Delaware | 1-7562 | 94-1697231 | ||
(State of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
Two Folsom Street San Francisco, California | 94105 | |
(Address of principal executive offices) | (Zip Code) |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
99.1 | Press Release dated November 21, 2013 announcing the Company’s earnings for the third quarter ended November 2, 2013. |
99.2 | Press Release dated November 21, 2013 announcing a share repurchase program. |
THE GAP, INC. | |||
(Registrant) | |||
Date: November 21, 2013 | By: | /s/ Sabrina L. Simmons | |
Sabrina L. Simmons | |||
Executive Vice President and | |||
Chief Financial Officer |
Exhibit Number | Description |
99.1 | Press Release dated November 21, 2013 announcing the Company’s earnings for the third quarter ended November 2, 2013. |
99.2 | Press Release dated November 21, 2013 announcing a share repurchase program. |
• | Third Quarter Earnings Per Share of $0.72, a 14 Percent Increase over Last Year |
• | Net Sales Up 3 Percent in the Third Quarter; Up 5 Percent on a Constant Currency Basis |
• | Comparable Sales Up 1 Percent for the Third Quarter Versus a 6 Percent Increase Last Year |
• | Reaffirmed Full Year Earnings Per Share Guidance of $2.57 to $2.65 |
• | Distributed $882 Million to Shareholders in the Quarter through Share Repurchase and Dividends; Announced New $1 Billion Share Repurchase Authorization |
• | Operating margin expanded 100 basis points to 14.5 percent. |
• | Increased online sales by 20 percent in the third quarter compared with last year, continuing to build upon the company’s online success and omni-channel strategies. |
• | The company continued to expand its Gap store base in mainland China, opening 18 additional stores in the third quarter, for a total of 73 stores. |
• | In line with its strategy to expand Old Navy internationally, the company ended the quarter with 14 Old Navy stores in Japan, on pace to open 15 to 20 stores for the year. The company also announced its intention to open its first franchise-operated Old Navy store in the Philippines in 2014. |
• | The company continued to grow its Franchise business during the quarter with the addition of four markets - Brazil, Costa Rica, Hungary and Peru - now totaling more than 350 stores in over 40 global markets. |
• | Gap Inc. opened 15 Athleta stores in the third quarter, for a total of 61 stores open to date, and the brand is on pace to end fiscal 2013 with about 65 stores. |
• | Gap Global: positive 1 percent versus positive 4 percent last year |
• | Banana Republic Global: negative 1 percent versus positive 5 percent last year |
• | Old Navy Global: flat versus positive 9 percent last year |
($ in millions) | Gap Global | Old Navy Global | Banana Republic Global | Other (2) | Total | Percentage of Net Sales | |||||||||||||||||
Quarter Ended November 2, 2013 | |||||||||||||||||||||||
U.S. (1) | $ | 960 | $ | 1,371 | $ | 572 | $ | 155 | $ | 3,058 | 77 | % | |||||||||||
Canada | 111 | 126 | 60 | 1 | 298 | 7 | % | ||||||||||||||||
Europe | 199 | — | 21 | — | 220 | 6 | % | ||||||||||||||||
Asia | 282 | 20 | 37 | — | 339 | 8 | % | ||||||||||||||||
Other regions | 53 | — | 8 | — | 61 | 2 | % | ||||||||||||||||
Total | $ | 1,605 | $ | 1,517 | $ | 698 | $ | 156 | $ | 3,976 | 100 | % | |||||||||||
($ in millions) | Gap Global | Old Navy Global | Banana Republic Global | Other (2) | Total | Percentage of Net Sales | |||||||||||||||||
Quarter Ended October 27, 2012 | |||||||||||||||||||||||
U.S. (1) | $ | 966 | $ | 1,385 | $ | 572 | $ | 89 | $ | 3,012 | 78 | % | |||||||||||
Canada | 102 | 126 | 60 | — | 288 | 8 | % | ||||||||||||||||
Europe | 187 | — | 19 | — | 206 | 5 | % | ||||||||||||||||
Asia | 264 | 3 | 39 | — | 306 | 8 | % | ||||||||||||||||
Other regions | 46 | — | 6 | — | 52 | 1 | % | ||||||||||||||||
Total | $ | 1,565 | $ | 1,514 | $ | 696 | $ | 89 | $ | 3,864 | 100 | % |
(1) | U.S. includes the United States, Puerto Rico, and Guam. |
(2) | Includes Piperlime, Athleta, and fiscal year 2013 includes Intermix. |
13 Weeks Ended November 2, 2013 | ||||||||||||||
Store Locations Beginning of Q3 | Store Locations Opened | Store Locations Closed | Store Locations End of Q3 | Square Feet (millions) | ||||||||||
Gap North America | 969 | 10 | 1 | 978 | 10.2 | |||||||||
Gap Europe | 196 | 1 | 3 | 194 | 1.7 | |||||||||
Gap Asia | 202 | 19 | 1 | 220 | 2.2 | |||||||||
