10-Q

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, 2017

☐ 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)	(Zip code)

Registrant’s telephone number, including area code: (415) 427-0100

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files)    Yes  ☑    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 filer	☑	Accelerated 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 15, 2017 was 388,857,073.

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 impact of the adoption of new accounting standards;

• recognition of unrealized gains and losses from designated cash flow hedges into income;

• the impact of the potential settlement of outstanding tax matters;

• the impact of losses due to indemnification obligations;

• the outcome of proceedings, lawsuits, disputes, and claims;

• the impact of continuing depreciation of certain foreign currencies on gross margins for our foreign subsidiaries;

• current cash balances and cash flows being sufficient to support our business operations, including growth initiatives and planned capital expenditures;

• ability to supplement near-term liquidity, if necessary, with our $500 million revolving credit facility or other available market instruments;

• the impact of the seasonality of our operations;

• dividend payments in fiscal 2017; and

• the impact of changes in 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 risk that we or our franchisees will be unsuccessful in gauging apparel trends and changing consumer preferences, including channel preferences;

• the highly competitive nature of our business in the United States and internationally;

• the risk that failure to maintain, enhance, and protect our brand image could have an adverse effect on our results of operations;

• the risk that the failure to attract and retain key personnel, or effectively manage succession, could have an adverse impact on our results of operations;

• 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 changes in the regulatory or administrative landscape could adversely affect our financial condition, strategies, and results of operations;

• the risk that our investments in digital and customer initiatives may not deliver the results we anticipate;

• the risk that if we are unable to manage our inventory effectively, our gross margins will be adversely affected;

• 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 foreign currency exchange rate fluctuations could adversely impact our financial results;

• the risks to our business, including our costs and supply chain, associated with global sourcing and manufacturing;

• the risk that changes in global economic conditions or consumer spending patterns could adversely impact our results of operations;

• the risks to our efforts to expand internationally, including our ability to operate under a global brand structure and operating in regions where we have less experience;

• 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 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 position or our business initiatives;

• the risk that updates or changes to our information technology (“IT”) systems may disrupt our operations;

• 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 reductions in income and cash flow from our marketing and servicing arrangement related to our private label and co-branded credit cards could adversely affect our operating results and cash flows;

• the risk that adoption of new accounting pronouncements will impact future results;

• 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.

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, 2017 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 22, 2017, and 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 Management’s Discussion and Analysis included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017.

THE GAP, INC.

TABLE OF CONTENTS

		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of October 28, 2017, January 28, 2017, and October 29, 2016	1
	Condensed Consolidated Statements of Income for the Thirteen and Thirty-Nine Weeks Ended October 28, 2017 and October 29, 2016	2
	Condensed Consolidated Statements of Comprehensive Income for the Thirteen and Thirty-Nine Weeks Ended October 28, 2017 and October 29, 2016	3
	Condensed Consolidated Statements of Cash Flows for the Thirty-Nine Weeks Ended October 28, 2017 and October 29, 2016	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 6.	Exhibits	24

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, 2017		January 28, 2017		October 29, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	1,353	$	1,783	$	1,522
Merchandise inventory	2,476		1,830		2,398
Other current assets	654		702		751
Total current assets	4,483		4,315		4,671
Property and equipment, net of accumulated depreciation of $6,041, $5,813, and $5,900	2,686		2,616		2,662
Other long-term assets	726		679		674
Total assets	$	7,895	$	7,610	$	8,007
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of debt	$	—	$	65	$	424
Accounts payable	1,330		1,243		1,413
Accrued expenses and other current liabilities	1,132		1,113		1,059
Income taxes payable	134		32		19
Total current liabilities	2,596		2,453		2,915
Long-term liabilities:
Long-term debt	1,248		1,248		1,320
Lease incentives and other long-term liabilities	1,027		1,005		1,046
Total long-term liabilities	2,275		2,253		2,366
Commitments and contingencies (see Note 11)
Stockholders’ equity:
Common stock $0.05 par value
Authorized 2,300 shares for all periods presented; Issued and Outstanding 389, 399, and 399 shares	19		20		20
Additional paid-in capital	—		81		57
Retained earnings	2,965		2,749		2,621
Accumulated other comprehensive income	40		54		28
Total stockholders’ equity	3,024		2,904		2,726
Total liabilities and stockholders’ equity	$	7,895	$	7,610	$	8,007

See Accompanying Notes to Condensed Consolidated Financial Statements

1

THE GAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	13 Weeks Ended						39 Weeks Ended
($ and shares in millions except per share amounts)	October 28, 2017			October 29, 2016			October 28, 2017			October 29, 2016
Net sales	$	3,838		$	3,798		$	11,077		$	11,087
Cost of goods sold and occupancy expenses	2,313			2,305			6,770			6,948
Gross profit	1,525			1,493			4,307			4,139
Operating expenses	1,147			1,104			3,224			3,249
Operating income	378			389			1,083			890
Interest expense	18			20			53			57
Interest income	(4		)	(3		)	(11		)	(6		)
Income before income taxes	364			372			1,041			839
Income taxes	135			168			398			383
Net income	$	229		$	204		$	643		$	456
Weighted-average number of shares - basic	391			399			395			398
Weighted-average number of shares - diluted	393			400			397			400
Earnings per share - basic	$	0.59		$	0.51		$	1.63		$	1.15
Earnings per share - diluted	$	0.58		$	0.51		$	1.62		$	1.14
Cash dividends declared and paid per share	$	0.23		$	0.23		$	0.69		$	0.69

See Accompanying Notes to Condensed Consolidated Financial Statements

2

THE GAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	13 Weeks Ended						39 Weeks Ended
($ in millions)	October 28, 2017			October 29, 2016			October 28, 2017			October 29, 2016
Net income	$	229		$	204		$	643		$	456
Other comprehensive income (loss)
Foreign currency translation	(5		)	(10		)	12			(1		)
Change in fair value of derivative financial instruments, net of tax (tax benefit) of $2, $4, $(6), and $(5)	23			39			(20		)	(57		)
Reclassification adjustment for (gains) losses on derivative financial instruments, net of (tax) tax benefit of $6, $-, $4, and $(6)	(1		)	—			(6		)	1
Other comprehensive income (loss), net of tax	17			29			(14		)	(57		)
Comprehensive income	$	246		$	233		$	629		$	399

See Accompanying Notes to Condensed Consolidated Financial Statements

3

THE GAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	39 Weeks Ended
($ in millions)	October 28, 2017			October 29, 2016
Cash flows from operating activities:
Net income	$	643		$	456
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	418			449
Amortization of lease incentives	(46		)	(47		)
Share-based compensation	60			55
Tax benefit from exercise of stock options and vesting of stock units	—			(4		)
Excess tax benefit from exercise of stock options and vesting of stock units	—			(1		)
Store asset impairment charges	17			89
Non-cash and other items	9			12
Deferred income taxes	(50		)	(10		)
Changes in operating assets and liabilities:
Merchandise inventory	(636		)	(513		)
Other current assets and other long-term assets	(60		)	(52		)
Accounts payable	55			294
Accrued expenses and other current liabilities	(46		)	10
Income taxes payable, net of prepaid and other tax-related items	188			80
Lease incentives and other long-term liabilities	48			(18		)
Net cash provided by operating activities	600			800
Cash flows from investing activities:
Purchases of property and equipment	(463		)	(383		)
Insurance proceeds related to loss on property and equipment	60			—
Other	(3		)	(1		)
Net cash used for investing activities	(406		)	(384		)
Cash flows from financing activities:
Payments of current maturities of debt	(67		)	—
Proceeds from issuances under share-based compensation plans	23			25
Withholding tax payments related to vesting of stock units	(15		)	(18		)
Repurchases of common stock	(300		)	—
Excess tax benefit from exercise of stock options and vesting of stock units	—			1
Cash dividends paid	(272		)	(275		)
Net cash used for financing activities	(631		)	(267		)
Effect of foreign exchange rate fluctuations on cash and cash equivalents	7			3
Net increase (decrease) in cash and cash equivalents	(430		)	152
Cash and cash equivalents at beginning of period	1,783			1,370
Cash and cash equivalents at end of period	$	1,353		$	1,522
Supplemental disclosure of cash flow information:
Cash paid for interest during the period	$	76		$	80
Cash paid for income taxes during the period, net of refunds	$	260		$	318

See Accompanying Notes to Condensed Consolidated Financial Statements

4

THE GAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

The Condensed Consolidated Balance Sheets as of October 28, 2017 and October 29, 2016, and the Condensed Consolidated Statements of Income and the Condensed Consolidated Statements of Comprehensive Income for the thirteen and thirty-nine weeks endedOctober 28, 2017 and October 29, 2016, and the Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks endedOctober 28, 2017 and October 29, 2016 have been prepared by The Gap, Inc. (the “Company,” “we,” and “our”). In the opinion of management, such statements include all adjustments (which include normal recurring adjustments) considered necessary to present fairly our financial position, results of operations, and cash flows as of October 28, 2017 and October 29, 2016 and for all periods presented. The Condensed Consolidated Balance Sheet as of January 28, 2017 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, 2017.

The results of operations for the thirteen and thirty-nine weeks endedOctober 28, 2017 are not necessarily indicative of the operating results that may be expected for the 53-week period ending February 3, 2018.

Note 2. Recent Accounting Pronouncements

Except as noted below, the Company has considered all recent accounting pronouncements and has concluded that there are no recent accounting pronouncements that may have a material impact on its Consolidated Financial Statements, based on current information.

Recent Accounting Pronouncements Related to Revenue Recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards. ASU No. 2014-09, as amended, is effective retrospectively for fiscal years and interim periods within those years beginning after December 15, 2017.

While we do not expect the adoption of ASU No. 2014-09 and related ASUs to have a material impact on our Consolidated Financial Statements, we expect the adoption to result in change in the timing of recognizing revenue for breakage income for gift cards, gift certificates, and credit vouchers, credit card reward points and certificate liability, as well as sales where we ship the merchandise to the customer from a distribution center or store. Additionally, under the new guidance, we expect to recognize allowances for estimated sales returns on a gross basis rather than net basis on the Consolidated Balance Sheets.

We are currently evaluating the classification of income earned in connection with our private label and co-branded credit cards. We are also evaluating expanded disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

We will adopt these ASUs on a modified retrospective basis beginning in the first quarter of fiscal 2018.

5

Other Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2018. We are still assessing the impact of this ASU on our Consolidated Financial Statements, but it will result in a substantial increase in our long-term assets and liabilities. We will adopt the ASU beginning in the first quarter of fiscal 2019.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. We adopted the provisions of this ASU in the first quarter of fiscal 2017. Beginning in the first quarter of fiscal 2017, we have made the policy election to account for forfeitures when they occur, rather than estimating expected forfeitures, when recognizing share-based compensation cost. We adopted this provision of the ASU using a modified retrospective transition method, which resulted in the cumulative-effect adjustment of a $3 million increase to retained earnings as of the beginning of the first quarter of fiscal 2017. Also, all excess tax benefits and tax deficiencies related to share-based payment awards are now reflected in the Consolidated Statement of Income as a component of the provision for income taxes on a prospective basis, whereas they were recognized in equity under the previous guidance. Additionally, excess tax benefits related to share-based payment awards are now reflected in operating activities, along with other income tax related cash flows, in our Consolidated Statement of Cash Flows on a prospective basis.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. The amendments simplify the subsequent measurement of goodwill and eliminate the two-step goodwill impairment test. The ASU is effective prospectively for fiscal years and interim periods within those years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We early adopted this ASU for the interim goodwill impairment test in the first quarter of fiscal 2017. The adoption of this ASU did not have any impact on the Consolidated Financial Statements.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities. The amendments are intended to better align an entity’s risk management activities and financial reporting for hedging relationships through changes to the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2018. We are currently assessing the potential impact of this ASU on our Consolidated Financial Statements.

Note 3. Debt and Credit Facilities

Long-term debt consists of the following:

($ in millions)	October 28, 2017		January 28, 2017			October 29, 2016
Notes	$	1,248	$	1,248		$	1,248
Japan Term Loan	—		65			96
Total debt	1,248		1,313			1,344
Less: Current portion of Japan Term Loan	—		(65		)	(24		)
Total long-term debt	$	1,248	$	1,248		$	1,320

As of October 28, 2017, January 28, 2017, and October 29, 2016, the estimated fair value of our $1.25 billion aggregate principal amount of 5.95 percent notes (the “Notes”) due April 2021 was $1.35 billion, $1.32 billion, and $1.34 billion, respectively, and was based on the quoted market price of the Notes (level 1 inputs) as of the last business day of the respective fiscal quarter. The aggregate principal amount of the Notes is recorded in long-term debt in the Condensed Consolidated Balance Sheets, net of the unamortized discount.

As of January 28, 2017 and October 29, 2016, the carrying amount of our 15 billion Japanese yen, four-year, unsecured term loan (“Japan Term Loan”) approximated its fair value, as the interest rate varied depending on quoted market rates (level 1 inputs). Repayments of 2.5 billion Japanese yen were paid on January 15 of each year, and a final repayment of 7.5 billion Japanese yen which was due on January 15, 2018 was paid in full in June 2017. Interest was payable at least quarterly based on an interest rate equal to the Tokyo Interbank Offered Rate plus a fixed margin.

In October 2015, we entered into a $400 million unsecured term loan (the “Term Loan”), which was included in current maturities of debt in the Condensed Consolidated Balance Sheet as of October 29, 2016. The Term Loan was repaid in full in January 2017. Interest was payable at least quarterly based on an interest rate equal to the London Interbank Offered Rate plus a fixed margin.

We have a $500 million, five-year, unsecured revolving credit facility (the “Facility”), which is scheduled to expire in May 2020. There were no borrowings and no material outstanding standby letters of credit under the Facility as of October 28, 2017.

6

We maintain multiple agreements with third parties that make unsecured revolving credit facilities available for our operations in foreign locations (the “Foreign Facilities”). These Foreign Facilities are uncommitted and are generally available for borrowings, overdraft borrowings, and the issuance of bank guarantees. The total capacity of the Foreign Facilities was $47 million as of October 28, 2017. As of October 28, 2017, there were no borrowings under the Foreign Facilities. There were $14 million in bank guarantees issued and outstanding primarily related to store leases under the Foreign Facilities as of October 28, 2017.

We have bilateral unsecured standby letter of credit agreements that are uncommitted and do not have expiration dates. As of October 28, 2017, we had $15 million in standby letters of credit issued under these agreements.

Note 4. Fair Value Measurements

There were no purchases, sales, issuances, or settlements related to recurring level 3 measurements during the thirteen and thirty-nine weeks endedOctober 28, 2017 or October 29, 2016. There were no transfers of financial assets or liabilities into or out of level 1 and level 2 during the thirteen and thirty-nine weeks endedOctober 28, 2017 or October 29, 2016.

Financial Assets and Liabilities

Financial assets and liabilities measured at fair value on a recurring basis and cash equivalents are as follows:

			Fair Value Measurements at Reporting Date Using
($ in millions)	October 28, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	389	$	28	$	361	$	—
Derivative financial instruments	31		—		31		—
Deferred compensation plan assets	46		46		—		—
Total	$	466	$	74	$	392	$	—
Liabilities:
Derivative financial instruments	$	20	$	—	$	20	$	—
			Fair Value Measurements at Reporting Date Using
($ in millions)	January 28, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	697	$	256	$	441	$	—
Derivative financial instruments	58		—		58		—
Deferred compensation plan assets	40		40		—		—
Total	$	795	$	296	$	499	$	—
Liabilities:
Derivative financial instruments	$	21	$	—	$	21	$	—
			Fair Value Measurements at Reporting Date Using
($ in millions)	October 29, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant  Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	596	$	106	$	490	$	—
Derivative financial instruments	62		—		62		—
Deferred compensation plan assets	41		41		—		—
Total	$	699	$	147	$	552	$	—
Liabilities:
Derivative financial instruments	$	49	$	—	$	49	$	—

We have highly liquid investments classified as cash equivalents, which are placed primarily in time deposits and money market funds. We value these investments at their original purchase prices plus interest that has accrued at the stated rate.

