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 February 26, 2015 announcing the Company’s earnings for the fourth quarter and fiscal year ended January 31, 2015. |
99.2 | Press Release dated February 26, 2015 announcing a share repurchase authorization and dividend increase. |
THE GAP, INC. | |||
(Registrant) | |||
Date: February 26, 2015 | By: | /s/ Sabrina L. Simmons | |
Sabrina L. Simmons | |||
Executive Vice President and | |||
Chief Financial Officer |
Exhibit Number | Description |
99.1 | Press Release dated February 26, 2015 announcing the Company’s earnings for the fourth quarter and fiscal year ended January 31, 2015. |
99.2 | Press Release dated February 26, 2015 announcing a share repurchase authorization and dividend increase. |
• | Fourth Quarter 2014 Earnings Per Share Grew 10 Percent; Up 20 Percent Excluding Foreign Exchange Impact |
• | Fiscal Year 2014 Earnings Per Share Increased 5 Percent; Up 10 Percent Excluding Foreign Exchange Impact |
• | Full Year 2014 Net Sales Grew 2 Percent to $16.44 Billion; Up 3 Percent on a Constant Currency Basis |
• | Distributed $1.6 Billion to Shareholders in Fiscal Year 2014 through Share Repurchases and Dividends |
• | The company’s largest global brand, Old Navy, delivered positive comparable sales results during each quarter of fiscal year 2014, including a positive 11 percent increase during the fourth quarter. |
• | Gap Inc. continued to execute its long-term global growth strategy by adding 39 new stores in greater China during fiscal year 2014, including 7 new Old Navy stores and 32 new Gap stores. Additionally, the company announced plans to open about 40 new stores in greater China during fiscal year 2015. |
• | Building on its success as a performance and lifestyle brand, Athleta grew its U.S. footprint to 101 stores during fiscal year 2014, and the brand plans to open about 20 additional U.S. stores during fiscal year 2015. |
• | During fiscal year 2014, Gap Inc. continued to deliver new digital capabilities to customers and made further progress in mobile and personalization. The company launched its new Order in Store capability, building upon its current omni-channel suite including Reserve in Store, Find in Store and Ship from Store, which are now widely available across the company’s U.S. store fleet. |
• | Gap Global: negative 5 percent versus positive 3 percent last year |
• | Banana Republic Global: flat versus negative 1 percent last year |
• | Old Navy Global: positive 5 percent versus positive 2 percent last year |
($ in millions) | Gap Global | Old Navy Global | Banana Republic Global | Other (2) | Total | Percentage of Net Sales | |||||||||||||||||
13 Weeks Ended January 31, 2015 | |||||||||||||||||||||||
U.S. (1) | $ | 990 | $ | 1,765 | $ | 700 | $ | 206 | $ | 3,661 | 78 | % | |||||||||||
Canada | 104 | 143 | 75 | 1 | 323 | 7 | % | ||||||||||||||||
Europe | 219 | — | 22 | — | 241 | 5 | % | ||||||||||||||||
Asia | 352 | 47 | 38 | — | 437 | 9 | % | ||||||||||||||||
Other regions | 35 | 3 | 8 | — | 46 | 1 | % | ||||||||||||||||
Total | $ | 1,700 | $ | 1,958 | $ | 843 | $ | 207 | $ | 4,708 | 100 | % | |||||||||||
($ in millions) | Gap Global | Old Navy Global | Banana Republic Global | Other (2) | Total | Percentage of Net Sales | |||||||||||||||||
13 Weeks Ended February 1, 2014 | |||||||||||||||||||||||
U.S. (1) | $ | 1,050 | $ | 1,577 | $ | 683 | $ | 196 | $ | 3,506 | 77 | % | |||||||||||
Canada | 111 | 136 | 71 | 1 | 319 | 7 | % | ||||||||||||||||
Europe | 242 | — | 21 | — | 263 | 6 | % | ||||||||||||||||
Asia | 363 | 28 | 43 | — | 434 | 9 | % | ||||||||||||||||
Other regions | 45 | — | 8 | — | 53 | 1 | % | ||||||||||||||||
Total | $ | 1,811 | $ | 1,741 | $ | 826 | $ | 197 | $ | 4,575 | 100 | % | |||||||||||
($ in millions) | Gap Global | Old Navy Global | Banana Republic Global | Other (2) | Total | Percentage of Net Sales | |||||||||||||||||