Old Navy North America | 1,003 | 7 | 3 | 1,007 | 17.3 | |||||||||
Old Navy Asia | 10 | 4 | — | 14 | 0.2 | |||||||||
Banana Republic North America | 593 | 5 | 2 | 596 | 5.0 | |||||||||
Banana Republic Asia | 42 | 2 | 1 | 43 | 0.2 | |||||||||
Banana Republic Europe | 10 | 1 | — | 11 | 0.1 | |||||||||
Athleta North America | 46 | 15 | — | 61 | 0.2 | |||||||||
Piperlime North America | 1 | — | — | 1 | — | |||||||||
Intermix North America | 34 | 1 | — | 35 | 0.1 | |||||||||
Company-operated stores total | 3,106 | 65 | 11 | 3,160 | 37.2 | |||||||||
Franchise | 338 | 20 | 3 | 355 | N/A | |||||||||
Total | 3,444 | 85 | 14 | 3,515 | 37.2 |
• | growing sales and earnings; |
• | earnings per share for fiscal year 2013; |
• | commitment to returning excess cash to shareholders; |
• | international expansion, including Old Navy stores in Japan and the Philippines; |
• | additional Athleta stores; |
• | depreciation and amortization for fiscal year 2013; |
• | operating margin for fiscal year 2013; |
• | effective tax rate for fiscal year 2013; |
• | inventory dollars per store at the end of the fourth quarter of fiscal year 2013 |
• | capital expenditures for fiscal year 2013; |
• | store openings and closings for fiscal year 2013, and weightings by channel; |
• | real estate square footage for fiscal year 2013; |
• | leveraging expenses; |
• | impact of foreign exchange rates on sales and earnings; |
• | impact of calendar shifts, including the impact on fourth quarter earnings, expense, and spread between comparable sales and total sales; |
• | delivering performance while pursuing long-term strategic initiatives; |
• | the company’s long-term plans, including omni-channel, responsive supply chain and seamless inventory. |
• | the risk that additional information may arise during the company’s close process or as a result of subsequent events that would require the company to make adjustments to the financial information; |
• | the risk that adoption of new accounting pronouncements will impact future results; |
• | the risk that changes in general economic conditions or consumer spending patterns could adversely impact the company’s results of operations; |
• | the highly competitive nature of the company’s business in the United States and internationally; |
• | the risk that the company or its franchisees will be unsuccessful in gauging apparel trends and changing consumer preferences; |
• | the risk to the company’s business associated with global sourcing and manufacturing, including sourcing costs, events causing disruptions in product shipment, or an inability to secure sufficient manufacturing capacity; |
• | the risk that the company’s franchisees will be unable to successfully open, operate, and grow their franchised stores in a manner consistent with the company’s requirements regarding its brand identities and customer experience standards; |
• | the risk that the company or its franchisees will be unsuccessful in identifying, negotiating, and securing new store locations and renewing, modifying or terminating leases for existing store locations effectively; |
• | the risk that comparable sales and margins will experience fluctuations; |
• | the risk that changes in the company’s credit profile or deterioration in market conditions may limit its access to the capital markets and adversely impact its financial results or business initiatives; |
• | the risk that trade matters could increase the cost or reduce the supply of apparel available to the company and adversely affect its business, financial condition, and results of operations; |
• | the risk that updates or changes to the company’s information technology (“IT”) systems may disrupt its operations; |
• | the risk that actual or anticipated cyber attacks, and other cybersecurity risks, may cause the company to incur increasing costs; |
• | the risk that natural disasters, public health crises, political crises, or other catastrophic events could adversely affect the company’s operations and financial results; |
• | the risk that acts or omissions by the company’s third-party vendors, including a failure to comply with the company’s code of vendor conduct, could have a negative impact on its reputation or operations; |
• | the risk that the company does not repurchase some or all of the shares it anticipates purchasing pursuant to its repurchase program; |