7

Derivative financial instruments primarily include foreign exchange forward contracts. The currencies hedged against changes in the U.S. dollar are Canadian dollars, Japanese yen, British pounds, Euro, Mexican pesos, Chinese yuan, and Taiwan dollars. The fair value of the Company’s derivative financial instruments is determined using pricing models based on current market rates. Derivative financial instruments in an asset position are recorded in other current assets or other long-term assets in the Condensed Consolidated Balance Sheets. Derivative financial instruments in a liability position are recorded in accrued expenses and other current liabilities or lease incentives and other long-term liabilities in the Condensed Consolidated Balance Sheets.

We maintain the Gap Inc. Deferred Compensation Plan (“DCP”), which allows eligible employees and non-employee directors to defer compensation up to a maximum amount. 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 in 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 primarily at the store level.

During the thirteen weeks endedOctober 28, 2017, we recorded a charge for the impairment of long-lived assets of $4 million, which reduced the then carrying amount of the applicable long-lived assets of $5 million to their fair value of $1 million. The impairment charge was recorded in operating expenses in the Condensed Consolidated Statement of Income.

During the thirty-nine weeks endedOctober 28, 2017, we recorded a charge for the impairment of long-lived assets of $17 million, which reduced the then carrying amount of the applicable long-lived assets of $18 million to their fair value of $1 million. The impairment charge was recorded in operating expenses in the Condensed Consolidated Statement of Income.

In May 2016, the Company announced measures to close its fleet of 53 Old Navy stores in Japan and select Banana Republic stores, primarily internationally. During the thirteen weeks endedOctober 29, 2016, we recorded charges for impairment of long-lived assets of $2 million related to the announced store closures, and an additional $31 million for long-lived assets that were unrelated to the announced measures. The impairment charges were recorded in operating expenses in the Condensed Consolidated Statement of Income and reduced the then carrying amount of the applicable long-lived assets of $34 million to their fair value of $1 million.

During the thirty-nine weeks endedOctober 29, 2016, we recorded charges for impairment of long-lived assets of $54 million related to the announced store closures, primarily related to Old Navy Japan, and an additional $35 million for long-lived assets that were unrelated to the announced measures. The impairment charges were recorded in operating expenses in the Condensed Consolidated Statement of Income and reduced the then carrying amount of the applicable long-lived assets of $102 million to their fair value of $13 million.

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 thirteen and thirty-nine weeks endedOctober 28, 2017 or October 29, 2016.

Note 5. 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 Canadian dollars, Japanese yen, British pounds, Euro, Mexican pesos, Chinese yuan, and Taiwan dollars. Cash flows from derivative financial instruments are classified as cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows.

8

Cash Flow Hedges

We designate the following foreign exchange forward contracts as cash flow hedges: (1) 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; (2) forward contracts used to hedge forecasted intercompany royalty payments denominated in foreign currencies received by entities whose functional currencies are U.S. dollars; and (3) forward contracts used to hedge forecasted intercompany revenue transactions related to merchandise sold from our regional purchasing entity, whose functional currency is the U.S. dollar, to certain international subsidiaries in their local currencies. The foreign exchange forward contracts entered into to hedge forecasted merchandise purchases and related costs, intercompany royalty payments, and intercompany revenue transactions 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 in income in the period in which the underlying transaction impacts the income statement.

Net Investment Hedges

We also use foreign exchange forward contracts to hedge the net assets of international subsidiaries to offset the foreign currency translation and economic exposures related to our investment in the subsidiaries.

Other Derivatives Not Designated as Hedging Instruments

We enter into 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 in the Condensed Consolidated Statements of Income in the same period and generally offset.

9

Outstanding Notional Amounts

We had foreign exchange forward contracts outstanding in the following notional amounts:

($ in millions)	October 28, 2017		January 28, 2017		October 29, 2016
Derivatives designated as cash flow hedges	$	873	$	1,101	$	1,201
Derivatives designated as net investment hedges	30		31		31
Derivatives not designated as hedging instruments	581		618		664
Total	$	1,484	$	1,750	$	1,896

Quantitative Disclosures about Derivative Financial Instruments

The fair values of foreign exchange forward contracts are as follows:

($ in millions)	October 28, 2017		January 28, 2017		October 29, 2016
Derivatives designated as cash flow hedges:
Other current assets	$	16	$	28	$	35
Other long-term assets	$	4	$	16	$	13
Accrued expenses and other current liabilities	$	11	$	10	$	26
Lease incentives and other long-term liabilities	$	2	$	1	$	8
Derivatives designated as net investment hedges:
Other current assets	$	—	$	—	$	1
Other long-term assets	$	—	$	—	$	—
Accrued expenses and other current liabilities	$	2	$	—	$	—
Lease incentives and other long-term liabilities	$	—	$	—	$	—
Derivatives not designated as hedging instruments:
Other current assets	$	11	$	13	$	13
Other long-term assets	$	—	$	1	$	—
Accrued expenses and other current liabilities	$	5	$	10	$	14
Lease incentives and other long-term liabilities	$	—	$	—	$	1
Total derivatives in an asset position	$	31	$	58	$	62
Total derivatives in a liability position	$	20	$	21	$	49

The majority of the unrealized gains and losses from designated cash flow hedges as of October 28, 2017 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, 2017 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 in the Condensed Consolidated Balance Sheets, and as such, the fair values shown above represent gross amounts. The amounts subject to enforceable master netting arrangements are $8 million, $18 million, and $9 million as of October 28, 2017, January 28, 2017, and October 29, 2016, respectively. If we did elect to offset, the net amounts of our derivative financial instruments in an asset position would be $23 million, $40 million, and $53 million and the net amounts of the derivative financial instruments in a liability position would be $12 million, $3 million, and $40 million as of October 28, 2017, January 28, 2017 and October 29, 2016, respectively.

See Note 4 of Notes to Condensed Consolidated Financial Statements for disclosures on the fair value measurements of our derivative financial instruments.

10

The effective portion of gains and losses on foreign exchange forward contracts in cash flow hedging and net investment hedging relationships recorded in other comprehensive income and the Condensed Consolidated Statements of Income, on a pre-tax basis, are as follows:

	13 Weeks Ended						39 Weeks Ended
($ in millions)	October 28, 2017			October 29, 2016			October 28, 2017			October 29, 2016
Derivatives in cash flow hedging relationships:
Gain (loss) recognized in other comprehensive income	$	25		$	43		$	(26	)	$	(62	)
Gain (loss) reclassified into cost of goods sold and occupancy expenses	$	(5	)	$	2		$	2		$	15
Loss reclassified into operating expenses	$	—		$	(2	)	$	—		$	(10	)
Derivatives in net investment hedging relationships:
Gain (loss) recognized in other comprehensive income	$	1		$	1		$	(1	)	$	(1	)

For the thirteen and thirty-nine weeks endedOctober 28, 2017 and October 29, 2016, there were no amounts of gains or losses reclassified from accumulated other comprehensive income into net income for derivative financial instruments in net investment hedging relationships, as we did not sell or liquidate (or substantially liquidate) any of our hedged subsidiaries during the periods.

Gains and losses on foreign exchange forward contracts not designated as hedging instruments recorded in the Condensed Consolidated Statements of Income, on a pre-tax basis, are as follows:

	13 Weeks Ended				39 Weeks Ended
($ in millions)	October 28, 2017		October 29, 2016		October 28, 2017			October 29, 2016
Gain (loss) recognized in operating expenses	$	10	$	12	$	(13	)	$	(5	)

Note 6. Share Repurchases

Share repurchase activity is as follows:

	13 Weeks Ended				39 Weeks Ended
($ and shares in millions except average per share cost)	October 28, 2017		October 29, 2016		October 28, 2017		October 29, 2016
Number of shares repurchased (1)	3.8		—		12.5		—
Total cost	$	100	$	—	$	300	$	—
Average per share cost including commissions	$	26.64	$	—	$	24.21	$	—

__________

(1) Excludes shares withheld to settle employee statutory tax withholding related to the vesting of stock units.

In February 2016, we announced that the Board of Directors approved a $1.0 billion share repurchase authorization, of which $700 million was remaining as of October 28, 2017.

All of the share repurchases were paid for as of October 28, 2017. All common stock repurchased is immediately retired.

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Note 7. Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive income by component, net of tax, are as follows:

($ in millions)	Foreign Currency Translation			Cash Flow Hedges			Total
Balance at January 28, 2017	$	29		$	25		$	54
13 Weeks Ended April 29, 2017:
Foreign currency translation	(4		)	—			(4		)
Change in fair value of derivative financial instruments	—			—			—
Amounts reclassified from accumulated other comprehensive income	—			(4		)	(4		)
Other comprehensive loss, net of tax	(4		)	(4		)	(8		)
Balance at April 29, 2017	25			21			46
13 Weeks Ended July 29, 2017:
Foreign currency translation	21			—			21
Change in fair value of derivative financial instruments	—			(43		)	(43		)
Amounts reclassified from accumulated other comprehensive income	—			(1		)	(1		)
Other comprehensive income (loss), net of tax	21			(44		)	(23		)
Balance at July 29, 2017	46			(23		)	23
13 Weeks Ended October 28, 2017:
Foreign currency translation	(5		)	—			(5		)
Change in fair value of derivative financial instruments	—			23			23
Amounts reclassified from accumulated other comprehensive income	—			(1		)	(1		)
Other comprehensive income (loss), net of tax	(5		)	22			17
Balance at October 28, 2017	$	41		$	(1	)	$	40
($ in millions)	Foreign Currency Translation			Cash Flow Hedges			Total
Balance at January 30, 2016	$	22		$	63		$	85
13 Weeks Ended April 30, 2016:
Foreign currency translation	31			—			31
Change in fair value of derivative financial instruments	—			(89		)	(89		)
Amounts reclassified from accumulated other comprehensive income	—			(7		)	(7		)
Other comprehensive income (loss), net of tax	31			(96		)	(65		)
Balance at April 30, 2016	53			(33		)	20
13 Weeks Ended July 30, 2016:
Foreign currency translation	(22		)	—			(22		)
Change in fair value of derivative financial instruments	—			(7		)	(7		)
Amounts reclassified from accumulated other comprehensive income	—			8			8
Other comprehensive income (loss), net of tax	(22		)	1			(21		)
Balance at July 30, 2016	31			(32		)	(1		)
13 Weeks Ended October 29, 2016:
Foreign currency translation	(10		)	—			(10		)
Change in fair value of derivative financial instruments	—			39			39
Amounts reclassified from accumulated other comprehensive income	—			—			—
Other comprehensive income (loss), net of tax	(10		)	39			29
Balance at October 29, 2016	$	21		$	7		$	28

See Note 5 of Notes to Condensed Consolidated Financial Statements for additional disclosures about reclassifications out of accumulated other comprehensive income and their corresponding effects on the respective line items in the Condensed Consolidated Statements of Income.

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Note 8. Share-Based Compensation

Share-based compensation expense recognized in the Condensed Consolidated Statements of Income, primarily in operating expenses, is as follows:

	13 Weeks Ended						39 Weeks Ended
($ in millions)	October 28, 2017			October 29, 2016			October 28, 2017			October 29, 2016
Stock units	$	14		$	14		$	47		$	43
Stock options	3			4			10			9
Employee stock purchase plan	1			1			3			3
Share-based compensation expense	18			19			60			55
Less: Income tax benefit	(7		)	(8		)	(23		)	(25		)
Share-based compensation expense, net of tax	$	11		$	11		$	37		$	30

Note 9. Income Taxes

The Company conducts business globally, and as a result, files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as the United States, Canada, France, the United Kingdom, China, Hong Kong, Japan, and India. We are no longer subject to U.S. federal income tax examinations for fiscal years before 2009, and with few exceptions, we are also no longer subject to U.S. state, local, or non-U.S. income tax examinations for fiscal years before 2008.

The Company is in continual discussions with taxing authorities regarding tax matters in the various U.S. and foreign jurisdictions in the normal course of business. As of October 28, 2017, it is reasonably possible that we will recognize a decrease in gross unrecognized tax benefits within the next 12 months of up to $6 million, primarily due to the closing of audits. If we do recognize such a decrease, the net impact on the Condensed Consolidated Statement of Income would not be material.

Note 10. Earnings Per Share

Weighted-average number of shares used for earnings per share is as follows:

	13 Weeks Ended		39 Weeks Ended
(shares in millions)	October 28, 2017	October 29, 2016	October 28, 2017	October 29, 2016
Weighted-average number of shares - basic	391	399	395	398
Common stock equivalents	2	1	2	2
Weighted-average number of shares - diluted	393	400	397	400

The above computations of weighted-average number of shares – diluted exclude 9 million and 8 million shares related to stock options and other stock awards for the thirteen weeks endedOctober 28, 2017 and October 29, 2016, respectively, and 9 million and 7 million shares related to stock options and other stock awards for the thirty-nine weeks endedOctober 28, 2017 and October 29, 2016, respectively, as their inclusion would have an anti-dilutive effect on earnings per share.

Note 11. 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.

13

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, 2017, Actions filed against us included commercial, intellectual property, customer, employment, 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, 2017, January 28, 2017, and October 29, 2016, 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 as of October 28, 2017, January 28, 2017, and October 29, 2016 was not material for any individual Action or in total. Subsequent to October 28, 2017 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. Accordingly, developments, settlements, or resolutions may occur and impact income in the quarter of such development, settlement, or resolution. 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.

Fire at the Fishkill Distribution Center

On August 29, 2016, a fire occurred in one of the buildings at a Company-owned distribution center campus in Fishkill, New York. The impacted building primarily held Gap and Banana Republic products for distribution to stores and fulfilled online orders for Gap and Old Navy in the Northeast region of the United States.

The Company maintains property and business interruption insurance coverage. Based on the provisions of the Company’s insurance policies, the Company recorded insurance recoveries based on the determination that recovery of certain fire-related costs is probable. During fiscal 2016, the Company incurred a total of $133 million in certain fire-related costs. In January of fiscal 2016, the Company agreed upon a partial settlement of $159 million related to the loss on inventory and recorded a gain of $73 million, representing the excess over the loss on inventory, which was recorded in operating expenses in the Consolidated Statement of Income. During fiscal 2016, the Company received $174 million of insurance proceeds. As a result, the insurance receivable balance was $32 million as of January 28, 2017 and was recorded in other current assets in the Consolidated Balance Sheet.

During the thirteen and thirty-nine weeks endedOctober 28, 2017, the Company incurred immaterial costs and $15 million, respectively, in certain fire-related costs for which the Company recorded insurance recoveries based on the determination that recovery of these fire-related costs is probable. In June 2017, the Company also agreed upon a partial settlement and recorded a gain of $64 million, primarily related to property and equipment, representing the excess over the loss on fire-related recoverable costs, which was recorded in operating expenses in the Condensed Consolidated Statement of Income.

The Company received $29 million and $131 million of insurance proceeds during the thirteen and thirty-nine weeks endedOctober 28, 2017, respectively. Included in the $29 million was $20 million in insurance proceeds related to business interruption, which were recorded as a reduction to cost of goods sold and occupancy expenses in the Condensed Consolidated Statement of Income. The remaining $9 million and $111 million of insurance proceeds received during the thirteen and thirty-nine weeks ended October 28, 2017, respectively, were recorded as a reduction to the insurance receivable balance. As a result, the insurance proceeds received in excess of expected recoveries was less than $1 million as of October 28, 2017.

