures that would be necessary for such
reconciliation. Namely, we are not able to reliably predict the
impact of many of the costs and expenses that may be incurred in
the future that could impact operating expenses/SG&A. In
addition, we believe such a reconciliation would imply a degree of
precision and certainty that could be confusing to investors. The
variability of those costs and expenses may be material and have a
significant and unpredictable impact on our future GAAP
results.
The non-GAAP measures used by the company should not be
considered as a substitute for, or superior to, measures of
financial performance prepared in accordance with GAAP and may not
be the same as similarly titled measures used by other companies
due to possible differences in method and in items or events being
adjusted. The company urges investors to review the
reconciliation of these non-GAAP financial measures to the most
directly comparable GAAP financial measures included in the tables
to this press release below, and not to rely on any single
financial measure to evaluate its business. The non-GAAP financial
measures used by the company have limitations in their usefulness
to investors because they have no standardized meaning prescribed
by GAAP and are not prepared under any comprehensive set of
accounting rules or principles.
Forward-Looking Statements
This press release and
related conference call contain 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 statements regarding the
following: our new Chief Executive Officer, his qualifications to
lead the company, and defining a bright future for the company;
making what we do, what we stand for, and what we sell relevant;
our brands balancing the need for clothes and want for fashion;
sparking defining trends; making consumers into fans and growing
fandom; growing our customers and the value of our brands;
continuing to strengthen our financial footing; accelerating
efforts to drive profitable growth by unlocking the value in our
brands; revitalizing our brands; redefining our brands' meaning to
consumers; focusing on creativity; designing for relevant as a
pursuit rather than a goal; building to quality; leveraging our
company's legacy; reigniting a creative culture and attracting
great talent; committing our brands to a distinctive purpose;
reorienting our brands around design and the customer; reengaging
in the cultural conversation and making products that inspire
cultural dialogue; providing experiences in stores and online that
excite and delight our customers; mattering to our people,
investors, communities, and the world; expected costs savings from
organizational changes and the impact on our teams being
consumer-centric; our positioning into the second half of the year;
focusing on the levers and opportunities in our control to deliver
for our customers, employees, and shareholders; Old Navy's
positioning in the marketplace; Old Navy's marketing, product, and
value in the back-to-school season; maximizing fine fabrics at
Banana Republic in the second half of the year; Banana Republic's
broader home offering; our new President and CEO of Athleta and
bringing Athleta to its full potential over the long term;
moderating buys and using our responsive levers; expected ending
inventory in fiscal 2023; our plans to pay down our asset-backed
line of credit in fiscal 2023; our dividend strategy and paying a
third quarter fiscal 2023 dividend; expected third quarter and
fiscal 2023 net sales; the impact of an additional week in fiscal
2023 on fiscal 2023 net sales; expected third quarter and fiscal
2023 gross margin; expected air expense in third quarter and fiscal
2023; expected inventory position and promotional activity in the
third quarter and fiscal 2023; inflationary costs, including
commodity costs and ocean freight rates, in the third quarter and
fiscal 2023; expected ROD in the third quarter and fiscal 2023;
expected third quarter and fiscal 2023 adjusted operating
expenses/adjusted SG&A; expected capital expenditures in fiscal
2023; delivering our fiscal 2023 outlook; unlocking the value of
our bands; actions to put the company on a path towards
sustainable, profitable growth and delivering long-term shareholder
value; and streamlining the way we work in order to focus on
growth-driving initiatives.
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 risks, any of which could have an adverse
effect on our financial condition, results of operations, and
reputation: the overall global economic and geopolitical
environment and the impact on consumer spending patterns; 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 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 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
we fail to manage key executive succession and retention and to
continue to attract and retain qualified personnel; 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 inflationary pressures continue to
negatively impact gross margins or that we are unable to pass along
price increases; the risk that our investments in customer,
digital, and omni-channel shopping initiatives may not deliver the
results we anticipate; 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 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; the ongoing conflict
between Russia and Ukraine and the impact on global market
stability; 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 that trade matters could increase the cost or
reduce the supply of apparel available to us; 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; reductions in income and cash flow
from our credit card arrangement related to our private label and
co-branded credit cards; 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 risk that changes in our
credit profile or deterioration in market conditions may limit our
access to the capital markets; 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 worsening global economic and
geopolitical conditions could result in changes to the assumptions
and estimates used when preparing our 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; 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 the adoption of
new accounting pronouncements will impact future results; and the
risk that additional information may arise during our close process
or as a result of subsequent events that would require us to make
adjustments to our financial information.