• | the risk that the company will not be successful in defending various proceedings, lawsuits, disputes, claims, and audits; and |
• | the risk that changes in the regulatory or administrative landscape could adversely affect the company’s financial condition, strategies, and results of operations. |
($ in millions) | November 2, 2013 | October 27, 2012 | |||||
ASSETS | |||||||
Current assets: | |||||||
Cash, cash equivalents, and short-term investments | $ | 996 | $ | 1,770 | |||
Merchandise inventory | 2,471 | 2,269 | |||||
Other current assets | 923 | 794 | |||||
Total current assets | 4,390 | 4,833 | |||||
Property and equipment, net | 2,714 | 2,559 | |||||
Other long-term assets | 682 | 615 | |||||
Total assets | $ | 7,786 | $ | 8,007 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Current maturities of debt | $ | — | $ | 2 | |||
Accounts payable | 1,513 | 1,584 | |||||
Accrued expenses and other current liabilities | 1,064 | 1,041 | |||||
Income taxes payable | 54 | 1 | |||||
Total current liabilities | 2,631 | 2,628 | |||||
Long-term liabilities: | |||||||
Long-term debt | 1,247 | 1,246 | |||||
Lease incentives and other long-term liabilities | 952 | 972 | |||||
Total long-term liabilities | 2,199 | 2,218 | |||||
Total stockholders' equity | 2,956 | 3,161 | |||||
Total liabilities and stockholders' equity | $ | 7,786 | $ | 8,007 |
13 Weeks Ended | 39 Weeks Ended | ||||||||||||||
($ and shares in millions except per share amounts) | November 2, 2013 | October 27, 2012 | November 2, 2013 | October 27, 2012 | |||||||||||
Net sales | $ | 3,976 | $ | 3,864 | $ | 11,573 | $ | 10,926 | |||||||
Cost of goods sold and occupancy expenses | 2,387 | 2,271 | 6,873 | 6,531 | |||||||||||
Gross profit | 1,589 | 1,593 | 4,700 | 4,395 | |||||||||||
Operating expenses | 1,013 | 1,073 | 3,073 | 3,055 | |||||||||||
Operating income | 576 | 520 | 1,627 | 1,340 | |||||||||||
Interest, net | 20 | 21 | 38 | 63 | |||||||||||
Income before income taxes | 556 | 499 | 1,589 | 1,277 | |||||||||||
Income taxes | 219 | 191 | 616 | 493 | |||||||||||
Net income | $ | 337 | $ | 308 | $ | 973 | $ | 784 | |||||||
Weighted-average number of shares - basic | 463 | 481 | 465 | 485 | |||||||||||
Weighted-average number of shares - diluted | 468 | 488 | 471 | 491 | |||||||||||
Earnings per share - basic | $ | 0.73 | $ | 0.64 | $ | 2.09 | $ | 1.62 | |||||||
Earnings per share - diluted | $ | 0.72 | $ | 0.63 | $ | 2.07 | $ | 1.60 |
39 Weeks Ended | |||||||
($ in millions) | November 2, 2013 | October 27, 2012 | |||||
Cash flows from operating activities: | |||||||
Net income | $ | 973 | $ | 784 | |||
Depreciation and amortization (a) | 349 | 363 | |||||
Change in merchandise inventory | (723 | ) | (655 | ) | |||
Other, net | 354 | 733 | |||||
Net cash provided by operating activities | 953 | 1,225 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (487 | ) | (449 | ) | |||
Purchases of short-term investments | — | (175 | ) | ||||
Maturities of short-term investments | 50 | 125 | |||||
Other | (2 | ) | (12 | ) | |||
Net cash used for investing activities | (439 | ) | (511 | ) | |||
Cash flows from financing activities: | |||||||
Payments of short-term debt | — | (17 | ) | ||||
Payments of long-term debt | — | (400 | ) | ||||
Proceeds from issuances under share-based compensation plans, net of withholding tax payments | 90 | 159 | |||||
Repurchases of common stock | (875 | ) | (467 | ) | |||
Excess tax benefit from exercise of stock options and vesting of stock units | 55 | 32 | |||||
Cash dividends paid | (232 | ) | (182 | ) | |||
Other | (1 | ) | — | ||||
Net cash used for financing activities | (963 | ) | (875 | ) | |||
Effect of foreign exchange rate fluctuations on cash and cash equivalents | (15 | ) | (4 | ) | |||
Net decrease in cash and cash equivalents | (464 | ) | (165 | ) | |||
Cash and cash equivalents at beginning of period | 1,460 | 1,885 | |||||
Cash and cash equivalents at end of period | $ | 996 | $ | 1,720 |
39 Weeks Ended | |||||||
($ in millions) | November 2, 2013 | October 27, 2012 | |||||
Net cash provided by operating activities | $ | 953 | $ | 1,225 | |||
Less: purchases of property and equipment | (487 | ) | (449 | ) | |||
Free cash flow (a) | $ | 466 | $ | 776 |
• | returning excess cash to shareholders; |
• | increase in annual dividends. |
• | the risk that the company does not repurchase some or all of the shares it anticipates purchasing pursuant to its repurchase program. |