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 May 22, 2014 announcing earnings for the first quarter ended May 3, 2014. |
THE GAP, INC. | |||
(Registrant) | |||
Date: May 22, 2014 | By: | /s/ Sabrina L. Simmons | |
Sabrina L. Simmons | |||
Executive Vice President and | |||
Chief Financial Officer |
Exhibit Number | Description |
• | Net Sales Grew 1 Percent in the First Quarter; Up 2 Percent on a Constant Currency Basis |
• | First Quarter Diluted Earnings Per Share of $0.58; Reaffirmed Full Year Earnings Per Share Guidance Range of $2.90 to $2.95 |
• | Distributed $328 Million through Share Repurchases and Dividends |
• | During the first quarter of fiscal year 2014, Old Navy opened its first company-operated store and e-commerce site in mainland China, allowing customers in the world’s second-largest apparel market to shop the brand’s offering for the entire family. During the quarter, Old Navy also opened its first-ever franchise-operated store in the Philippines, with plans to open a total of five Old Navy franchise stores in that market during 2014. |
• | Gap brand debuted in Taiwan during the first quarter of fiscal year 2014, while also continuing to grow its store base in mainland China. The brand is on track to open approximately 30 additional Gap stores in the greater China region during fiscal year 2014. |
• | With six new store openings during the first quarter of fiscal year 2014, the company continued to grow its Athleta brand, bringing together fashion and performance to create premium, versatile products for its customers. Athleta is now on track to end the year with about 100 U.S. stores. |
• | The company increased online net sales 13 percent to $575 million for the first quarter of fiscal year 2014, on top of last year’s 27 percent increase, continuing its progress toward bridging the growing digital world with its physical stores to create world-class shopping experiences for its customers. |
• | Gap Global: negative 5 percent versus positive 3 percent last year |
• | Banana Republic Global: negative 1 percent versus flat last year |
• | Old Navy Global: positive 1 percent versus positive 3 percent last year |
($ in millions) | Gap Global | Old Navy Global | Banana Republic Global | Other (2) | Total | Percentage of Net Sales | |||||||||||||||||
Quarter Ended May 3, 2014 | |||||||||||||||||||||||
U.S. (1) | $ | 828 | $ | 1,352 | $ | 548 | $ | 182 | $ | 2,910 | 77 | % | |||||||||||
Canada | 80 | 101 | 53 | 1 | 235 | 6 | % | ||||||||||||||||
Europe | 201 | — | 23 | — | 224 | 6 | % | ||||||||||||||||
Asia | 286 | 28 | 37 | — | 351 | 10 | % | ||||||||||||||||
Other regions | 46 | — | 8 | — | 54 | 1 | % | ||||||||||||||||
Total | $ | 1,441 | $ | 1,481 | $ | 669 | $ | 183 | $ | 3,774 | 100 | % | |||||||||||
($ in millions) | Gap Global | Old Navy Global | Banana Republic Global | Other (2) | Total | Percentage of Net Sales | |||||||||||||||||
Quarter Ended May 4, 2013 | |||||||||||||||||||||||
U.S. (1) | $ | 896 | $ | 1,344 | $ | 544 | $ | 147 | $ | 2,931 | 79 | % | |||||||||||
Canada | 86 | 105 | 53 | 1 | 245 | 7 | % | ||||||||||||||||
Europe | 180 | — | 18 | — | 198 | 5 | % | ||||||||||||||||
Asia | 266 | 10 | 37 | — | 313 | 8 | % | ||||||||||||||||
Other regions | 36 | — | 6 | — | 42 | 1 | % | ||||||||||||||||
Total | $ | 1,464 | $ | 1,459 | $ | 658 | $ | 148 | $ | 3,729 | 100 | % |
(1) | U.S. includes the United States, Puerto Rico, and Guam. |
(2) | Includes Piperlime, Athleta, and Intermix. |
13 Weeks Ended May 3, 2014 | ||||||||||||||
Store Locations Beginning of Q1 | Store Locations Opened | Store Locations Closed | Store Locations End of Q1 | Square Feet (millions) | ||||||||||
Gap North America | 968 | 3 | 5 | 966 | 10.1 | |||||||||