Additional information regarding factors that could cause
results to differ can be found in our Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 14, 2023, as well as our subsequent filings
with the Securities and Exchange Commission.
These forward-looking statements are based on information as of
August 24, 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.
About Gap Inc.
Gap Inc., a collection of purpose-led lifestyle brands, is the
largest American specialty apparel company offering clothing,
accessories, and personal care products for men, women, and
children under the Old Navy, Gap, Banana Republic, and
Athleta brands. The company uses omni-channel
capabilities to bridge the digital world and physical stores to
further enhance its shopping experience. Gap Inc. is guided by its
purpose, Inclusive, by Design, and takes pride in creating products
and experiences its customers love while doing right by its
employees, communities, and planet. Gap Inc. products are
available for purchase worldwide through company-operated stores,
franchise stores, and e-commerce sites. Fiscal year 2022 net
sales were $15.6 billion. For
more information, please visit www.gapinc.com.
Investor Relations Contact:
Nina Bari
Investor_relations@gap.com
Media Relations Contact:
Megan
Foote
Press@gap.com
The Gap, Inc.
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
|
|
|
|
|
UNAUDITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
|
|
July 29, 2023
|
|
July 30, 2022
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
|
$
1,350
|
|
$
708
|
|
Merchandise inventory
|
|
|
|
2,226
|
|
3,135
|
|
Other current assets
|
|
|
|
663
|
|
1,106
|
|
Total
current assets
|
|
|
|
4,239
|
|
4,949
|
|
Property and equipment,
net
|
|
|
|
2,595
|
|
2,809
|
|
Operating lease
assets
|
|
|
|
3,113
|
|
3,532
|
|
Other long-term
assets
|
|
|
|
903
|
|
881
|
|
Total
assets
|
|
|
|
$
10,850
|
|
$
12,171
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
|
$
1,406
|
|
$
1,640
|
|
Accrued expenses and other current liabilities
|
|
|
|
1,007
|
|
1,216
|
|
Current portion of operating lease liabilities
|
|
|
|
578
|
|
717
|
|
Income taxes payable
|
|
|
|
16
|
|
41
|
|
Total
current liabilities
|
|
|
|
3,007
|
|
3,614
|
|
Long-term
liabilities:
|
|
|
|
|
|
|
|
Revolving credit facility
|
|
|
|
150
|
|
350
|
|
Long-term debt
|
|
|
|
1,487
|
|
1,485
|
|
Long-term operating lease liabilities
|
|
|
|
3,433
|
|
3,857
|
|
Other long-term liabilities
|
|
|
|
510
|
|
560
|
|
Total
long-term liabilities
|
|
|
|
5,580
|
|
6,252
|
|
Total stockholders'
equity
|
|
|
|
2,263
|
|
2,305
|
|
Total
liabilities and stockholders' equity
|
|
|
|
$
10,850
|
|
$
12,171
|
|
|
|
|
|
|
|
|
|
|
The Gap, Inc.
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
|
|
|
|
|
|
|
UNAUDITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
26 Weeks Ended
|
|
($ and shares in millions except per share
amounts)
|
|
|
|
July 29, 2023
|
|
July 30, 2022
|
|
July 29, 2023
|
|
July 30, 2022
|
|
Net sales
|
|
|
$
3,548
|
|
$
3,857
|
|
$
6,824
|
|
$
7,334
|
|
Cost of goods sold and
occupancy expenses
|
|
|
|
2,215
|
|
2,527
|
|
4,277
|
|
4,908
|
|
Gross profit
|
|
|
1,333
|
|
1,330
|
|
2,547
|
|
2,426
|
|
Operating
expenses
|
|
|
1,227
|
|
1,358
|
|
2,451
|
|
2,651
|
|
Operating income
(loss)
|
|
|
106
|
|
(28)
|
|
96
|
|
(225)
|
|
Interest,
net
|
|
|
(2)
|
|
20
|
|
8
|
|
39
|
|
Income (loss) before
income taxes
|
|
|
108
|
|
(48)
|
|
88
|
|
(264)
|
|
Income tax expense
(benefit)
|
|
(9)
|
|
1
|
|
(11)
|
|
(53)
|
|
Net income
(loss)
|
|
|
$
117
|
|
$
(49)
|
|
$
99
|
|
$
(211)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number
of shares - basic
|
|
|
369
|
|
367
|
|
368
|
|
369
|
|
Weighted-average number
of shares - diluted
|
|
|
371
|
|
367
|
|
372
|
|
369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) per
share - basic
|
|
|
$
0.32
|
|
$
(0.13)
|
|
$
0.27
|
|
$
(0.57)
|
|
Net earnings (loss) per
share - diluted
|
|
|
|
$
0.32
|
|
$
(0.13)
|
|
$
0.27
|
|
$
(0.57)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Gap, Inc.