We will continue to incur additional logistics costs related to the disruption to our North American supply chain network. As settlements are reached, any recoveries related to business interruption insurance will be recognized as a reduction to cost of goods sold and occupancy expenses in the Condensed Consolidated Statements of Income.

During the thirty-nine weeks endedOctober 28, 2017, we allocated $60 million of insurance proceeds to the loss on property and equipment based on the partial settlement of claims reported as insurance proceeds related to loss on property and equipment, a component of cash flows from investing activities, in the Condensed Consolidated Statement of Cash Flows.

Note 12. Segment Information

The Gap, Inc. is a global retailer that sells apparel, accessories, and personal care products under the Gap, Old Navy, Banana Republic, Athleta, Intermix, and Weddington Way brands. We identify our operating segments according to how our business activities are managed and evaluated. As of October 28, 2017, our operating segments included Gap Global, Old Navy Global, Banana Republic Global, Athleta, and Intermix. 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, 2017.

14

Net sales by brand and region are as follows:

($ in millions)	Gap Global		Old Navy Global		Banana Republic Global		Other (2)		Total		Percentage of Net Sales
13 Weeks Ended October 28, 2017
U.S. (1)	$	750	$	1,587	$	467	$	200	$	3,004	79	%
Canada	109		143		57		1		310		8
Europe	154		—		4		—		158		4
Asia	278		13		21		—		312		8
Other regions	31		15		8		—		54		1
Total	$	1,322	$	1,758	$	557	$	201	$	3,838	100	%
($ in millions)	Gap Global		Old Navy Global		Banana Republic Global		Other (3)		Total		Percentage of Net Sales
13 Weeks Ended October 29, 2016
U.S. (1)	$	756	$	1,507	$	479	$	172	$	2,914	77	%
Canada	102		131		55		1		289		8
Europe	150		—		14		—		164		4
Asia	296		55		25		—		376		10
Other regions	36		12		7		—		55		1
Total	$	1,340	$	1,705	$	580	$	173	$	3,798	100	%
($ in millions)	Gap Global		Old Navy Global		Banana Republic Global		Other (2)		Total		Percentage of Net Sales
39 Weeks Ended October 28, 2017
U.S. (1)	$	2,137	$	4,609	$	1,396	$	633	$	8,775	79	%
Canada	277		387		156		2		822		8
Europe	435		—		11		—		446		4
Asia	780		34		69		—		883		8
Other regions	83		47		21		—		151		1
Total	$	3,712	$	5,077	$	1,653	$	635	$	11,077	100	%
($ in millions)	Gap Global		Old Navy Global		Banana Republic Global		Other (3)		Total		Percentage of Net Sales
39 Weeks Ended October 29, 2016
U.S. (1)	$	2,203	$	4,335	$	1,456	$	550	$	8,544	77	%
Canada	264		358		159		2		783		7
Europe	453		—		45		—		498		5
Asia	856		171		80		—		1,107		10
Other regions	100		32		23		—		155		1
Total	$	3,876	$	4,896	$	1,763	$	552	$	11,087	100	%

__________

(1) U.S. includes the United States, Puerto Rico, and Guam.

(2) Includes Athleta, Intermix, and Weddington Way.

(3) Includes Athleta and Intermix.

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.

15

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

OUR BUSINESS

We are a global retailer offering apparel, accessories, and personal care products for men, women, and children under the Gap, Old Navy, Banana Republic, Athleta, Intermix, and Weddington Way brands. We have Company-operated stores in the United States, Canada, the United Kingdom, France, Ireland, Japan, Italy, China, Hong Kong, Taiwan, and Mexico. We have franchise agreements with unaffiliated franchisees to operate Gap, Banana Republic, and Old Navy stores throughout Asia, Australia, Europe, Latin America, the Middle East, and Africa. Under these agreements, third parties operate, or will operate, stores that sell apparel and related products under our brand names. Our products are also available to customers online through Company-owned websites and through the use of third parties that provide logistics and fulfillment services. In addition to operating in the specialty, outlet, online, and franchise channels, we also use our omni-channel capabilities to bridge the digital world and physical stores to further enhance our shopping experience for our customers. Our omni-channel services, including order-in-store, reserve-in-store, find-in-store, and ship-from-store, as well as enhanced mobile experiences, are tailored uniquely across our portfolio of brands. Most of the products sold under our brand names are designed by us and manufactured by independent sources. We also sell products that are designed and manufactured by branded third parties, primarily at our Intermix brand.

OVERVIEW

Results for the first three quarters of fiscal 2017 include a gain from insurance proceeds of $64 million related to the fire that occurred in one of the buildings at a Company-owned distribution center campus in Fishkill, New York on August 29, 2016 (“the Fishkill fire”), which was recorded in operating expenses in the Condensed Consolidated Statement of Income. During the third quarter of fiscal 2017, we also received $20 million in insurance proceeds related to business interruption, which were recorded as a reduction to cost of goods sold and occupancy expenses in the Condensed Consolidated Statement of Income. Fiscal 2016 results were impacted by the previously announced measures to better align talent and financial resources against our most important priorities to position the Company for improved business performance and long-term success. In connection with these measures, the Company incurred $29 million and $179 million in restructuring costs during the thirteen and thirty-nine weeks ended October 29, 2016, respectively, on a pre-tax basis.

Financial results for the third quarter of fiscal 2017 are as follows:

• Net sales for the third quarter of fiscal 2017 increased 1 percent compared with the third quarter of fiscal 2016.

• Comparable sales for the third quarter of fiscal 2017 increased 3 percent compared with a 3 percent decrease for the third quarter of fiscal 2016, which included an estimated negative impact from the Fishkill fire of approximately 2 percentage points.

• Gross profit for the third quarter of fiscal 2017 and fiscal 2016 were $1.5 billion. Gross margin for the third quarter of fiscal 2017 was 39.7 percent compared with 39.3 percent for the third quarter of fiscal 2016.

• Operating margin for the third quarter of fiscal 2017 was 9.8 percent compared with 10.2 percent for the third quarter of fiscal 2016.

• Net income for the third quarter of fiscal 2017 was $229 million compared with $204 million for the third quarter of fiscal 2016.

• Diluted earnings per share was $0.58 for the third quarter of fiscal 2017 compared with $0.51 for the third quarter of fiscal 2016. Diluted earnings per share for the third quarter of fiscal 2016 included about a $0.09 impact of restructuring costs incurred in the third quarter of fiscal 2016.

• During the first three quarters of fiscal 2017, we distributed $572 million to shareholders through share repurchases and dividends.

Our business priorities for fiscal 2017 remain as follows:

• offering product that is consistently brand-appropriate and on-trend with high customer acceptance, with a focus on expanding our advantage in loyalty categories;

• investing in digital and customer capabilities to support growth;

• creating a unique and differentiated customer experience that builds loyalty, with focus on both the physical and digital expressions of our brands;

• attracting and retaining great talent in our businesses and functions; and

• leveraging our scale to improve the effectiveness and efficiency of our processes.

16

In fiscal 2017, we are focused on investing strategically in the business while also maintaining operating expense discipline. One of our primary objectives is to continue transforming our product to market process, with the development of a more efficient operating model, allowing us to more fully leverage our scale. To enable this, we have several product, supply chain, and IT initiatives underway. Further, we expect to continue our investment in customer experience, both in stores and online, to drive higher customer engagement and loyalty, resulting in market share gains. Finally, we will continue to invest in strengthening brand awareness, customer acquisition, and digital capabilities.

In fiscal 2017, we expect that gross margins for our foreign subsidiaries, net of the impact from our merchandise hedge program, will continue to be negatively impacted by the depreciation of certain foreign currencies as our merchandise purchases are primarily in U.S. dollars.

RESULTS OF OPERATIONS

Net Sales

See Note 12 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q, for net sales by brand and region.

Comparable Sales (“Comp Sales”)

The percentage change in Comp Sales by global brand and for The Gap, Inc., as compared with the preceding year, is as follows:

	13 Weeks Ended				39 Weeks Ended
	October 28, 2017		October 29, 2016		October 28, 2017		October 29, 2016
Gap Global	1	%	(8	)%	(1	)%	(5	)%
Old Navy Global	4	%	3	%	5	%	(1	)%
Banana Republic Global	(1	)%	(8	)%	(4	)%	(9	)%
The Gap, Inc.	3	%	(3	)%	2	%	(3	)%

Comp Sales for the third quarter of fiscal 2016 include an estimated negative impact from the Fishkill fire of approximately 4 percentage points for Gap Global, approximately 1 percentage point for Old Navy Global, and approximately 2 percentage points for Banana Republic Global.

Comp Sales include the results of Company-operated stores and sales through online channels in those countries where we have existing comparable store sales. The calculation of The Gap, Inc. Comp Sales includes the results of Athleta and Intermix but excludes the results of our franchise business.

A store is included in the Comp Sales calculations when it has been open and operated by the Company for at least one year and the selling square footage has not changed by 15 percent or more within the past year. A store is included in the Comp Sales calculations on the first day it has comparable prior year sales. Stores in which the selling square footage has changed by 15 percent or more as a result of a remodel, expansion, or reduction are excluded from the Comp Sales calculations until the first day they have comparable prior year sales.

A store is considered non-comparable (“Non-comp”) when it has been open and operated by the Company for less than one year or has changed its selling square footage by 15 percent or more within the past year.

A store is considered “Closed” if it is temporarily closed for three or more full consecutive days or it is permanently closed. When a temporarily closed store reopens, the store will be placed in the Comp/Non-comp status it was in prior to its closure. If a store was in Closed status for three or more days in the prior year, the store will be in Non-comp status for the same days the following year.

Current year foreign exchange rates are applied to both current year and prior year Comp Sales to achieve a consistent basis for comparison.

Store Count and Square Footage Information

Net sales per average square foot are as follows:

	13 Weeks Ended				39 Weeks Ended
	October 28, 2017		October 29, 2016		October 28, 2017	October 29, 2016
Net sales per average square foot (1)	$	82	$	81	242	$	240

__________

(1) Excludes net sales associated with our online and franchise businesses.

17

Store count, openings, closings, and square footage for our stores are as follows:

	January 28, 2017	39 Weeks Ended October 28, 2017		October 28, 2017
	Number of Store Locations	Number of Stores Opened	Number of Stores Closed	Number of Store Locations		Square Footage (in millions)
Gap North America	844	6	15	835		8.6
Gap Asia	311	24	26	309		3.0
Gap Europe	164	2	9	157		1.3
Old Navy North America	1,043	20	6	1,057		17.6
Old Navy Asia	13	—	—	13		0.2
Banana Republic North America	601	4	9	596		5.0
Banana Republic Asia	48	1	1	48		0.2
Banana Republic Europe	1	—	1	—		—
Athleta North America	132	8	—	140		0.6
Intermix North America	43	—	5	38		0.1
Company-operated stores total	3,200	65	72	3,193		36.6
Franchise	459	31	44	446		N/A
Total	3,659	96	116	3,639		36.6
Decrease over prior year				(2.8	)%	(2.9	)%
	January 30, 2016	39 Weeks Ended October 29, 2016		October 29, 2016
	Number of Store Locations	Number of Stores Opened	Number of Stores Closed	Number of Store Locations		Square Footage (in millions)
Gap North America	866	11	19	858		9.0
Gap Asia	305	18	8	315		3.0
Gap Europe	175	1	10	166		1.4
Old Navy North America	1,030	19	10	1,039		17.4
Old Navy Asia	65	5	10	60		0.9
Banana Republic North America	612	7	7	612		5.1
Banana Republic Asia	51	—	2	49		0.2
Banana Republic Europe	10	—	—	10		0.1
Athleta North America	120	10	—	130		0.5
Intermix North America	41	2	1	42		0.1
Company-operated stores total	3,275	73	67	3,281		37.7
Franchise	446	52	37	461		N/A
Total	3,721	125	104	3,742		37.7
Decrease over prior year				(1.4	)%	(2.3	)%

Gap and Banana Republic outlet and factory stores are reflected in each of the respective brands.

Net Sales

Our net sales for the third quarter of fiscal 2017 increased $40 million, or 1 percent, compared with the third quarter of fiscal 2016 primarily driven by an increase in net sales at Old Navy, partially offset by a decrease in net sales at Gap and Banana Republic. The increase in Comp Sales of 3 percent for the third quarter of fiscal 2017 was offset by the impact of lost sales primarily from international store closures in fiscal 2016.

Our net sales for the first three quarters of fiscal 2017 decreased $10 million compared with the first three quarters of fiscal 2016 primarily driven by a decrease in net sales at Gap and Banana Republic, as well as an unfavorable impact of foreign exchange of $49 million, partially offset by an increase in net sales at Old Navy. The unfavorable impact of foreign exchange was primarily due to the weakening of the Japanese yen, British pound, and Chinese yuan against the U.S. dollar. The foreign exchange impact is the translation impact if net sales for the first three quarters of fiscal 2016 were translated at exchange rates applicable during the first three quarters of fiscal 2017. The increase in Comp Sales of 2 percent for the first three quarters of fiscal 2017 was offset by the impact of lost sales primarily from international store closures in fiscal 2016.

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Cost of Goods Sold and Occupancy Expenses

	13 Weeks Ended						39 Weeks Ended
($ in millions)	October 28, 2017			October 29, 2016			October 28, 2017			October 29, 2016
Cost of goods sold and occupancy expenses	$	2,313		$	2,305		$	6,770		$	6,948
Gross profit	$	1,525		$	1,493		$	4,307		$	4,139
Cost of goods sold and occupancy expenses as a percentage of net sales	60.3		%	60.7		%	61.1		%	62.7		%
Gross margin	39.7		%	39.3		%	38.9		%	37.3		%

Cost of goods sold and occupancy expenses decreased 0.4 percent as a percentage of net sales in the third quarter of fiscal 2017 compared with the third quarter of fiscal 2016.

• Cost of goods sold was flat as a percentage of net sales in the third quarter of fiscal 2017 compared with the third quarter of fiscal 2016, primarily driven by improved average selling price per unit at Old Navy and Banana Republic, offset by higher average unit cost at all global brands.

• Occupancy expenses decreased0.4 percent as a percentage of net sales in the third quarter of fiscal 2017 compared with the third quarter of fiscal 2016, primarily driven by an increase in online sales without a corresponding increase in occupancy expenses and the closure of international stores in fiscal 2016, partially offset by real estate expenses for new stores at the Times Square, New York location for Gap and Old Navy.

Cost of goods sold and occupancy expenses decreased1.6 percent as a percentage of net sales during the first three quarters of fiscal 2017 compared with the first three quarters of fiscal 2016.

• Cost of goods sold decreased1.2 percent as a percentage of net sales during the first three quarters of fiscal 2017 compared with the first three quarters of fiscal 2016, primarily driven by higher margins achieved as a result of improved average selling price per unit at all global brands, partially offset by higher average unit cost at all global brands.

• Occupancy expenses decreased0.4 percent as a percentage of net sales during the first three quarters of fiscal 2017 compared with the first three quarters of fiscal 2016, primarily driven by an increase in online sales without a corresponding increase in occupancy expenses and the closure of international stores in fiscal 2016, partially offset by real estate expenses incurred for new stores at the Times Square, New York location for Gap and Old Navy.

Operating Expenses

	13 Weeks Ended						39 Weeks Ended
($ in millions)	October 28, 2017			October 29, 2016			October 28, 2017			October 29, 2016
Operating expenses	$	1,147		$	1,104		$	3,224		$	3,249
Operating expenses as a percentage of net sales	29.9		%	29.1		%	29.1		%	29.3		%
Operating margin	9.8		%	10.2		%	9.8		%	8.0		%

Operating expenses increased $43 million, or 0.8 percent as a percentage of net sales, in the third quarter of fiscal 2017 compared with the third quarter of fiscal 2016. The increase in operating expenses for the third quarter of fiscal 2017 compared with the third quarter of fiscal 2016 was primarily due to the following:

• an increase in payroll-related expenses primarily driven by an increase in bonus expense; and

• an increase in marketing and investments in digital and customer initiatives; partially offset by

• $36 million of restructuring costs incurred in the third quarter of fiscal 2016; and

• a decrease of $27 million of store asset impairment charges unrelated to restructuring activities.