52 Weeks Ended January 31, 2015 | |||||||||||||||||||||||
U.S. (1) | $ | 3,575 | $ | 5,967 | $ | 2,405 | $ | 725 | $ | 12,672 | 77 | % | |||||||||||
Canada | 384 | 500 | 249 | 4 | 1,137 | 7 | % | ||||||||||||||||
Europe | 824 | — | 93 | — | 917 | 6 | % | ||||||||||||||||
Asia | 1,208 | 149 | 145 | — | 1,502 | 9 | % | ||||||||||||||||
Other regions | 174 | 3 | 30 | — | 207 | 1 | % | ||||||||||||||||
Total | $ | 6,165 | $ | 6,619 | $ | 2,922 | $ | 729 | $ | 16,435 | 100 | % | |||||||||||
($ in millions) | Gap Global | Old Navy Global | Banana Republic Global | Other (2) | Total | Percentage of Net Sales | |||||||||||||||||
52 Weeks Ended February 1, 2014 | |||||||||||||||||||||||
U.S. (1) | $ | 3,800 | $ | 5,698 | $ | 2,365 | $ | 668 | $ | 12,531 | 78 | % | |||||||||||
Canada | 404 | 482 | 238 | 4 | 1,128 | 7 | % | ||||||||||||||||
Europe | 809 | — | 82 | — | 891 | 5 | % | ||||||||||||||||
Asia | 1,165 | 77 | 155 | — | 1,397 | 9 | % | ||||||||||||||||
Other regions | 173 | — | 28 | — | 201 | 1 | % | ||||||||||||||||
Total | $ | 6,351 | $ | 6,257 | $ | 2,868 | $ | 672 | $ | 16,148 | 100 | % |
(1) | U.S. includes the United States, Puerto Rico, and Guam. |
(2) | Includes Piperlime, Athleta, and Intermix. |
• | the estimated negative impact of about 6 percentage points, or approximately $0.16, due to foreign currency fluctuations at current exchange rates; and |
• | the estimated negative impact of about 4 percentage points, or approximately $0.13, due to delayed merchandise receipts at West Coast ports. |
13 Weeks Ended January 31, 2015 | ||||||||||||||
Store Locations Beginning of Q4 | Store Locations Opened | Store Locations Closed | Store Locations End of Q4 | Square Feet (millions) | ||||||||||
Gap North America | 977 | 6 | 23 | 960 | 10.0 | |||||||||
Gap Asia | 249 | 18 | 1 | 266 | 2.7 | |||||||||
Gap Europe | 189 | 2 | 2 | 189 | 1.6 | |||||||||
Old Navy North America | 1,015 | 6 | 8 | 1,013 | 17.2 | |||||||||
Old Navy Asia | 36 | 7 | — | 43 | 0.7 | |||||||||
Banana Republic North America | 610 | 4 | 4 | 610 | 5.1 | |||||||||
Banana Republic Asia | 45 | 1 | 2 | 44 | 0.2 | |||||||||
Banana Republic Europe | 11 | — | — | 11 | 0.1 | |||||||||
Athleta North America | 92 | 9 | — | 101 | 0.4 | |||||||||
Piperlime North America | 1 | — | — | 1 | — | |||||||||
Intermix North America | 41 | 1 | — | 42 | 0.1 | |||||||||
Company-operated stores total | 3,266 | 54 | 40 | 3,280 | 38.1 | |||||||||
Franchise | 414 | 16 | 1 | 429 | N/A | |||||||||
Total | 3,680 | 70 | 41 | 3,709 | 38.1 |
• | global growth strategies, including store openings in Asia, Athleta store openings, and franchise store openings; |
• | earnings per share for fiscal year 2015, on a reported basis and as impacted by foreign exchange, West Coast port issues, and Gap brand expectations; |
• | operating margin for fiscal year 2015; |
• | effective tax rate for fiscal year 2015; |
• | returning excess cash to shareholders through share repurchases and dividends; |
• | expected dividend for fiscal year 2015; |
• | capital expenditures for fiscal year 2015; |
• | depreciation and amortization for fiscal year 2015; |
• | store openings and closings, and weightings by brand, in fiscal year 2015; |
• | square footage for fiscal year 2015; |
• | timing of Gap brand turnaround, including timing of product changes; |
• | achieving high-single digit operating income growth, and double-digit earnings per share growth; |
• | impact of West Coast port slowdown and congestion, including impacts on financial results and inventory; |
• | expenses and expense deleverage in fiscal 2015; and |
• | roll out of omni-channel initiatives. |
• | the risk that adjustments to the company’s unaudited financial statements may be identified through the course of the company’s independent registered public accounting firm completing its integrated audit of the company’s financial statements and financial controls; |