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
|
|
|
UNAUDITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended
|
($ in millions)
|
|
|
July 29,
2023 (a)
|
|
July 30,
2022 (a)
|
Cash flows from
operating activities:
|
|
|
|
Net income
(loss)
|
$
99
|
|
$
(211)
|
Depreciation and
amortization
|
267
|
|
262
|
Loss on divestiture
activity
|
-
|
|
35
|
Gain on sale of
building
|
(47)
|
|
-
|
Change in merchandise
inventory
|
160
|
|
(140)
|
Change in accounts
payable
|
104
|
|
(292)
|
Change in accrued
expenses and other current liabilities
|
(76)
|
|
(191)
|
Change in income taxes
payable, net of receivables and other tax-related items
|
5
|
|
372
|
Other, net
|
|
|
16
|
|
(42)
|
Net cash provided by
(used for) operating activities
|
528
|
|
(207)
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Purchases of property
and equipment
|
(199)
|
|
(406)
|
Net proceeds from sale
of building
|
76
|
|
333
|
Proceeds from
divestiture activity
|
11
|
|
-
|
Net cash used for
investing activities
|
(112)
|
|
(73)
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from revolving
credit facility
|
-
|
|
350
|
Repayments of revolving
credit facility
|
(200)
|
|
-
|
Payments for debt
issuance costs
|
-
|
|
(6)
|
Proceeds from issuances
under share-based compensation plans
|
13
|
|
15
|
Withholding tax
payments related to vesting of stock units
|
(11)
|
|
(15)
|
Repurchases of common
stock
|
-
|
|
(111)
|
Cash dividends
paid
|
(111)
|
|
(111)
|
Net cash (used for)
provided by financing activities
|
(309)
|
|
122
|
|
|
|
|
|
|
|
|
|
Effect of foreign
exchange rate fluctuations on cash, cash equivalents, and
restricted cash
|
(2)
|
|
(9)
|
Net increase (decrease)
in cash, cash equivalents, and restricted cash
|
105
|
|
(167)
|
Cash, cash equivalents,
and restricted cash at beginning of period
|
1,273
|
|
902
|
Cash, cash equivalents,
and restricted cash at end of period
|
$
1,378
|
|
$
735
|
|
|
|
|
|
|
|
|
|
____________________
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) For the
twenty-six weeks ended July 29, 2023 and July 30, 2022, total cash,
cash equivalents, and restricted cash includes $28 million and $27
million, respectively, of restricted cash recorded within other
long-term assets on the Condensed Consolidated Balance
Sheets.
|
|
|
|
|
|
|
|
|
|
The Gap, Inc.
|
|
|
|
|
NON-GAAP FINANCIAL MEASURES
|
|
|
|
|
UNAUDITED
|
|
|
|
|
|
|
|
|
|
|
FREE CASH FLOW
|
|
|
|
|
|
|
Free cash flow is a
non-GAAP financial measure. We believe free cash flow is an
important metric because it represents a measure of how much cash a
company has available for discretionary and non-discretionary items
after the deduction of capital expenditures. We require regular
capital expenditures including technology improvements as well as
building and maintaining our stores and distribution centers. We
use this metric internally, as we believe our sustained ability to
generate free cash flow is an important driver of value creation.
However, this non-GAAP financial measure is not intended to
supersede or replace our GAAP results.