Operating expenses decreased $25 million, or 0.2 percent as a percentage of net sales, during the first three quarters of fiscal 2017 compared with the first three quarters of fiscal 2016. The decrease in operating expenses for the first three quarters of fiscal 2017 compared with the first three quarters of fiscal 2016 was primarily due to the following:

• $171 million of restructuring costs incurred during the first three quarters of fiscal 2016;

• a gain from insurance proceeds of $64 million related to the Fishkill fire recorded in the second quarter of fiscal 2017; and

• a decrease of $18 million of store asset impairment charges unrelated to restructuring activities; partially offset by

• an increase in payroll-related expenses primarily driven by an increase in bonus expense; and

• an increase in marketing and investments in digital and customer initiatives.

19

Interest Expense

	13 Weeks Ended				39 Weeks Ended
($ in millions)	October 28, 2017		October 29, 2016		October 28, 2017		October 29, 2016
Interest expense	$	18	$	20	$	53	$	57

Interest expense for the third quarter and the first three quarters of fiscal 2017 and fiscal 2016 primarily includes interest on overall borrowings and obligations mainly related to our $1.25 billion 5.95 percent Notes.

Income Taxes

	13 Weeks Ended						39 Weeks Ended
($ in millions)	October 28, 2017			October 29, 2016			October 28, 2017			October 29, 2016
Income taxes	$	135		$	168		$	398		$	383
Effective tax rate	37.1		%	45.2		%	38.2		%	45.6		%

The decrease in the effective tax rate for the third quarter and first three quarters of fiscal 2017 compared with the third quarter and first three quarters of fiscal 2016 was primarily due to the impact of restructuring costs incurred for foreign subsidiaries during the third quarter of fiscal 2016 and resulting valuation allowances on certain foreign deferred tax assets. The decrease in the effective tax rate for the first three quarters of fiscal 2017 compared with the first three quarters of fiscal 2016 was partially offset by the impact of the adoption of ASU No. 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting in fiscal 2017. See Note 2 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q for additional disclosures on the adoption of the accounting standard.

LIQUIDITY AND CAPITAL RESOURCES

Our largest source of cash flows is cash collections from the sale of our merchandise. Our primary uses of cash include merchandise inventory purchases, occupancy costs, personnel-related expenses, purchases of property and equipment, and payment of taxes. In addition, we may have dividend payments, debt repayments, and share repurchases. As of October 28, 2017, cash and cash equivalents were $1.4 billion, the majority of which was held in the United States and is generally accessible without any limitations.

We believe that current cash balances and cash flows from our operations will be sufficient to support our business operations, including growth initiatives and planned capital expenditures, for the next 12 months and beyond. We are also able to supplement near-term liquidity, if necessary, with our $500 million revolving credit facility or other available market instruments.

Cash Flows from Operating Activities

Net cash provided by operating activities during the first three quarters of fiscal 2017 decreased $200 million compared with the first three quarters of fiscal 2016, primarily due to the following:

Net income

• an increase of $187 million in net income.

Non-cash items

• a decrease of $72 million related to store asset impairment charges during the first three quarters of fiscal 2017 compared with the first three quarters of fiscal 2016 primarily due to restructuring activities in fiscal 2016.

Changes in operating assets and liabilities

• a decrease of $239 million related to accounts payable primarily due to the timing of lease payments and other non-merchandise payables;

• a decrease of $123 million related to merchandise inventory primarily due to the volume and timing of receipts; and

• a decrease of $56 million related to accrued expenses and other current liabilities in part due to the timing of severance payments as a result of fiscal 2016 restructuring activities; partially offset by

• an increase of $108 million related to income taxes payable, net of prepaid and other tax-related items, primarily due to an increase in taxable income during the first three quarters of fiscal 2017 compared with the first three quarters of fiscal 2016 as well as the timing of tax payments.

We fund inventory expenditures during normal and peak periods through cash flows from operating activities and available cash. Our business follows a seasonal pattern, with sales peaking during the end-of-year holiday period. The seasonality of our operations may lead to significant fluctuations in certain asset and liability accounts between fiscal year-end and subsequent interim periods.

20

Cash Flows from Investing Activities

Net cash used for investing activities during the first three quarters of fiscal 2017 increased $22 million compared with the first three quarters of fiscal 2016, primarily due to the following:

• $80 million more in property and equipment purchases including purchases related to the rebuilding of the Company’s Fishkill, New York distribution center campus; offset by

• $60 million in insurance proceeds allocated to loss on property and equipment during the first three quarters of fiscal 2017 related to the Fishkill fire compared with no insurance proceeds allocated during the first three quarters of fiscal 2016.

Cash Flows from Financing Activities

Net cash used for financing activities during the first three quarters of fiscal 2017 increased $364 million compared with the first three quarters of fiscal 2016, primarily due to the following:

• $300 million of cash used for repurchases of common stock during the first three quarters of fiscal 2017 compared with no repurchases of common stock during the first three quarters of fiscal 2016; and

• $67 million related to the repayment of the Japan Term Loan in full in June 2017.

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 as we require regular capital expenditures to build and maintain stores and purchase new equipment to improve our business. 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. Free cash flow for the first three quarters of fiscal 2017 is further adjusted for insurance proceeds allocated to loss on property and equipment, as our cash used for purchases of property and equipment for the first three quarters of fiscal 2017 includes certain capital expenditures related to the rebuilding of the Company-owned distribution center which was impacted by the Fishkill fire.

The following table reconciles free cash flow, a non-GAAP financial measure, from a GAAP financial measure.

	39 Weeks Ended
($ in millions)	October 28, 2017			October 29, 2016
Net cash provided by operating activities	$	600		$	800
Less: Purchases of property and equipment	(463		)	(383		)
Add: Insurance proceeds related to loss on property and equipment	60			—
Free cash flow	$	197		$	417

Debt and Credit Facilities

Certain financial information about the Company’s debt and credit facilities is set forth under the heading “Debt and Credit Facilities” in Note 3 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Dividend Policy

In determining whether and at what level to declare a dividend, we consider a number of factors including sustainability, operating performance, liquidity, and market conditions.

We paid a dividend of $0.23 per share during each of the first three quarters of fiscal 2017 and fiscal 2016. Including the dividend paid during the first three quarters of fiscal 2017 of $0.69 per share, we intend to pay an annual dividend of $0.92 per share for fiscal 2017, consistent with the annual dividend for fiscal 2016.

Share Repurchases

Certain financial information about the Company’s share repurchases is set forth under the heading “Share Repurchases” in Note 6 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

21

Summary Disclosures about Contractual Cash Obligations and Commercial Commitments

There have been no material changes to our contractual obligations and commercial commitments as disclosed in our Annual Report on Form 10-K as of January 28, 2017, other than those which occur in the normal course of business. See Note 11 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, for disclosures on commitments and contingencies.

Critical Accounting Policies and Estimates

There have been no significant changes to our critical accounting policies and estimates as discussed in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Our market risk profile as of January 28, 2017 is disclosed in our Annual Report on Form 10-K and has not significantly changed. See Notes 3, 4, and 5 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, of this Form 10-Q, for disclosures on our debt, investments, and derivative financial instruments.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s third quarter of fiscal 2017 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

22

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

As a multinational company, we are subject to various proceedings, lawsuits, disputes, and claims arising in the ordinary course of our business. Many of these Actions raise complex factual and legal issues and are subject to uncertainties. Actions filed against us from time to time include commercial, intellectual property, customer, employment, 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.

We cannot predict with assurance the outcome of Actions brought against us. Accordingly, developments, settlements, or resolutions may occur and impact income in the quarter of such development, settlement, or resolution. However, we do not believe that the outcome of any current Action would have a material effect on our financial results.

Item 1A. Risk Factors.

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 28, 2017.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table presents information with respect to purchases of common stock of the Company made during the thirteen weeks endedOctober 28, 2017 by The Gap, Inc. or any affiliated purchaser, as defined in Exchange Act Rule 10b-18(a)(3):

	Total Number of Shares Purchased (1)	Average Price Paid Per Share Including Commissions		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or approximate dollar amount) of Shares that May Yet be Purchased Under the Plans or Programs (2)
Month #1 (July 30 - August 26)	539,800	$	23.15	539,800	$	788	million
Month #2 (August 27 - September 30)	2,249,992	$	26.66	2,249,992	$	728	million
Month #3 (October 1 - October 28)	963,538	$	28.57	963,538	$	700	million
Total	3,753,330	$	26.64	3,753,330

__________

(1) Excludes shares withheld to settle employee statutory tax withholding related to the vesting of stock units.

(2) On February 25, 2016, we announced that the Board of Directors approved a $1 billion share repurchase authorization, which has no expiration date.

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Item 6. Exhibits.

10.1	Agreement with Shawn Curran dated September 29, 2017 and confirmed on October 5, 2017. (1)
31.1	Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002). (1)
31.2	Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002). (1)
32.1	Certification of the Chief Executive Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (2)
32.2	Certification of the Chief Financial Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (2)
101	The following materials from The Gap, Inc.’s Quarterly Report on Form 10-Q for the quarter ended October 28, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. (1)

__________

(1) Filed herewith.

(2) Furnished herewith.

24

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		THE GAP, INC.
Date:	November 22, 2017	By	/s/ Arthur Peck
			Arthur Peck
			Chief Executive Officer
Date:	November 22, 2017	By	/s/ Teri List-Stoll
			Teri List-Stoll
			Executive Vice President and Chief Financial Officer

25

Exhibit Index

10.1	Agreement with Shawn Curran dated September 29, 2017 and confirmed on October 5, 2017. (1)
31.1	Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002). (1)
31.2	Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002). (1)
32.1	Certification of the Chief Executive Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (2)
32.2	Certification of the Chief Financial Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (2)
101	The following materials from The Gap, Inc.’s Quarterly Report on Form 10-Q for the quarter ended October 28, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. (1)

_____________________________

(1) Filed herewith.

(2) Furnished herewith.

26

EX-10.1

Exhibit 10.1

[Gap Inc. Letterhead]

September 29, 2017

Shawn Curran

Dear Shawn:

This letter is to confirm our offer to you as Executive Vice President, Global Supply Chain and Product Operations, Gap Inc.

Salary. Effective on your Start Date, your annual salary will be $620,000, payable every two weeks.

You are scheduled to receive a compensation review in March 2019, based on your time in the position.

Start Date. Your first day in your new position will be October 11, 2017, reporting to Art Peck, President and Chief Executive Officer, Gap Inc.

Annual Bonus. Based on your position as Executive Vice President, you will be eligible for an annual bonus based on Gap Inc. and/or Division financial and operational objectives as well as individual performance. Effective on your Start Date, your annual target bonus will be 80% of your base salary. Depending on results, your actual bonus, if any, may be higher or lower and can reach a maximum of 160%. Bonus payments will be prorated based on active time in position, divisional or country assignment and changes in base salary or incentive target that may occur during the fiscal year including any changes related to your acceptance of this position. Bonuses for fiscal 2017 are scheduled for payment in March 2018 and you must be employed by Gap Inc. on the payment date. Gap Inc. has the right to modify the program at any time. Management discretion can be used to modify the final award amount. Bonus payments are subject to supplemental income tax withholding.

Special Stock Award. The Compensation and Management Development Committee of the Board of Directors (the “Committee”), pursuant to the provisions of Gap Inc.’s stock plan, has approved a stock award grant covering 15,000 shares of Gap Inc. common stock with an effective grant date of October 11, 2017. Awards are in the form of units that are paid in Gap Inc. stock upon vesting. The award will become vested as shown in the schedule below, provided you are employed by Gap Inc. on the vesting date. Awards are subject to income tax withholding upon vesting.

Stock Award of 7,500 shares vesting two years from grant date.

Stock Award of 7,500 shares vesting three years from grant date.

Long-Term Growth Program. Based on your position as Executive Vice President, you will be eligible to participate in the Long-Term Growth Program that rewards achievement of Gap Inc. and/or Division financial objectives over a three-year period. Under the current program, your target opportunity to earn performance shares is 120% of your base salary. Depending on results, your actual performance shares, if any, may be higher or lower and can reach a maximum of 300% of target shares. Awards are made in the form of performance shares that are paid in Gap Inc. stock upon vesting.

For the current fiscal 2017-2019 performance cycle, the Committee has approved a grant of performance shares covering a target amount of 9,882 shares of Gap Inc. common stock with an effective grant date of October 11, 2017. The shares were prorated for this fiscal year based on active time in your new role. The number of earned performance shares, if any, will be determined no later than March 2020. Payout is subject to certification by the Committee and the provisions of Gap Inc.’s stock plan. Earned shares will vest 50% on the date the Committee certifies attainment and 50% one year from the certification date provided you are employed by Gap Inc. on the vesting dates. Gap Inc. has the right to modify the program at any time.

Shawn Curan

September 29, 2017

Page 2

Committee discretion can be used to modify the final share amount. Shares are subject to income tax withholding upon vesting.

The Long-Term Growth Program replaces the annual Performance Stock Award Program, for which you are no longer eligible. However, to the extent earned, you will receive a final award under the Performance Stock Award Program in March 2018. The award will be prorated based on time in your previous position.

Termination/Severance. In the event that your employment is involuntarily terminated by the Company for reasons other than (i) For Cause (as defined below) or (ii) for the avoidance of doubt, death or disability, prior to July 1, 2020, the Company will provide you the following after your "separation from service" within the meaning of Internal Revenue Code (“IRC”) Section 409A ("Separation from Service”), provided you sign a general release of claims in the form requested by the Company and it becomes effective within 45 calendar days after such Separation from Service (such 45^th day, the “Release Deadline”): 

(1) Your then current salary, at regular pay cycle intervals, for eighteen months commencing in the first regular pay cycle following the Release Deadline (the “severance period”).  Payments will cease if you accept other employment or professional relationship with a competitor of the Company (defined as another company primarily engaged in the apparel design or apparel retail business or any retailer with apparel sales in excess of $500 million annually), or if you breach your remaining obligations to the Company (e.g., your duty to protect confidential information, agreement not to solicit Company employees).  Except for any compensation received from external board memberships in place at the time of your Separation from Service, payments will be reduced by any compensation you receive (as received) during the severance period from other employment or professional relationship with a non-competitor. Each payment will be treated as a separate payment for purposes of IRC Section 409A, to the maximum extent possible.

(2) Through the end of the period in which you are receiving payments under paragraph (1) above or shorter period you are covered by COBRA, if you properly elect and maintain COBRA coverage, payment of a portion of your COBRA premium in a method as determined by the Company. This payment may be taxable income to you and subject to tax withholding. Notwithstanding the foregoing, the Company’s payment of the monthly COBRA premium shall cease immediately if the Company determines in its discretion that paying such monthly COBRA premium would result in the Company being in violation of, or incurring any fine, penalty, or excise tax under, applicable law (including, without limitation, any penalty imposed for violation of the nondiscrimination requirements under the Patient Protection and Affordable Care Act or guidance issued thereunder, or any similar law or regulation).

(3) Through the end of the period in which you are receiving payments under paragraph (1) above, reimbursement for your costs to maintain the same or comparable financial counseling program the Company provides to senior executives in effect at the time of your Separation from Service.  The amount of expenses eligible for reimbursement during a calendar year shall not affect the expenses eligible for reimbursement in any other calendar year.  Reimbursement shall be made on or before the last day of the calendar year following the calendar year in which the reimbursement is incurred but not later than the end of the second calendar year following the calendar year of your Separation from Service.