• | 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 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 that if the company is unable to manage its inventory effectively, its gross margins will be adversely affected; |
• | the risks to the company’s efforts to expand internationally, including the company’s ability to operate under a global brand structure, foreign exchange fluctuations, and operating in regions where it has less experience; |
• | the risks to the company’s business, including its costs and supply chain, associated with global sourcing and manufacturing; |
• | the risks to the company’s reputation or operations associated with importing merchandise from foreign countries, including failure of the company’s vendors to adhere to its Code of Vendor Conduct; |
• | 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 the company’s franchisees’ operation of franchise stores is not directly within the company’s control and could impair the value of its brands; |
• | 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 the company’s access to the capital markets and adversely impact the company’s financial results or business initiatives; |
• | the risk that the failure to attract and retain key personnel could have an adverse impact on the company’s results of operations; |
• | the risk that the company’s investments in omni-channel shopping initiatives may not deliver the results the company anticipates; |
• | the risk that updates or changes to the company’s information technology (“IT”) systems may disrupt the company’s operations; |
• | the risk that the company is 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 the company’s security measures, which could have an adverse effect on the company’s results of operations and reputation; |
• | the risk that natural disasters, public health crises, political crises, or other catastrophic events could adversely affect the company’s operations and financial results, or those of the company’s franchisees or vendors; |
• | the risk that changes in the regulatory or administrative landscape could adversely affect the company’s financial condition, strategies, and results of operations; |
• | the risk that the company does not repurchase some or all of the shares it anticipates purchasing pursuant to its repurchase program; and |
• | the risk that the company will not be successful in defending various proceedings, lawsuits, disputes, claims, and audits. |
($ in millions) | January 31, 2015 | February 1, 2014 | |||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,515 | $ | 1,510 | |||
Merchandise inventory | 1,889 | 1,928 | |||||
Other current assets | 913 | 992 | |||||
Total current assets | 4,317 | 4,430 | |||||
Property and equipment, net | 2,773 | 2,758 | |||||
Other long-term assets | 600 | 661 | |||||
Total assets | $ | 7,690 | $ | 7,849 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Current maturities of debt | $ | 21 | $ | 25 | |||
Accounts payable | 1,173 | 1,242 | |||||
Accrued expenses and other current liabilities | 1,020 | 1,142 | |||||
Income taxes payable | 20 | 36 | |||||
Total current liabilities | 2,234 | 2,445 | |||||
Long-term liabilities: | |||||||
Long-term debt | 1,332 | 1,369 | |||||
Lease incentives and other long-term liabilities | 1,141 | 973 | |||||
Total long-term liabilities | 2,473 | 2,342 | |||||
Total stockholders' equity | 2,983 | 3,062 | |||||
Total liabilities and stockholders' equity | $ | 7,690 | $ | 7,849 |
13 Weeks Ended | 52 Weeks Ended | ||||||||||||||
($ and shares in millions except per share amounts) | January 31, 2015 | February 1, 2014 | January 31, 2015 | February 1, 2014 | |||||||||||
Net sales | $ | 4,708 | $ | 4,575 | $ | 16,435 | $ | 16,148 | |||||||
Cost of goods sold and occupancy expenses | 3,050 | 2,982 | 10,146 | 9,855 | |||||||||||