Gap Europe | 193 | — | 3 | 190 | 1.6 | |||||||||
Gap Asia | 228 | 4 | 1 | 231 | 2.3 | |||||||||
Old Navy North America | 1,004 | 7 | 6 | 1,005 | 17.2 | |||||||||
Old Navy Asia | 18 | 5 | — | 23 | 0.3 | |||||||||
Banana Republic North America | 596 | 3 | 1 | 598 | 5.0 | |||||||||
Banana Republic Asia | 43 | 3 | — | 46 | 0.2 | |||||||||
Banana Republic Europe | 11 | — | — | 11 | 0.1 | |||||||||
Athleta North America | 65 | 6 | — | 71 | 0.3 | |||||||||
Piperlime North America | 1 | — | — | 1 | — | |||||||||
Intermix North America | 37 | — | — | 37 | 0.1 | |||||||||
Company-operated stores total | 3,164 | 31 | 16 | 3,179 | 37.2 | |||||||||
Franchise | 375 | 15 | 4 | 386 | N/A | |||||||||
Total | 3,539 | 46 | 20 | 3,565 | 37.2 |
• | earnings per share for fiscal 2014; |
• | long-term, profitable growth; |
• | global growth, omni-channel, seamless inventory and responsive supply chain initiatives; |
• | Old Navy franchise store openings in the Philippines; |
• | Gap store openings in China; |
• | number Athleta stores at the end of fiscal year 2014; |
• | depreciation and amortization for fiscal year 2014; |
• | operating margins for fiscal years 2014 and 2015; |
• | effective tax rate for fiscal year 2014; |
• | inventory dollars per store at the end of the second quarter of fiscal year 2014; |
• | capital expenditures for fiscal year 2014; |
• | real estate square footage for fiscal year 2014; |
• | SG&A leverage in fiscal year 2014; |
• | store openings and closings, and weightings by brand, for fiscal year 2014; and |
• | gaining market share. |
• | 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 the adoption of new accounting pronouncements will impact future results; |
• | the risk that changes in global economic conditions or consumer spending patterns could adversely impact our results of operations; |
• | the highly competitive nature of our business in the United States and internationally; |
• | the risk that we or our franchisees will be unsuccessful in gauging apparel trends and changing consumer preferences; |
• | the risk that if we are unable to manage our inventory effectively, our gross margins will be adversely affected; |
• | the risks to our efforts to expand internationally, including our ability to operate under a global brand structure, foreign exchange, and operating in regions where we have less experience; |
• | 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 and adversely affect our business, financial condition, and results of operations; |
• | the risk that our franchisees’ operation of franchise stores is not directly within our control and could impair the value of our brands; |
• | the risk that we or our 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 our credit profile or deterioration in market conditions may limit our access to the capital markets and adversely impact our financial results or our business initiatives; |
• | the risk that the failure to attract and retain key personnel could have an adverse impact on our results of operations; |
• | the risk that our investments in omni-channel shopping initiatives may not deliver the results we anticipate; |
• | the risk that updates or changes to our information technology (“IT”) systems may disrupt our operations; |
• | the risk that we are subject to data or other security breaches that may result in increased costs, violations of law, significant legal and financial exposure, and a loss of confidence in our security measures, which could have an adverse effect on our results of operations and our reputation; |
• | the risk that natural disasters, public health crises, political crises, or other catastrophic events could adversely affect our operations and financial results, or those of our franchisees or vendors; |