(4) Prorated Annual Bonus for the fiscal year in which the termination occurs, on the condition that you have worked at least 3 months of the fiscal year in which you are terminated, based on actual financial results and 100% standard for any non-financial component (other than those intended to comply with IRC Section 162(m)). Such bonus will be paid in March of the year following termination at the time Annual Bonuses for the year of termination are paid, but in no event later than the 15th day of the third month following the later of the end of the Company’s taxable year or the end of the calendar year in which such termination occurs. In the event termination occurs after the end of a fiscal year but before the date of bonus payments, such bonus for the preceding fiscal year will be paid pursuant to the terms of this section and the terms of the bonus plan.

Shawn Curran

September 29, 2017

Page 3

(5) Accelerated vesting (but not settlement) of restricted stock units (“RSUs”) and performance shares that remain subject only to time vesting conditions (excluding any performance shares that remain subject to performance-based vesting conditions) scheduled to vest prior to April 1 following the end of the fiscal year of termination. Shares of the Company stock in settlement of any vested RSUs and/or performance shares under this section will be delivered on the applicable regularly scheduled vesting dates subject to the terms and conditions of the applicable award agreement including, without limitation, the IRC Section 409A six-month delay language thereunder to the extent necessary to avoid taxation under IRC Section 409A .

The payments in (1), (3), (4) and (5) above are, and the payment described in (2) above may be, taxable income to you and are subject to tax withholding.  If the aggregate amount that would be payable to you under paragraphs (1), (2), (3) and (4) above through the date which is six months after your Separation from Service (excluding amounts exempt from IRC Section 409A under the short-term deferral rule thereunder or Treas. Reg. Section 1.409A-1(b)(9)(v))  exceeds the limit under Treas. Reg. Section 1.409A-1(b)(9)(iii)(A) and you are a “specified employee” under Treas. Reg. Section 1.409A-1(i) on the date of your Separation from Service, then the excess will be paid to you no earlier than the date which is six months after the date of such separation (or such earlier time permitted under IRC Section 409A(a)(2)(B)(i)). This delay will only be imposed to the extent required to avoid the tax for which you would otherwise be liable under IRC Section 409A(a)(1)(B).  Any delayed payment instead will be made on the first business day following the expiration of the six-month period, as applicable (or such earlier time permitted under IRC Section 409A(a)(2)(B)(i)). Payments that are not delayed will be paid in accordance with their terms determined without regard to such delay.

The term “For Cause” shall mean a good faith determination by the Company that your employment be terminated for any of the following reasons:  (1) indictment, conviction or admission of any crimes involving theft, fraud or moral turpitude; (2) engaging in gross neglect of duties, including willfully failing or refusing to implement or follow direction of the Company; or (3) breaching Gap Inc.’s policies and procedures, including but not limited to the Code of Business Conduct; where applicable, the Company shall provide reasonable notice of any breach and opportunity to remediate.

At any time, if you voluntarily resign your employment from Gap Inc. or your employment is terminated For Cause, you will receive no compensation, payment or benefits after your last day of employment.  If your employment terminates for any reason, you will not be entitled to any payments, benefits or compensation other than as provided in this Agreement.

Recoupment Policy. As an Executive Vice President, the Company’s recoupment policy will apply to you. Under the current policy, subject to the discretion and approval of the Board, Gap Inc. will, to the extent permitted by governing law, in all appropriate cases as determined by the Board, require reimbursement and/or cancellation of any bonus or other incentive compensation, including stock-based compensation, awarded to an executive officer or other member of the Gap Inc.’s executive leadership team where all of the following factors are present: (a) the award was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement, (b) in the Board’s view, the executive engaged in fraud or intentional misconduct that was a substantial contributing cause to the need for the restatement, and (c) a lower award would have been made to the executive based upon the restated financial results. In each such instance, Gap Inc. will seek to recover the individual executive’s entire annual bonus or award for the relevant period, plus a reasonable rate of interest.

Benefits/Indemnification. You are eligible to participate in Gap Inc. health and welfare benefit programs offered to similarly situated Corporate Executive Vice Presidents. Gap Inc. reserves the right to change its health and welfare programs at any time. Gap Inc. provides you certain indemnification and insurance as more fully described in Article V. of the Gap Inc. By-laws.

Abide by Gap Inc. Policies. You agree to abide by all Gap Inc. policies including, but not limited to, policies contained in the Code of Business Conduct. As an executive officer, you are subject to Stock Ownership Requirements for Gap Inc. Executives which can be found on Gapinc.com. Following your employment,

Shawn Curan

September 29, 2017

Page 4

you agree to cooperate with the Company to: (i) provide information reasonably requested by the Company in order to respond to disclosure or other obligations; and (ii) testify truthfully regarding any matters involving the Company about which you have any relevant information, or which arise from your employment with the Company.

Insider Trading Policies. Based on the level of your position, you will be subject to Gap Inc.'s Securities Law Compliance Manual, which among other things places restrictions on your ability to buy and sell Gap Inc. stock and requires you to pre-clear trades. This position will subject you to the requirements of Section 16 of the United States Securities and Exchange Act of 1934, as amended. If you do not already have a copy of the compliance manual, or have questions about it, you should contact Gap Inc. Global Equity Administration, at (415) 427-8478.

Confidentiality. You acknowledge that you will be in a relationship of confidence and trust with Gap Inc. As a result, during your employment with Gap Inc., you will acquire “Confidential Information,” which is information (whether in electronic or any other format) that people outside Gap Inc. never see, such as unannounced product information or designs, business or strategic plans, financial information and organizational charts, and other materials. 

You agree that you will keep the Confidential Information in strictest confidence and trust. You will not, without the prior written consent of Gap Inc.’s Global General Counsel, directly or indirectly use or disclose to any person or entity any Confidential Information, during or after your employment, except as is necessary in the ordinary course of performing your duties while employed by Gap Inc., or if required to be disclosed by order of a court of competent jurisdiction, administrative agency or governmental body, or by subpoena, summons or other legal process, provided that prior to such disclosure, Gap Inc. is given reasonable advance notice of such order and an opportunity to object to such disclosure. Notwithstanding this agreement, nothing in this letter prevents you from reporting, in confidence, potential violations of law to relevant governmental authorities or courts.

You agree that in the event your employment terminates for any reason, you will immediately deliver to Gap Inc. all company property, including all documents, materials or property of any description, or any reproduction of such materials, containing or pertaining to any Confidential Information.

Non-Solicitation of Employees. In order to protect Confidential Information, you agree that so long as you are employed by Gap Inc., and for a period of one year thereafter, you will not directly or indirectly, on behalf of yourself, any other person or entity, solicit, call upon, recruit, or attempt to solicit any of Gap Inc.’s employees or in any way encourage any Gap Inc. employee to leave their employment with Gap Inc. You further agree that you will not directly or indirectly, on behalf of yourself, any other person or entity, interfere or attempt to interfere with Gap Inc.’s relationship with any person who at any time was an employee, consultant, customer or vendor or otherwise has or had a business relationship with Gap Inc.    

Non-disparagement. You agree now, and after your employment with the Gap Inc. terminates not to, directly or indirectly, disparage Gap Inc. in any way or to make negative, derogatory or untrue statements about Gap Inc., its business activities, or any of its directors, managers, officers, employees, affiliates, agents or representatives to any person or entity.

Employment Status. You understand that your employment is “at-will”. This means that you do not have a contract of employment for any particular duration or limiting the grounds for your termination in any way. You are free to resign at any time. Similarly, Gap Inc. is free to terminate your employment at any time for any reason. The only way your at-will status can be changed is through a written agreement with Gap Inc., signed by an authorized officer of Gap Inc. In the event that there is any dispute over the terms, enforcement or obligations in this letter, the prevailing party shall be entitled to recover from the other party reasonable attorney fees and costs incurred to enforce any agreements.

Please note that except for those agreements or plans referenced in this letter and attachments, this letter contains the entire understanding of the parties with respect to this offer of employment and supersedes any other agreements, representations or understandings (whether oral or written and whether express or implied)

Shawn Curran

September 29, 2017

Page 5

with respect to this offer. Please review and sign this letter. You may keep one original for your personal records.

Shawn, welcome to your new position and congratulations on this latest achievement in your career path at Gap Inc.

Yours sincerely,

/s/ Art Peck

Art Peck

President and Chief Executive Officer, Gap Inc.

Confirmed this 5th day of October, 2017

/s/ Shawn Curran     

Shawn Curran        

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Arthur Peck, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Gap, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 22, 2017
/s/ Arthur Peck
Arthur Peck
Chief Executive Officer
(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Teri List-Stoll, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Gap, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 22, 2017
/s/ Teri List-Stoll
Teri List-Stoll
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

EX-32.1

Exhibit 32.1

Certification of the Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of The Gap, Inc. (the “Company”) on Form 10-Q for the period ended October 28, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Arthur Peck, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	November 22, 2017
/s/ Arthur Peck
Arthur Peck
Chief Executive Officer
(Principal Executive Officer)

EX-32.2

Exhibit 32.2

Certification of the Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of The Gap, Inc. (the “Company”) on Form 10-Q for the period ended October 28, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Teri List-Stoll, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	November 22, 2017
/s/ Teri List-Stoll
Teri List-Stoll
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Oct. 28, 2017	Nov. 15, 2017
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Oct. 28, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Trading Symbol	GPS
Entity Registrant Name	GAP INC
Entity Central Index Key	0000039911
Current Fiscal Year End Date	--02-03
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		388,857,073

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Oct. 28, 2017	Jan. 28, 2017	Oct. 29, 2016
Current assets:
Cash and cash equivalents	$ 1,353	$ 1,783	$ 1,522
Merchandise inventory	2,476	1,830	2,398
Other current assets	654	702	751
Total current assets	4,483	4,315	4,671
Property and equipment, net of accumulated depreciation of $6,041, $5,813, and $5,900	2,686	2,616	2,662
Other long-term assets	726	679	674
Total assets	7,895	7,610	8,007
Current liabilities:
Current maturities of debt	0	65	424
Accounts payable	1,330	1,243	1,413
Accrued expenses and other current liabilities	1,132	1,113	1,059
Income taxes payable	134	32	19
Total current liabilities	2,596	2,453	2,915
Long-term liabilities:
Total long-term debt	1,248	1,248	1,320
Lease incentives and other long-term liabilities	1,027	1,005	1,046
Total long-term liabilities	2,275	2,253	2,366
Commitments and contingencies (see Note 11)
Stockholders' equity:
Authorized 2,300 shares for all periods presented; Issued and Outstanding 389, 399, and 399 shares	19	20	20
Additional Paid in Capital	0	81	57
Retained earnings	2,965	2,749	2,621
Amounts reclassified from accumulated other comprehensive income	40	54	28
Total stockholders' equity	3,024	2,904	2,726
Total liabilities and stockholders' equity	$ 7,895	$ 7,610	$ 8,007

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Millions, $ in Millions	Oct. 28, 2017	Jan. 28, 2017	Oct. 29, 2016
Property and equipment, accumulated depreciation	$ 6,041	$ 5,813	$ 5,900
Common stock, par value (in dollars per share)	$ 0.05	$ 0.05	$ 0.05
Common stock, shares authorized (in shares)	2,300	2,300	2,300
Common stock, shares issued (in shares)	389	399	399
Common stock, shares outstanding (in shares)	389	399	399

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Oct. 28, 2017	Oct. 29, 2016	Oct. 28, 2017	Oct. 29, 2016
Net sales	$ 3,838	$ 3,798	$ 11,077	$ 11,087
Cost of goods sold and occupancy expenses	2,313	2,305	6,770	6,948
Gross profit	1,525	1,493	4,307	4,139
Operating expenses	1,147	1,104	3,224	3,249
Operating income	378	389	1,083	890
Interest expense	18	20	53	57
Interest income	(4)	(3)	(11)	(6)
Income before income taxes	364	372	1,041	839
Income taxes	135	168	398	383
Net income	$ 229	$ 204	$ 643	$ 456
Weighted-average number of shares - basic (in shares)	391	399	395	398
Weighted-average number of shares - diluted (in shares)	393	400	397	400
Earnings per share - basic (in dollars per share)	$ 0.59	$ 0.51	$ 1.63	$ 1.15
Earnings per share - diluted (in dollars per share)	0.58	0.51	1.62	1.14
Cash dividends declared and paid per share (in dollars per share)	$ 0.23	$ 0.23	$ 0.69	$ 0.69

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Oct. 28, 2017	Oct. 29, 2016	Oct. 28, 2017	Oct. 29, 2016
Net income	$ 229	$ 204	$ 643	$ 456
Other comprehensive income (loss), net of tax:
Foreign currency translation	(5)	(10)	12	(1)
Change in fair value of derivative financial instruments, net of tax (tax benefit) of $2, $4, $(6), and $(5)	23	39	(20)	(57)
Reclassification adjustment for (gains) losses on derivative financial instruments, net of (tax) tax benefit of $6, $-, $4, and $(6)	(1)	0	(6)	1
Other comprehensive income (loss), net of tax	17	29	(14)	(57)
Comprehensive income	$ 246	$ 233	$ 629	$ 399

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Oct. 28, 2017	Oct. 29, 2016	Oct. 28, 2017	Oct. 29, 2016
Change in fair value of derivative financial instruments, net of tax (tax benefit)	$ 2	$ 4	$ (6)	$ (5)
Reclassification adjustment for (gains) losses on derivative financial instruments, net of (tax) tax benefit	$ 6	$ 0	$ 4	$ (6)

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	9 Months Ended
	Oct. 28, 2017	Oct. 29, 2016
Cash flows from operating activities:
Net income	$ 643	$ 456
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	418	449
Amortization of lease incentives	(46)	(47)
Share-based compensation	60	55
Tax benefit from exercise of stock options and vesting of stock units	0	(4)
Excess tax benefit from exercise of stock options and vesting of stock units	0	(1)
Store asset impairment charges	17	89
Non-cash and other items	9	12
Deferred income taxes	(50)	(10)
Changes in operating assets and liabilities:
Merchandise inventory	(636)	(513)
Other current assets and other long-term assets	(60)	(52)
Accounts payable	55	294
Accrued expenses and other current liabilities	(46)	10
Income taxes payable, net of prepaid and other tax-related items	188	80
Lease incentives and other long-term liabilities	48	(18)
Net cash provided by operating activities	600	800
Cash flows from investing activities:
Purchases of property and equipment	(463)	(383)
Insurance proceeds related to loss on property and equipment	60	0
Other	(3)	(1)
Net cash used for investing activities	(406)	(384)
Cash flows from financing activities:
Payments of current maturities of debt	(67)	0
Proceeds from issuances under share-based compensation plans	23	25
Withholding tax payments related to vesting of stock units	(15)	(18)
Repurchases of common stock	(300)	0
Excess tax benefit from exercise of stock options and vesting of stock units	0	1
Cash dividends paid	(272)	(275)
Net cash used for financing activities	(631)	(267)
Effect of foreign exchange rate fluctuations on cash and cash equivalents	7	3
Net increase (decrease) in cash and cash equivalents	(430)	152
Cash and cash equivalents at beginning of period	1,783	1,370
Cash and cash equivalents at end of period	1,353	1,522
Supplemental disclosure of cash flow information:
Cash paid for interest during the period	76	80
Cash paid for income taxes during the period, net of refunds	$ 260	$ 318

XML

Basis of Presentation

9 Months Ended

Oct. 28, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The Condensed Consolidated Balance Sheets as of October 28, 2017 and October 29, 2016, and the Condensed Consolidated Statements of Income and the Condensed Consolidated Statements of Comprehensive Income for the thirteen and thirty-nine weeks endedOctober 28, 2017 and October 29, 2016, and the Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks endedOctober 28, 2017 and October 29, 2016 have been prepared by The Gap, Inc. (the “Company,” “we,” and “our”). In the opinion of management, such statements include all adjustments (which include normal recurring adjustments) considered necessary to present fairly our financial position, results of operations, and cash flows as of October 28, 2017 and October 29, 2016 and for all periods presented. The Condensed Consolidated Balance Sheet as of January 28, 2017 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, 2017.