Gross profit | 1,658 | 1,593 | 6,289 | 6,293 | |||||||||||
Operating expenses | 1,139 | 1,071 | 4,206 | 4,144 | |||||||||||
Operating income | 519 | 522 | 2,083 | 2,149 | |||||||||||
Interest, net | 17 | 18 | 70 | 56 | |||||||||||
Income before income taxes | 502 | 504 | 2,013 | 2,093 | |||||||||||
Income taxes | 183 | 197 | 751 | 813 | |||||||||||
Net income | $ | 319 | $ | 307 | $ | 1,262 | $ | 1,280 | |||||||
Weighted-average number of shares - basic | 423 | 448 | 435 | 461 | |||||||||||
Weighted-average number of shares - diluted | 428 | 454 | 440 | 467 | |||||||||||
Earnings per share - basic | $ | 0.75 | $ | 0.69 | $ | 2.90 | $ | 2.78 | |||||||
Earnings per share - diluted | $ | 0.75 | $ | 0.68 | $ | 2.87 | $ | 2.74 |
52 Weeks Ended | |||||||
($ in millions) | January 31, 2015 | February 1, 2014 | |||||
Cash flows from operating activities: | |||||||
Net income | $ | 1,262 | $ | 1,280 | |||
Depreciation and amortization (a) | 500 | 470 | |||||
Change in merchandise inventory | (9 | ) | (193 | ) | |||
Other, net | 376 | 148 | |||||
Net cash provided by operating activities | 2,129 | 1,705 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (714 | ) | (670 | ) | |||
Proceeds from sale of property and equipment | 121 | — | |||||
Maturities of short-term investments | — | 50 | |||||
Other | (3 | ) | (4 | ) | |||
Net cash used for investing activities | (596 | ) | (624 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from issuance of long-term debt | — | 144 | |||||
Payments of long-term debt | (21 | ) | — | ||||
Issuances under share-based compensation plans, net | 38 | 97 | |||||
Repurchases of common stock | (1,179 | ) | (979 | ) | |||
Excess tax benefit from exercise of stock options and vesting of stock units | 38 | 56 | |||||
Cash dividends paid | (383 | ) | (321 | ) | |||
Other | — | (1 | ) | ||||
Net cash used for financing activities | (1,507 | ) | (1,004 | ) | |||
Effect of foreign exchange rate fluctuations on cash and cash equivalents | (21 | ) | (27 | ) | |||
Net increase in cash and cash equivalents | 5 | 50 | |||||
Cash and cash equivalents at beginning of period | 1,510 | 1,460 | |||||
Cash and cash equivalents at end of period | $ | 1,515 | $ | 1,510 |
52 Weeks Ended | |||||||
($ in millions) | January 31, 2015 | February 1, 2014 | |||||
Net cash provided by operating activities | $ | 2,129 | $ | 1,705 | |||
Less: purchases of property and equipment | (714 | ) | (670 | ) | |||
Free cash flow (a) | $ | 1,415 | $ | 1,035 |
• | returning excess cash to shareholders; |
• | future share repurchases; and |
• | annual per share dividend. |
• | the risk that changes in global 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 risks to the company’s business, including its costs and supply chain, associated with global sourcing and manufacturing; |
• | the risks to the company’s reputation or operations associated with importing merchandise from foreign countries, including failure of the company’s vendors to adhere to its Code of Vendor Conduct; |
• | the risk that the company is 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 the company’s security measures, which could have an adverse effect on the company’s results of operations and reputation; |
• | the risk that natural disasters, public health crises, political crises, or other catastrophic events could adversely affect the company’s operations and financial results, or those of the company’s franchisees or vendors; |
• | the risk that changes in the regulatory or administrative landscape could adversely affect the company’s financial condition, strategies, and results of operations; |
• | the risk that the company does not repurchase some or all of the shares it anticipates purchasing pursuant to its repurchase program; and |
• | the risk that the company will not be successful in defending various proceedings, lawsuits, disputes, claims, and audits. |