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended
|
($ in millions)
|
|
July 29, 2023
|
|
July 30, 2022
|
Net cash provided by
(used for) operating activities
|
|
|
$
528
|
|
$
(207)
|
Less: Purchases of
property and equipment
|
|
(199)
|
|
(406)
|
Free cash
flow
|
|
$
329
|
|
$
(613)
|
|
|
|
|
|
|
The Gap, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-GAAP FINANCIAL MEASURES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTED STATEMENT OF OPERATIONS METRICS FOR THE
SECOND QUARTER OF FISCAL YEAR 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following
adjusted statement of operations metrics are non-GAAP financial
measures. These measures are provided to enhance visibility into
the Company's underlying results for the period excluding the
impact of restructuring costs. Management believes the adjusted
metrics are useful for the assessment of ongoing operations as we
believe the adjusted items are not indicative of our ongoing
operations, and provide additional information to investors to
facilitate the comparison of results against past and future years.
However, these non-GAAP financial measures are not intended to
supersede or replace the GAAP measures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
13 Weeks Ended July 29, 2023
|
|
Operating
Expenses
|
|
Operating
Expenses as a %
of Net Sales
|
|
Operating
Income
|
|
Operating
Margin
|
|
Income Tax
Expense (Benefit)
|
|
Net
Income
|
|
Earnings per
Share - Diluted (b)
|
|
|
GAAP metrics, as
reported
|
|
$
1,227
|
|
34.6 %
|
|
$ 106
|
|
3.0 %
|
|
$
(9)
|
|
$ 117
|
|
$
0.32
|
|
|
Adjustments
for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring costs
(a)
|
|
(13)
|
|
(0.4) %
|
|
13
|
|
0.4 %
|
|
3
|
|
10
|
|
0.03
|
|
|
Non-GAAP
metrics
|
|
$
1,214
|
|
34.2 %
|
|
$ 119
|
|
3.4 %
|
|
$
(6)
|
|
$ 127
|
|
$
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Includes $3 million
of employee-related costs and $10 million of consulting and other
associated costs related to our previously announced actions to
further simplify and optimize our operating model and
structure.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Earnings per share
was computed individually for each line item; therefore, the sum of
the individual lines may not equal the total.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Gap, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-GAAP FINANCIAL MEASURES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTED STATEMENT OF OPERATIONS METRICS FOR THE
SECOND QUARTER OF FISCAL YEAR 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following adjusted
statement of operations metrics are non-GAAP financial measures.
These measures are provided to enhance visibility into the
Company's underlying results for the period excluding the impact of
impairment of certain inventory and a loss on divestiture activity.
Management believes the adjusted metrics are useful for the
assessment of ongoing operations as we believe the adjusted items
are not indicative of our ongoing operations, and provide
additional information to investors to facilitate the comparison of
results against past and future years. However, these non-GAAP
financial measures are not intended to supersede or replace the
GAAP measures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
13 Weeks Ended July 30, 2022
|
|
Gross
Profit
|
|
Gross
Margin
|
|
Operating
Expenses
|
|
Operating
Expenses as a %
of Net Sales
|
|
Operating
Income
(loss)
|
|
Operating
Margin
|
|
Income
Taxes
|
|
Net Income
(loss)
|
|
Earnings (loss)
per Share -
Diluted
|
GAAP metrics, as
reported
|
|
$
1,330
|
|
34.5 %
|
|
$
1,358
|
|
35.2 %
|
|
$
(28)
|
|
(0.7) %
|
|
$ 1
|
|
$
(49)
|
|
$
(0.13)
|
Adjustments
for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory impairment
charges (a)