• | the risk that changes in the regulatory or administrative landscape could adversely affect our financial condition, strategies, and results of operations; |
• | the risk that we do not repurchase some or all of the shares we anticipate purchasing pursuant to our repurchase program; and |
• | the risk that we will not be successful in defending various proceedings, lawsuits, disputes, claims, and audits. |
($ in millions) | May 3, 2014 | May 4, 2013 | |||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,544 | $ | 1,610 | |||
Merchandise inventory | 1,909 | 1,723 | |||||
Other current assets | 867 | 798 | |||||
Total current assets | 4,320 | 4,131 | |||||
Property and equipment, net | 2,703 | 2,608 | |||||
Other long-term assets | 672 | 700 | |||||
Total assets | $ | 7,695 | $ | 7,439 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Current maturities of debt | $ | 24 | $ | — | |||
Accounts payable | 1,101 | 1,008 | |||||
Accrued expenses and other current liabilities | 980 | 934 | |||||
Income taxes payable | 98 | 160 | |||||
Total current liabilities | 2,203 | 2,102 | |||||
Long-term liabilities: | |||||||
Long-term debt | 1,369 | 1,247 | |||||
Lease incentives and other long-term liabilities | 1,087 | 929 | |||||
Total long-term liabilities | 2,456 | 2,176 | |||||
Total stockholders' equity | 3,036 | 3,161 | |||||
Total liabilities and stockholders' equity | $ | 7,695 | $ | 7,439 |
13 Weeks Ended | |||||||
($ and shares in millions except per share amounts) | May 3, 2014 | May 4, 2013 | |||||
Net sales | $ | 3,774 | $ | 3,729 | |||
Cost of goods sold and occupancy expenses | 2,308 | 2,185 | |||||
Gross profit | 1,466 | 1,544 | |||||
Operating expenses | 1,023 | 1,014 | |||||
Operating income | 443 | 530 | |||||
Interest, net | 17 | — | |||||
Income before income taxes | 426 | 530 | |||||
Income taxes | 166 | 197 | |||||
Net income | $ | 260 | $ | 333 | |||
Weighted-average number of shares - basic | 445 | 464 | |||||
Weighted-average number of shares - diluted | 451 | 471 | |||||
Earnings per share - basic | $ | 0.58 | $ | 0.72 | |||
Earnings per share - diluted | $ | 0.58 | $ | 0.71 |
13 Weeks Ended | |||||||
($ in millions) | May 3, 2014 | May 4, 2013 | |||||
Cash flows from operating activities: | |||||||
Net income | $ | 260 | $ | 333 | |||
Depreciation and amortization (a) | 118 | 118 | |||||
Change in merchandise inventory | 21 | 28 | |||||
Other, net | 114 | (123 | ) | ||||
Net cash provided by operating activities | 513 | 356 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (162 | ) | (151 | ) | |||
Maturities of short-term investments | — | 50 | |||||
Other | (1 | ) | (3 | ) | |||
Net cash used for investing activities | (163 | ) | (104 | ) | |||
Cash flows from financing activities: | |||||||
Issuances under share-based compensation plans, net | (14 | ) | 15 | ||||
Repurchases of common stock | (230 | ) | (58 | ) | |||
Excess tax benefit from exercise of stock options and vesting of stock units | 24 | 28 | |||||
Cash dividends paid | (98 | ) | (70 | ) | |||
Other | — | (1 | ) | ||||
Net cash used for financing activities | (318 | ) | (86 | ) | |||
Effect of foreign exchange rate fluctuations on cash and cash equivalents | 2 | (16 | ) | ||||
Net increase in cash and cash equivalents | 34 | 150 | |||||
Cash and cash equivalents at beginning of period | 1,510 | 1,460 | |||||
Cash and cash equivalents at end of period | $ | 1,544 | $ | 1,610 |
13 Weeks Ended | |||||||
($ in millions) | May 3, 2014 | May 4, 2013 | |||||
Net cash provided by operating activities | $ | 513 | $ | 356 | |||
Less: purchases of property and equipment | (162 | ) | (151 | ) | |||
Free cash flow (a) | $ | 351 | $ | 205 |