The results of operations for the thirteen and thirty-nine weeks endedOctober 28, 2017 are not necessarily indicative of the operating results that may be expected for the 53-week period ending February 3, 2018.

XML

Recent Accounting Pronouncements

9 Months Ended

Oct. 28, 2017

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Except as noted below, the Company has considered all recent accounting pronouncements and has concluded that there are no recent accounting pronouncements that may have a material impact on its Consolidated Financial Statements, based on current information.

Recent Accounting Pronouncements Related to Revenue Recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards. ASU No. 2014-09, as amended, is effective retrospectively for fiscal years and interim periods within those years beginning after December 15, 2017.

While we do not expect the adoption of ASU No. 2014-09 and related ASUs to have a material impact on our Consolidated Financial Statements, we expect the adoption to result in change in the timing of recognizing revenue for breakage income for gift cards, gift certificates, and credit vouchers, credit card reward points and certificate liability, as well as sales where we ship the merchandise to the customer from a distribution center or store. Additionally, under the new guidance, we expect to recognize allowances for estimated sales returns on a gross basis rather than net basis on the Consolidated Balance Sheets.

We are currently evaluating the classification of income earned in connection with our private label and co-branded credit cards. We are also evaluating expanded disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

We will adopt these ASUs on a modified retrospective basis beginning in the first quarter of fiscal 2018.

Other Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2018. We are still assessing the impact of this ASU on our Consolidated Financial Statements, but it will result in a substantial increase in our long-term assets and liabilities. We will adopt the ASU beginning in the first quarter of fiscal 2019.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. We adopted the provisions of this ASU in the first quarter of fiscal 2017. Beginning in the first quarter of fiscal 2017, we have made the policy election to account for forfeitures when they occur, rather than estimating expected forfeitures, when recognizing share-based compensation cost. We adopted this provision of the ASU using a modified retrospective transition method, which resulted in the cumulative-effect adjustment of a $3 million increase to retained earnings as of the beginning of the first quarter of fiscal 2017. Also, all excess tax benefits and tax deficiencies related to share-based payment awards are now reflected in the Consolidated Statement of Income as a component of the provision for income taxes on a prospective basis, whereas they were recognized in equity under the previous guidance. Additionally, excess tax benefits related to share-based payment awards are now reflected in operating activities, along with other income tax related cash flows, in our Consolidated Statement of Cash Flows on a prospective basis.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. The amendments simplify the subsequent measurement of goodwill and eliminate the two-step goodwill impairment test. The ASU is effective prospectively for fiscal years and interim periods within those years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We early adopted this ASU for the interim goodwill impairment test in the first quarter of fiscal 2017. The adoption of this ASU did not have any impact on the Consolidated Financial Statements.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities. The amendments are intended to better align an entity’s risk management activities and financial reporting for hedging relationships through changes to the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2018. We are currently assessing the potential impact of this ASU on our Consolidated Financial Statements.

XML

Debt and Credit Facilities

9 Months Ended

Oct. 28, 2017

Debt Disclosure [Abstract]

Debt and Credit Facilities

Debt and Credit Facilities

Long-term debt consists of the following:

($ in millions)	October 28, 2017		January 28, 2017			October 29, 2016
Notes	$	1,248	$	1,248		$	1,248
Japan Term Loan	—		65			96
Total debt	1,248		1,313			1,344
Less: Current portion of Japan Term Loan	—		(65		)	(24		)
Total long-term debt	$	1,248	$	1,248		$	1,320

As of October 28, 2017, January 28, 2017, and October 29, 2016, the estimated fair value of our $1.25 billion aggregate principal amount of 5.95 percent notes (the “Notes”) due April 2021 was $1.35 billion, $1.32 billion, and $1.34 billion, respectively, and was based on the quoted market price of the Notes (level 1 inputs) as of the last business day of the respective fiscal quarter. The aggregate principal amount of the Notes is recorded in long-term debt in the Condensed Consolidated Balance Sheets, net of the unamortized discount.

As of January 28, 2017 and October 29, 2016, the carrying amount of our 15 billion Japanese yen, four-year, unsecured term loan (“Japan Term Loan”) approximated its fair value, as the interest rate varied depending on quoted market rates (level 1 inputs). Repayments of 2.5 billion Japanese yen were paid on January 15 of each year, and a final repayment of 7.5 billion Japanese yen which was due on January 15, 2018 was paid in full in June 2017. Interest was payable at least quarterly based on an interest rate equal to the Tokyo Interbank Offered Rate plus a fixed margin.

In October 2015, we entered into a $400 million unsecured term loan (the “Term Loan”), which was included in current maturities of debt in the Condensed Consolidated Balance Sheet as of October 29, 2016. The Term Loan was repaid in full in January 2017. Interest was payable at least quarterly based on an interest rate equal to the London Interbank Offered Rate plus a fixed margin.

We have a $500 million, five-year, unsecured revolving credit facility (the “Facility”), which is scheduled to expire in May 2020. There were no borrowings and no material outstanding standby letters of credit under the Facility as of October 28, 2017.

We maintain multiple agreements with third parties that make unsecured revolving credit facilities available for our operations in foreign locations (the “Foreign Facilities”). These Foreign Facilities are uncommitted and are generally available for borrowings, overdraft borrowings, and the issuance of bank guarantees. The total capacity of the Foreign Facilities was $47 million as of October 28, 2017. As of October 28, 2017, there were no borrowings under the Foreign Facilities. There were $14 million in bank guarantees issued and outstanding primarily related to store leases under the Foreign Facilities as of October 28, 2017.

We have bilateral unsecured standby letter of credit agreements that are uncommitted and do not have expiration dates. As of October 28, 2017, we had $15 million in standby letters of credit issued under these agreements.

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Fair Value Measurements

9 Months Ended

Oct. 28, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

There were no purchases, sales, issuances, or settlements related to recurring level 3 measurements during the thirteen and thirty-nine weeks endedOctober 28, 2017 or October 29, 2016. There were no transfers of financial assets or liabilities into or out of level 1 and level 2 during the thirteen and thirty-nine weeks endedOctober 28, 2017 or October 29, 2016.

Financial Assets and Liabilities

Financial assets and liabilities measured at fair value on a recurring basis and cash equivalents are as follows:

			Fair Value Measurements at Reporting Date Using
($ in millions)	October 28, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	389	$	28	$	361	$	—
Derivative financial instruments	31		—		31		—
Deferred compensation plan assets	46		46		—		—
Total	$	466	$	74	$	392	$	—
Liabilities:
Derivative financial instruments	$	20	$	—	$	20	$	—
			Fair Value Measurements at Reporting Date Using
($ in millions)	January 28, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	697	$	256	$	441	$	—
Derivative financial instruments	58		—		58		—
Deferred compensation plan assets	40		40		—		—
Total	$	795	$	296	$	499	$	—
Liabilities:
Derivative financial instruments	$	21	$	—	$	21	$	—
			Fair Value Measurements at Reporting Date Using
($ in millions)	October 29, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant  Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	596	$	106	$	490	$	—
Derivative financial instruments	62		—		62		—
Deferred compensation plan assets	41		41		—		—
Total	$	699	$	147	$	552	$	—
Liabilities:
Derivative financial instruments	$	49	$	—	$	49	$	—

We have highly liquid investments classified as cash equivalents, which are placed primarily in time deposits and money market funds. We value these investments at their original purchase prices plus interest that has accrued at the stated rate.

Derivative financial instruments primarily include foreign exchange forward contracts. The currencies hedged against changes in the U.S. dollar are Canadian dollars, Japanese yen, British pounds, Euro, Mexican pesos, Chinese yuan, and Taiwan dollars. The fair value of the Company’s derivative financial instruments is determined using pricing models based on current market rates. Derivative financial instruments in an asset position are recorded in other current assets or other long-term assets in the Condensed Consolidated Balance Sheets. Derivative financial instruments in a liability position are recorded in accrued expenses and other current liabilities or lease incentives and other long-term liabilities in the Condensed Consolidated Balance Sheets.

We maintain the Gap Inc. Deferred Compensation Plan (“DCP”), which allows eligible employees and non-employee directors to defer compensation up to a maximum amount. 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 in 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 primarily at the store level.

During the thirteen weeks endedOctober 28, 2017, we recorded a charge for the impairment of long-lived assets of $4 million, which reduced the then carrying amount of the applicable long-lived assets of $5 million to their fair value of $1 million. The impairment charge was recorded in operating expenses in the Condensed Consolidated Statement of Income.

During the thirty-nine weeks endedOctober 28, 2017, we recorded a charge for the impairment of long-lived assets of $17 million, which reduced the then carrying amount of the applicable long-lived assets of $18 million to their fair value of $1 million. The impairment charge was recorded in operating expenses in the Condensed Consolidated Statement of Income.

In May 2016, the Company announced measures to close its fleet of 53 Old Navy stores in Japan and select Banana Republic stores, primarily internationally. During the thirteen weeks endedOctober 29, 2016, we recorded charges for impairment of long-lived assets of $2 million related to the announced store closures, and an additional $31 million for long-lived assets that were unrelated to the announced measures. The impairment charges were recorded in operating expenses in the Condensed Consolidated Statement of Income and reduced the then carrying amount of the applicable long-lived assets of $34 million to their fair value of $1 million.

During the thirty-nine weeks endedOctober 29, 2016, we recorded charges for impairment of long-lived assets of $54 million related to the announced store closures, primarily related to Old Navy Japan, and an additional $35 million for long-lived assets that were unrelated to the announced measures. The impairment charges were recorded in operating expenses in the Condensed Consolidated Statement of Income and reduced the then carrying amount of the applicable long-lived assets of $102 million to their fair value of $13 million.

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 thirteen and thirty-nine weeks endedOctober 28, 2017 or October 29, 2016.

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Derivative Financial Instruments

9 Months Ended

Oct. 28, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

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 Canadian dollars, Japanese yen, British pounds, Euro, Mexican pesos, Chinese yuan, and Taiwan dollars. Cash flows from derivative financial instruments are classified as cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows.

Cash Flow Hedges

We designate the following foreign exchange forward contracts as cash flow hedges: (1) 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; (2) forward contracts used to hedge forecasted intercompany royalty payments denominated in foreign currencies received by entities whose functional currencies are U.S. dollars; and (3) forward contracts used to hedge forecasted intercompany revenue transactions related to merchandise sold from our regional purchasing entity, whose functional currency is the U.S. dollar, to certain international subsidiaries in their local currencies. The foreign exchange forward contracts entered into to hedge forecasted merchandise purchases and related costs, intercompany royalty payments, and intercompany revenue transactions 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 in income in the period in which the underlying transaction impacts the income statement.

Net Investment Hedges

We also use foreign exchange forward contracts to hedge the net assets of international subsidiaries to offset the foreign currency translation and economic exposures related to our investment in the subsidiaries.

Other Derivatives Not Designated as Hedging Instruments

We enter into 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 in the Condensed Consolidated Statements of Income in the same period and generally offset.

Outstanding Notional Amounts

We had foreign exchange forward contracts outstanding in the following notional amounts:

($ in millions)	October 28, 2017		January 28, 2017		October 29, 2016
Derivatives designated as cash flow hedges	$	873	$	1,101	$	1,201
Derivatives designated as net investment hedges	30		31		31
Derivatives not designated as hedging instruments	581		618		664
Total	$	1,484	$	1,750	$	1,896

Quantitative Disclosures about Derivative Financial Instruments

The fair values of foreign exchange forward contracts are as follows:

($ in millions)	October 28, 2017		January 28, 2017		October 29, 2016
Derivatives designated as cash flow hedges:
Other current assets	$	16	$	28	$	35
Other long-term assets	$	4	$	16	$	13
Accrued expenses and other current liabilities	$	11	$	10	$	26
Lease incentives and other long-term liabilities	$	2	$	1	$	8
Derivatives designated as net investment hedges:
Other current assets	$	—	$	—	$	1
Other long-term assets	$	—	$	—	$	—
Accrued expenses and other current liabilities	$	2	$	—	$	—
Lease incentives and other long-term liabilities	$	—	$	—	$	—
Derivatives not designated as hedging instruments:
Other current assets	$	11	$	13	$	13
Other long-term assets	$	—	$	1	$	—
Accrued expenses and other current liabilities	$	5	$	10	$	14
Lease incentives and other long-term liabilities	$	—	$	—	$	1
Total derivatives in an asset position	$	31	$	58	$	62
Total derivatives in a liability position	$	20	$	21	$	49

The majority of the unrealized gains and losses from designated cash flow hedges as of October 28, 2017 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, 2017 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 in the Condensed Consolidated Balance Sheets, and as such, the fair values shown above represent gross amounts. The amounts subject to enforceable master netting arrangements are $8 million, $18 million, and $9 million as of October 28, 2017, January 28, 2017, and October 29, 2016, respectively. If we did elect to offset, the net amounts of our derivative financial instruments in an asset position would be $23 million, $40 million, and $53 million and the net amounts of the derivative financial instruments in a liability position would be $12 million, $3 million, and $40 million as of October 28, 2017, January 28, 2017 and October 29, 2016, respectively.

See Note 4 of Notes to Condensed Consolidated Financial Statements for disclosures on the fair value measurements of our derivative financial instruments.

The effective portion of gains and losses on foreign exchange forward contracts in cash flow hedging and net investment hedging relationships recorded in other comprehensive income and the Condensed Consolidated Statements of Income, on a pre-tax basis, are as follows:

	13 Weeks Ended						39 Weeks Ended
($ in millions)	October 28, 2017			October 29, 2016			October 28, 2017			October 29, 2016
Derivatives in cash flow hedging relationships:
Gain (loss) recognized in other comprehensive income	$	25		$	43		$	(26	)	$	(62	)
Gain (loss) reclassified into cost of goods sold and occupancy expenses	$	(5	)	$	2		$	2		$	15
Loss reclassified into operating expenses	$	—		$	(2	)	$	—		$	(10	)
Derivatives in net investment hedging relationships:
Gain (loss) recognized in other comprehensive income	$	1		$	1		$	(1	)	$	(1	)

For the thirteen and thirty-nine weeks endedOctober 28, 2017 and October 29, 2016, there were no amounts of gains or losses reclassified from accumulated other comprehensive income into net income for derivative financial instruments in net investment hedging relationships, as we did not sell or liquidate (or substantially liquidate) any of our hedged subsidiaries during the periods.

Gains and losses on foreign exchange forward contracts not designated as hedging instruments recorded in the Condensed Consolidated Statements of Income, on a pre-tax basis, are as follows:

	13 Weeks Ended				39 Weeks Ended
($ in millions)	October 28, 2017		October 29, 2016		October 28, 2017			October 29, 2016
Gain (loss) recognized in operating expenses	$	10	$	12	$	(13	)	$	(5	)

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Share Repurchases

9 Months Ended

Oct. 28, 2017

Disclosure Share Repurchase Activity [Abstract]

Share Repurchases

Share Repurchases

Share repurchase activity is as follows:

	13 Weeks Ended				39 Weeks Ended
($ and shares in millions except average per share cost)	October 28, 2017		October 29, 2016		October 28, 2017		October 29, 2016
Number of shares repurchased (1)	3.8		—		12.5		—
Total cost	$	100	$	—	$	300	$	—
Average per share cost including commissions	$	26.64	$	—	$	24.21	$	—

__________

(1) Excludes shares withheld to settle employee statutory tax withholding related to the vesting of stock units.

In February 2016, we announced that the Board of Directors approved a $1.0 billion share repurchase authorization, of which $700 million was remaining as of October 28, 2017.