|
|
58
|
|
1.5 %
|
|
-
|
|
- %
|
|
58
|
|
1.5 %
|
|
9
|
|
49
|
|
0.13
|
Loss on divestiture
activity (b)
|
|
-
|
|
- %
|
|
(35)
|
|
(0.9) %
|
|
35
|
|
0.9 %
|
|
5
|
|
30
|
|
0.08
|
Non-GAAP
metrics
|
|
$
1,388
|
|
36.0 %
|
|
$
1,323
|
|
34.3 %
|
|
$
65
|
|
1.7 %
|
|
$ 15
|
|
$
30
|
|
$
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Represents the
inventory impairment charges as a result of delayed seasonal
product due to global supply chain disruption and extended size
product discontinued at stores.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Represents the
impact of the loss on divestiture activity related to the
transition of the Old Navy Mexico business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Gap, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET SALES RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table
details the Company's second quarter fiscal year 2023 and 2022 net
sales (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
Old Navy
Global
|
|
Gap Global
|
|
Banana
Republic Global
|
|
Athleta
Global
|
|
Other (2)
|
|
Total
|
|
13 Weeks Ended July 29, 2023
|
|
|
|
|
|
|
|
U.S. (1)
|
|
|
$
1,777
|
|
$ 542
|
|
$
415
|
|
$
327
|
|
$
11
|
|
$
3,072
|
|
Canada
|
|
|
165
|
|
76
|
|
44
|
|
13
|
|
-
|
|
298
|
|
Europe
|
|
|
1
|
|
29
|
|
-
|
|
-
|
|
-
|
|
30
|
|
Asia
|
|
|
-
|
|
77
|
|
14
|
|
-
|
|
-
|
|
91
|
|
Other
regions
|
|
|
18
|
|
31
|
|
7
|
|
1
|
|
-
|
|
57
|
|
Total
|
|
|
$
1,961
|
|
$ 755
|
|
$
480
|
|
$
341
|
|
$
11
|
|
$
3,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
Old Navy
Global
|
|
Gap Global
|
|
Banana
Republic Global
|
|
Athleta
Global
|
|
Other (2)
|
|
Total
|
|
13 Weeks Ended July 30, 2022
|
|
|
|
|
|
|
|
U.S. (1)
|
|
|
$
1,880
|
|
$ 565
|
|
$
460
|
|
$
335
|
|
$
3
|
|
$
3,243
|
|
Canada
|
|
|
183
|
|
82
|
|
53
|
|
7
|
|
-
|
|
325
|
|
Europe
|
|
|
-
|
|
51
|
|
2
|
|
-
|
|
-
|
|
53
|
|
Asia
|
|
|
1
|
|
141
|
|
18
|
|
-
|
|
-
|
|
160
|
|
Other
regions
|
|
|
26
|
|
42
|
|
6
|
|
2
|
|
-
|
|
76
|
|
Total
|
|
|
$
2,090
|
|
$ 881
|
|
$
539
|
|
$
344
|
|
$
3
|
|
$
3,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) U.S. includes the
United States and Puerto Rico.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Primarily consists
of net sales from revenue-generating strategic
initiatives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Gap, Inc.
|
|
|
|
|
|
|
|
|
|
REAL ESTATE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Store count, openings,
closings, and square footage for our stores are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 28, 2023
|
|
26 Weeks Ended July 29, 2023
|
|
July 29, 2023
|
|
Number of
Store Locations
|
|
Number of Stores
Opened
|
|
Number of Stores
Closed
|
|
Number of
Store Locations
|
|
Square Footage
(in millions)
|
|
|
|
|
Old Navy North
America
|
1,238
|
|
17
|
|
8
|
|
1,247
|
|
19.9
|
Gap North
America
|
493
|
|
-
|
|
12
|
|
481
|
|
5.1
|
Gap Asia (1)
|
232
|
|
1
|
|
4
|
|
140
|
|
1.2
|
Banana Republic North
America
|
419
|
|
-
|
|
11
|
|
408
|
|
3.4
|
Banana Republic
Asia
|
46
|
|
3
|
|
2
|
|
47
|
|
0.2
|
Athleta North
America
|
257
|
|
15
|
|
3
|
|
269
|
|
1.1
|
Company-operated stores
total
|
2,685
|
|
36
|
|
40
|
|
2,592
|
|
30.9
|
Franchise
(1)
|
667
|
|
101
|
|
38
|
|
864
|
|
N/A
|
Total
|
3,352
|
|
137
|
|
78
|
|
3,456
|
|
30.9
|
|
|
|
|
|
|
|
|
|
|
____________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The 89 Gap China
stores that were transitioned to Baozun during the period are not
included as store closures or openings for Company-operated and
Franchise store activity. The ending balance for Gap Asia excludes
Gap China stores and the ending balance for Franchise includes Gap
China locations transitioned during the period.
|
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SOURCE Gap Inc.