All of the share repurchases were paid for as of October 28, 2017. All common stock repurchased is immediately retired.

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Accumulated Other Comprehensive Income

9 Months Ended

Oct. 28, 2017

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive income by component, net of tax, are as follows:

($ in millions)	Foreign Currency Translation			Cash Flow Hedges			Total
Balance at January 28, 2017	$	29		$	25		$	54
13 Weeks Ended April 29, 2017:
Foreign currency translation	(4		)	—			(4		)
Change in fair value of derivative financial instruments	—			—			—
Amounts reclassified from accumulated other comprehensive income	—			(4		)	(4		)
Other comprehensive loss, net of tax	(4		)	(4		)	(8		)
Balance at April 29, 2017	25			21			46
13 Weeks Ended July 29, 2017:
Foreign currency translation	21			—			21
Change in fair value of derivative financial instruments	—			(43		)	(43		)
Amounts reclassified from accumulated other comprehensive income	—			(1		)	(1		)
Other comprehensive income (loss), net of tax	21			(44		)	(23		)
Balance at July 29, 2017	46			(23		)	23
13 Weeks Ended October 28, 2017:
Foreign currency translation	(5		)	—			(5		)
Change in fair value of derivative financial instruments	—			23			23
Amounts reclassified from accumulated other comprehensive income	—			(1		)	(1		)
Other comprehensive income (loss), net of tax	(5		)	22			17
Balance at October 28, 2017	$	41		$	(1	)	$	40
($ in millions)	Foreign Currency Translation			Cash Flow Hedges			Total
Balance at January 30, 2016	$	22		$	63		$	85
13 Weeks Ended April 30, 2016:
Foreign currency translation	31			—			31
Change in fair value of derivative financial instruments	—			(89		)	(89		)
Amounts reclassified from accumulated other comprehensive income	—			(7		)	(7		)
Other comprehensive income (loss), net of tax	31			(96		)	(65		)
Balance at April 30, 2016	53			(33		)	20
13 Weeks Ended July 30, 2016:
Foreign currency translation	(22		)	—			(22		)
Change in fair value of derivative financial instruments	—			(7		)	(7		)
Amounts reclassified from accumulated other comprehensive income	—			8			8
Other comprehensive income (loss), net of tax	(22		)	1			(21		)
Balance at July 30, 2016	31			(32		)	(1		)
13 Weeks Ended October 29, 2016:
Foreign currency translation	(10		)	—			(10		)
Change in fair value of derivative financial instruments	—			39			39
Amounts reclassified from accumulated other comprehensive income	—			—			—
Other comprehensive income (loss), net of tax	(10		)	39			29
Balance at October 29, 2016	$	21		$	7		$	28

See Note 5 of Notes to Condensed Consolidated Financial Statements for additional disclosures about reclassifications out of accumulated other comprehensive income and their corresponding effects on the respective line items in the Condensed Consolidated Statements of Income.

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Share-Based Compensation

9 Months Ended

Oct. 28, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-Based Compensation

Share-based compensation expense recognized in the Condensed Consolidated Statements of Income, primarily in operating expenses, is as follows:

	13 Weeks Ended						39 Weeks Ended
($ in millions)	October 28, 2017			October 29, 2016			October 28, 2017			October 29, 2016
Stock units	$	14		$	14		$	47		$	43
Stock options	3			4			10			9
Employee stock purchase plan	1			1			3			3
Share-based compensation expense	18			19			60			55
Less: Income tax benefit	(7		)	(8		)	(23		)	(25		)
Share-based compensation expense, net of tax	$	11		$	11		$	37		$	30

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Income Taxes

9 Months Ended

Oct. 28, 2017

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company conducts business globally, and as a result, files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as the United States, Canada, France, the United Kingdom, China, Hong Kong, Japan, and India. We are no longer subject to U.S. federal income tax examinations for fiscal years before 2009, and with few exceptions, we are also no longer subject to U.S. state, local, or non-U.S. income tax examinations for fiscal years before 2008.

The Company is in continual discussions with taxing authorities regarding tax matters in the various U.S. and foreign jurisdictions in the normal course of business. As of October 28, 2017, it is reasonably possible that we will recognize a decrease in gross unrecognized tax benefits within the next 12 months of up to $6 million, primarily due to the closing of audits. If we do recognize such a decrease, the net impact on the Condensed Consolidated Statement of Income would not be material.

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Earnings Per Share

9 Months Ended

Oct. 28, 2017

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Weighted-average number of shares used for earnings per share is as follows:

	13 Weeks Ended		39 Weeks Ended
(shares in millions)	October 28, 2017	October 29, 2016	October 28, 2017	October 29, 2016
Weighted-average number of shares - basic	391	399	395	398
Common stock equivalents	2	1	2	2
Weighted-average number of shares - diluted	393	400	397	400

The above computations of weighted-average number of shares – diluted exclude 9 million and 8 million shares related to stock options and other stock awards for the thirteen weeks endedOctober 28, 2017 and October 29, 2016, respectively, and 9 million and 7 million shares related to stock options and other stock awards for the thirty-nine weeks endedOctober 28, 2017 and October 29, 2016, respectively, as their inclusion would have an anti-dilutive effect on earnings per share.

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Commitments and Contingencies

9 Months Ended

Oct. 28, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

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, 2017, Actions filed against us included commercial, intellectual property, customer, employment, 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, 2017, January 28, 2017, and October 29, 2016, 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 as of October 28, 2017, January 28, 2017, and October 29, 2016 was not material for any individual Action or in total. Subsequent to October 28, 2017 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. Accordingly, developments, settlements, or resolutions may occur and impact income in the quarter of such development, settlement, or resolution. 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.

Fire at the Fishkill Distribution Center

On August 29, 2016, a fire occurred in one of the buildings at a Company-owned distribution center campus in Fishkill, New York. The impacted building primarily held Gap and Banana Republic products for distribution to stores and fulfilled online orders for Gap and Old Navy in the Northeast region of the United States.

The Company maintains property and business interruption insurance coverage. Based on the provisions of the Company’s insurance policies, the Company recorded insurance recoveries based on the determination that recovery of certain fire-related costs is probable. During fiscal 2016, the Company incurred a total of $133 million in certain fire-related costs. In January of fiscal 2016, the Company agreed upon a partial settlement of $159 million related to the loss on inventory and recorded a gain of $73 million, representing the excess over the loss on inventory, which was recorded in operating expenses in the Consolidated Statement of Income. During fiscal 2016, the Company received $174 million of insurance proceeds. As a result, the insurance receivable balance was $32 million as of January 28, 2017 and was recorded in other current assets in the Consolidated Balance Sheet.

During the thirteen and thirty-nine weeks endedOctober 28, 2017, the Company incurred immaterial costs and $15 million, respectively, in certain fire-related costs for which the Company recorded insurance recoveries based on the determination that recovery of these fire-related costs is probable. In June 2017, the Company also agreed upon a partial settlement and recorded a gain of $64 million, primarily related to property and equipment, representing the excess over the loss on fire-related recoverable costs, which was recorded in operating expenses in the Condensed Consolidated Statement of Income.

The Company received $29 million and $131 million of insurance proceeds during the thirteen and thirty-nine weeks endedOctober 28, 2017, respectively. Included in the $29 million was $20 million in insurance proceeds related to business interruption, which were recorded as a reduction to cost of goods sold and occupancy expenses in the Condensed Consolidated Statement of Income. The remaining $9 million and $111 million of insurance proceeds received during the thirteen and thirty-nine weeks ended October 28, 2017, respectively, were recorded as a reduction to the insurance receivable balance. As a result, the insurance proceeds received in excess of expected recoveries was less than $1 million as of October 28, 2017.

We will continue to incur additional logistics costs related to the disruption to our North American supply chain network. As settlements are reached, any recoveries related to business interruption insurance will be recognized as a reduction to cost of goods sold and occupancy expenses in the Condensed Consolidated Statements of Income.

During the thirty-nine weeks endedOctober 28, 2017, we allocated $60 million of insurance proceeds to the loss on property and equipment based on the partial settlement of claims reported as insurance proceeds related to loss on property and equipment, a component of cash flows from investing activities, in the Condensed Consolidated Statement of Cash Flows.

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Segment Information

9 Months Ended

Oct. 28, 2017

Segment Reporting [Abstract]

Segment Information

Segment Information

The Gap, Inc. is a global retailer that sells apparel, accessories, and personal care products under the Gap, Old Navy, Banana Republic, Athleta, Intermix, and Weddington Way brands. We identify our operating segments according to how our business activities are managed and evaluated. As of October 28, 2017, our operating segments included Gap Global, Old Navy Global, Banana Republic Global, Athleta, and Intermix. 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, 2017.

Net sales by brand and region are as follows:

($ in millions)	Gap Global		Old Navy Global		Banana Republic Global		Other (2)		Total		Percentage of Net Sales
13 Weeks Ended October 28, 2017
U.S. (1)	$	750	$	1,587	$	467	$	200	$	3,004	79	%
Canada	109		143		57		1		310		8
Europe	154		—		4		—		158		4
Asia	278		13		21		—		312		8
Other regions	31		15		8		—		54		1
Total	$	1,322	$	1,758	$	557	$	201	$	3,838	100	%
($ in millions)	Gap Global		Old Navy Global		Banana Republic Global		Other (3)		Total		Percentage of Net Sales
13 Weeks Ended October 29, 2016
U.S. (1)	$	756	$	1,507	$	479	$	172	$	2,914	77	%
Canada	102		131		55		1		289		8
Europe	150		—		14		—		164		4
Asia	296		55		25		—		376		10
Other regions	36		12		7		—		55		1
Total	$	1,340	$	1,705	$	580	$	173	$	3,798	100	%
($ in millions)	Gap Global		Old Navy Global		Banana Republic Global		Other (2)		Total		Percentage of Net Sales
39 Weeks Ended October 28, 2017
U.S. (1)	$	2,137	$	4,609	$	1,396	$	633	$	8,775	79	%
Canada	277		387		156		2		822		8
Europe	435		—		11		—		446		4
Asia	780		34		69		—		883		8
Other regions	83		47		21		—		151		1
Total	$	3,712	$	5,077	$	1,653	$	635	$	11,077	100	%
($ in millions)	Gap Global		Old Navy Global		Banana Republic Global		Other (3)		Total		Percentage of Net Sales
39 Weeks Ended October 29, 2016
U.S. (1)	$	2,203	$	4,335	$	1,456	$	550	$	8,544	77	%
Canada	264		358		159		2		783		7
Europe	453		—		45		—		498		5
Asia	856		171		80		—		1,107		10
Other regions	100		32		23		—		155		1
Total	$	3,876	$	4,896	$	1,763	$	552	$	11,087	100	%

__________

(1) U.S. includes the United States, Puerto Rico, and Guam.

(2) Includes Athleta, Intermix, and Weddington Way.

(3) Includes Athleta and Intermix.

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.

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Debt and Credit Facilities Long Term Debt (Tables)

9 Months Ended

Oct. 28, 2017

Debt Disclosure [Abstract]

Long Term Debt

Long-term debt consists of the following:

($ in millions)	October 28, 2017		January 28, 2017			October 29, 2016
Notes	$	1,248	$	1,248		$	1,248
Japan Term Loan	—		65			96
Total debt	1,248		1,313			1,344
Less: Current portion of Japan Term Loan	—		(65		)	(24		)
Total long-term debt	$	1,248	$	1,248		$	1,320

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Fair Value Measurements (Tables)

9 Months Ended

Oct. 28, 2017

Fair Value Disclosures [Abstract]

Financial Assets And Liabilities Measured At Fair Value On Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis and cash equivalents are as follows:

			Fair Value Measurements at Reporting Date Using
($ in millions)	October 28, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	389	$	28	$	361	$	—
Derivative financial instruments	31		—		31		—
Deferred compensation plan assets	46		46		—		—
Total	$	466	$	74	$	392	$	—
Liabilities:
Derivative financial instruments	$	20	$	—	$	20	$	—
			Fair Value Measurements at Reporting Date Using
($ in millions)	January 28, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	697	$	256	$	441	$	—
Derivative financial instruments	58		—		58		—
Deferred compensation plan assets	40		40		—		—
Total	$	795	$	296	$	499	$	—
Liabilities:
Derivative financial instruments	$	21	$	—	$	21	$	—
			Fair Value Measurements at Reporting Date Using
($ in millions)	October 29, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant  Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	596	$	106	$	490	$	—
Derivative financial instruments	62		—		62		—
Deferred compensation plan assets	41		41		—		—
Total	$	699	$	147	$	552	$	—
Liabilities:
Derivative financial instruments	$	49	$	—	$	49	$	—

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Derivative Financial Instruments (Tables)

9 Months Ended

Oct. 28, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Foreign Exchange Forward Contracts Outstanding

We had foreign exchange forward contracts outstanding in the following notional amounts:

($ in millions)	October 28, 2017		January 28, 2017		October 29, 2016
Derivatives designated as cash flow hedges	$	873	$	1,101	$	1,201
Derivatives designated as net investment hedges	30		31		31
Derivatives not designated as hedging instruments	581		618		664
Total	$	1,484	$	1,750	$	1,896

Fair Values of Asset and Liability Derivative Financial Instruments

The fair values of foreign exchange forward contracts are as follows:

($ in millions)	October 28, 2017		January 28, 2017		October 29, 2016
Derivatives designated as cash flow hedges:
Other current assets	$	16	$	28	$	35
Other long-term assets	$	4	$	16	$	13
Accrued expenses and other current liabilities	$	11	$	10	$	26
Lease incentives and other long-term liabilities	$	2	$	1	$	8
Derivatives designated as net investment hedges:
Other current assets	$	—	$	—	$	1
Other long-term assets	$	—	$	—	$	—
Accrued expenses and other current liabilities	$	2	$	—	$	—
Lease incentives and other long-term liabilities	$	—	$	—	$	—
Derivatives not designated as hedging instruments:
Other current assets	$	11	$	13	$	13
Other long-term assets	$	—	$	1	$	—
Accrued expenses and other current liabilities	$	5	$	10	$	14
Lease incentives and other long-term liabilities	$	—	$	—	$	1
Total derivatives in an asset position	$	31	$	58	$	62
Total derivatives in a liability position	$	20	$	21	$	49

Effects of Derivative Financial Instruments on OCI and Condensed Consolidated Statements of Income

The effective portion of gains and losses on foreign exchange forward contracts in cash flow hedging and net investment hedging relationships recorded in other comprehensive income and the Condensed Consolidated Statements of Income, on a pre-tax basis, are as follows:

	13 Weeks Ended						39 Weeks Ended
($ in millions)	October 28, 2017			October 29, 2016			October 28, 2017			October 29, 2016
Derivatives in cash flow hedging relationships:
Gain (loss) recognized in other comprehensive income	$	25		$	43		$	(26	)	$	(62	)
Gain (loss) reclassified into cost of goods sold and occupancy expenses	$	(5	)	$	2		$	2		$	15
Loss reclassified into operating expenses	$	—		$	(2	)	$	—		$	(10	)
Derivatives in net investment hedging relationships:
Gain (loss) recognized in other comprehensive income	$	1		$	1		$	(1	)	$	(1	)

Schedule of Other Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance and Financial Position, Location [Table Text Block]

Gains and losses on foreign exchange forward contracts not designated as hedging instruments recorded in the Condensed Consolidated Statements of Income, on a pre-tax basis, are as follows:

	13 Weeks Ended				39 Weeks Ended
($ in millions)	October 28, 2017		October 29, 2016		October 28, 2017			October 29, 2016
Gain (loss) recognized in operating expenses	$	10	$	12	$	(13	)	$	(5	)

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Share Repurchases (Tables)

9 Months Ended

Oct. 28, 2017

Disclosure Share Repurchase Activity [Abstract]

Share Repurchase Activity

Share repurchase activity is as follows:

	13 Weeks Ended				39 Weeks Ended
($ and shares in millions except average per share cost)	October 28, 2017		October 29, 2016		October 28, 2017		October 29, 2016
Number of shares repurchased (1)	3.8		—		12.5		—
Total cost	$	100	$	—	$	300	$	—
Average per share cost including commissions	$	26.64	$	—	$	24.21	$	—

__________

(1) Excludes shares withheld to settle employee statutory tax withholding related to the vesting of stock units.

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Accumulated Other Comprehensive Income (Tables)

9 Months Ended

Oct. 28, 2017

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Changes in Accumulated Other Comprehensive Income by Component

Changes in accumulated other comprehensive income by component, net of tax, are as follows:

($ in millions)	Foreign Currency Translation			Cash Flow Hedges			Total
Balance at January 28, 2017	$	29		$	25		$	54
13 Weeks Ended April 29, 2017:
Foreign currency translation	(4		)	—			(4		)
Change in fair value of derivative financial instruments	—			—			—
Amounts reclassified from accumulated other comprehensive income	—			(4		)	(4		)
Other comprehensive loss, net of tax	(4		)	(4		)	(8		)
Balance at April 29, 2017	25			21			46
13 Weeks Ended July 29, 2017:
Foreign currency translation	21			—			21
Change in fair value of derivative financial instruments	—			(43		)	(43		)
Amounts reclassified from accumulated other comprehensive income	—			(1		)	(1		)
Other comprehensive income (loss), net of tax	21			(44		)	(23		)
Balance at July 29, 2017	46			(23		)	23
13 Weeks Ended October 28, 2017:
Foreign currency translation	(5		)	—			(5		)
Change in fair value of derivative financial instruments	—			23			23
Amounts reclassified from accumulated other comprehensive income	—			(1		)	(1		)
Other comprehensive income (loss), net of tax	(5		)	22			17
Balance at October 28, 2017	$	41		$	(1	)	$	40
($ in millions)	Foreign Currency Translation			Cash Flow Hedges			Total
Balance at January 30, 2016	$	22		$	63		$	85
13 Weeks Ended April 30, 2016:
Foreign currency translation	31			—			31
Change in fair value of derivative financial instruments	—			(89		)	(89		)
Amounts reclassified from accumulated other comprehensive income	—			(7		)	(7		)
Other comprehensive income (loss), net of tax	31			(96		)	(65		)
Balance at April 30, 2016	53			(33		)	20
13 Weeks Ended July 30, 2016:
Foreign currency translation	(22		)	—			(22		)
Change in fair value of derivative financial instruments	—			(7		)	(7		)
Amounts reclassified from accumulated other comprehensive income	—			8			8
Other comprehensive income (loss), net of tax	(22		)	1			(21		)
Balance at July 30, 2016	31			(32		)	(1		)
13 Weeks Ended October 29, 2016:
Foreign currency translation	(10		)	—			(10		)
Change in fair value of derivative financial instruments	—			39			39
Amounts reclassified from accumulated other comprehensive income	—			—			—
Other comprehensive income (loss), net of tax	(10		)	39			29
Balance at October 29, 2016	$	21		$	7		$	28

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Share-Based Compensation (Tables)

9 Months Ended

Oct. 28, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation Expense

Share-based compensation expense recognized in the Condensed Consolidated Statements of Income, primarily in operating expenses, is as follows:

	13 Weeks Ended						39 Weeks Ended
($ in millions)	October 28, 2017			October 29, 2016			October 28, 2017			October 29, 2016
Stock units	$	14		$	14		$	47		$	43
Stock options	3			4			10			9
Employee stock purchase plan	1			1			3			3
Share-based compensation expense	18			19			60			55
Less: Income tax benefit	(7		)	(8		)	(23		)	(25		)
Share-based compensation expense, net of tax	$	11		$	11		$	37		$	30

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Earnings Per Share (Tables)

9 Months Ended

Oct. 28, 2017

Earnings Per Share [Abstract]

Weighted-Average Number of Shares

Weighted-average number of shares used for earnings per share is as follows:

	13 Weeks Ended		39 Weeks Ended
(shares in millions)	October 28, 2017	October 29, 2016	October 28, 2017	October 29, 2016
Weighted-average number of shares - basic	391	399	395	398
Common stock equivalents	2	1	2	2
Weighted-average number of shares - diluted	393	400	397	400

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Segment Information (Tables)

9 Months Ended

Oct. 28, 2017

Segment Reporting [Abstract]

Net Sales by Brand and Region

Net sales by brand and region are as follows:

($ in millions)	Gap Global		Old Navy Global		Banana Republic Global		Other (2)		Total		Percentage of Net Sales
13 Weeks Ended October 28, 2017
U.S. (1)	$	750	$	1,587	$	467	$	200	$	3,004	79	%
Canada	109		143		57		1		310		8
Europe	154		—		4		—		158		4
Asia	278		13		21		—		312		8
Other regions	31		15		8		—		54		1
Total	$	1,322	$	1,758	$	557	$	201	$	3,838	100	%
($ in millions)	Gap Global		Old Navy Global		Banana Republic Global		Other (3)		Total		Percentage of Net Sales
13 Weeks Ended October 29, 2016
U.S. (1)	$	756	$	1,507	$	479	$	172	$	2,914	77	%
Canada	102		131		55		1		289		8
Europe	150		—		14		—		164		4
Asia	296		55		25		—		376		10
Other regions	36		12		7		—		55		1
Total	$	1,340	$	1,705	$	580	$	173	$	3,798	100	%
($ in millions)	Gap Global		Old Navy Global		Banana Republic Global		Other (2)		Total		Percentage of Net Sales
39 Weeks Ended October 28, 2017
U.S. (1)	$	2,137	$	4,609	$	1,396	$	633	$	8,775	79	%
Canada	277		387		156		2		822		8
Europe	435		—		11		—		446		4
Asia	780		34		69		—		883		8
Other regions	83		47		21		—		151		1
Total	$	3,712	$	5,077	$	1,653	$	635	$	11,077	100	%
($ in millions)	Gap Global		Old Navy Global		Banana Republic Global		Other (3)		Total		Percentage of Net Sales
39 Weeks Ended October 29, 2016
U.S. (1)	$	2,203	$	4,335	$	1,456	$	550	$	8,544	77	%
Canada	264		358		159		2		783		7
Europe	453		—		45		—		498		5
Asia	856		171		80		—		1,107		10
Other regions	100		32		23		—		155		1
Total	$	3,876	$	4,896	$	1,763	$	552	$	11,087	100	%

__________

(1) U.S. includes the United States, Puerto Rico, and Guam.

(2) Includes Athleta, Intermix, and Weddington Way.

(3) Includes Athleta and Intermix.

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Recent Accounting Pronouncements - Additional Information (Details) $ in Millions	Apr. 29, 2017 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative Effect of New Accounting Principle in Period of Adoption	$ 3

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Debt and Credit Facilities Long Term Debt (Details) - USD ($) $ in Millions	Oct. 28, 2017	Jan. 28, 2017	Oct. 29, 2016
Debt Instrument [Line Items]
Notes	$ 1,248	$ 1,248	$ 1,248
Japan Term Loan	0	65	96
Total debt	1,248	1,313	1,344
Less: Current portion of Japan Term Loan	0	(65)	(24)
Total long-term debt	$ 1,248	$ 1,248	$ 1,320

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Debt and Credit Facilities - Additional Information (Details) $ in Millions, ¥ in Billions	9 Months Ended	12 Months Ended
	Oct. 28, 2017 USD ($)	Jan. 28, 2017 JPY (¥)	Jan. 28, 2017 USD ($)	Oct. 29, 2016 USD ($)
5.95 Percent Notes Due April 2021
Debt Instrument [Line Items]
Aggregate principal amount of notes issued	$ 1,250
Notes, interest rate	5.95%
Estimated fair value	$ 1,350		$ 1,320	$ 1,340
Notes, maturity date	Apr. 12, 2021
Japan Term Loan [Member]
Debt Instrument [Line Items]
Aggregate principal amount of notes issued | ¥		¥ 15.0
Estimated fair value	$ 0		$ 65	96
Debt Instrument, Term		4 years
Long-term Debt, Maturities, Repayments of Principal in Next Twelve Months | ¥		¥ 7.5
Debt Instrument, Annual Principal Payment | ¥		¥ 2.5
Notes, maturity date	Jan. 15, 2018
Foreign Facilities [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 47
Borrowings	0
Bank guarantees related to store leases	14
Standby Letters of Credit [Member]
Debt Instrument [Line Items]
Unsecured committed letter of credit amount	$ 15
400 Million Dollar Term Loan with Extension [Member]
Debt Instrument [Line Items]
Short-Term Loans Payable				$ 400
Five-Year Unsecured Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Debt Instrument, Term	5 years
Maximum borrowing capacity	$ 500
Unsecured committed letter of credit amount	0
Borrowings	$ 0
Expiration date	May 01, 2020

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Fair Value Measurements - Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Millions	Oct. 28, 2017	Jan. 28, 2017	Oct. 29, 2016
Assets:
Cash equivalents	$ 389	$ 697	$ 596
Derivative financial instruments	31	58	62
Deferred compensation plan assets	46	40	41
Total	466	795	699
Liabilities:
Derivative financial instruments	20	21	49
Fair Value, Inputs, Level 1 [Member]
Assets:
Cash equivalents	28	256	106
Derivative financial instruments	0	0	0
Deferred compensation plan assets	46	40	41
Total	74	296	147
Liabilities:
Derivative financial instruments	0	0	0
Fair Value, Inputs, Level 2 [Member]
Assets:
Cash equivalents	361	441	490
Derivative financial instruments	31	58	62
Deferred compensation plan assets	0	0	0
Total	392	499	552
Liabilities:
Derivative financial instruments	20	21	49
Fair Value, Inputs, Level 3 [Member]
Assets:
Cash equivalents	0	0	0
Derivative financial instruments	0	0	0
Deferred compensation plan assets	0	0	0
Total	0	0	0
Liabilities:
Derivative financial instruments	$ 0	$ 0	$ 0

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Fair Value Measurements - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Oct. 28, 2017	Oct. 29, 2016	Oct. 28, 2017	Oct. 29, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other indefinite-lived intangible assets impairment charges	$ 0	$ 0	$ 0	$ 0
Store asset impairment charges	4,000,000		17,000,000	89,000,000
Goodwill impairment charges	0	0	0	0
Transfers into or out of level 2	0	0	0	0
Transfers into or out of level 1	0	0	0	0
Purchases, sales, issuances, or settlements related to recurring level 3 measurements	0	0	0	0
Facility Closing [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Store asset impairment charges		2,000,000		54,000,000
Impaired During Q3 QTD 2017 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long Lived Asset at Carrying Value	5,000,000		5,000,000
Impaired other assets fair value	1,000,000		1,000,000
Impaired During Q3 YTD 2017 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long Lived Asset at Carrying Value	18,000,000		18,000,000
Impaired other assets fair value	$ 1,000,000		$ 1,000,000
Non Restructuring Impairment [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Store asset impairment charges		31,000,000		35,000,000
Impaired During Q3 QTD 2016 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long Lived Asset at Carrying Value		34,000,000		34,000,000
Impaired other assets fair value		1,000,000		1,000,000
Impaired During Q3 YTD 2016 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long Lived Asset at Carrying Value		102,000,000		102,000,000
Impaired other assets fair value		$ 13,000,000		$ 13,000,000

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Derivative Financial Instruments - Foreign Exchange Contracts Outstanding to Sell Various Currencies (Details) - USD ($) $ in Millions	Oct. 28, 2017	Jan. 28, 2017	Oct. 29, 2016
Derivative [Line Items]
Derivative, Notional Amount	$ 1,484	$ 1,750	$ 1,896
Derivatives in cash flow hedging relationships
Derivative [Line Items]
Derivative, Notional Amount	873	1,101	1,201
Derivatives in net investment hedging relationships
Derivative [Line Items]
Derivative, Notional Amount	30	31	31
Not Designated as Hedging Instrument
Derivative [Line Items]
Derivative, Notional Amount	$ 581	$ 618	$ 664

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Derivative Financial Instruments - Fair Values of Asset and Liability Derivative Financial Instruments (Details) - USD ($) $ in Millions	Oct. 28, 2017	Jan. 28, 2017	Oct. 29, 2016
Derivatives, Fair Value [Line Items]
Derivative financial instruments, assets	$ 31	$ 58	$ 62
Derivative financial instruments, liabilities	20	21	49
Foreign Exchange Forward Contract
Derivatives, Fair Value [Line Items]
Derivative financial instruments, assets	31	58	62
Derivative financial instruments, liabilities	20	21	49
Derivatives in cash flow hedging relationships | Foreign Exchange Forward Contract | Other Current Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative financial instruments, assets	16	28	35
Derivatives in cash flow hedging relationships | Foreign Exchange Forward Contract | Other Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative financial instruments, assets	4	16	13
Derivatives in cash flow hedging relationships | Foreign Exchange Forward Contract | Accrued Liabilities Current [Member]
Derivatives, Fair Value [Line Items]
Derivative financial instruments, liabilities	11	10	26
Derivatives in cash flow hedging relationships | Foreign Exchange Forward Contract | Lease Incentive And Other Long Term Liabilities [Member]
Derivatives, Fair Value [Line Items]
Derivative financial instruments, liabilities	2	1	8
Derivatives in net investment hedging relationships | Foreign Exchange Forward Contract | Other Current Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative financial instruments, assets	0	0	1
Derivatives in net investment hedging relationships | Foreign Exchange Forward Contract | Other Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative financial instruments, assets	0	0	0
Derivatives in net investment hedging relationships | Foreign Exchange Forward Contract | Accrued Liabilities Current [Member]
Derivatives, Fair Value [Line Items]
Derivative financial instruments, liabilities	2	0	0
Derivatives in net investment hedging relationships | Foreign Exchange Forward Contract | Lease Incentive And Other Long Term Liabilities [Member]
Derivatives, Fair Value [Line Items]
Derivative financial instruments, liabilities	0	0	0
Not Designated as Hedging Instrument | Foreign Exchange Forward Contract | Other Current Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative financial instruments, assets	11	13	13
Not Designated as Hedging Instrument | Foreign Exchange Forward Contract | Other Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative financial instruments, assets	0	1	0
Not Designated as Hedging Instrument | Foreign Exchange Forward Contract | Accrued Liabilities Current [Member]
Derivatives, Fair Value [Line Items]
Derivative financial instruments, liabilities	5	10	14
Not Designated as Hedging Instrument | Foreign Exchange Forward Contract | Lease Incentive And Other Long Term Liabilities [Member]
Derivatives, Fair Value [Line Items]
Derivative financial instruments, liabilities	$ 0	$ 0	$ 1

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Derivative Financial Instruments - Effects Of Derivative Financial Instruments On OCI And Condensed Consolidated Statements Of Income (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Oct. 28, 2017	Oct. 29, 2016	Oct. 28, 2017	Oct. 29, 2016
Derivatives in net investment hedging relationships
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) reclassified from accumulated OCI into income, effective portion, net	$ 0	$ 0	$ 0	$ 0
Foreign Exchange Forward Contract | Derivatives in cash flow hedging relationships
Derivative Instruments, Gain (Loss) [Line Items]
Derivative instruments, gain (loss) recognized in OCI, effective portion, net	25	43	(26)	(62)
Foreign Exchange Forward Contract | Derivatives in net investment hedging relationships
Derivative Instruments, Gain (Loss) [Line Items]
Derivative instruments, gain (loss) recognized in OCI, effective portion, net	1	1	(1)	(1)
Foreign Exchange Forward Contract | Cost of Goods Sold and Occupancy Expense | Derivatives in cash flow hedging relationships
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) reclassified from accumulated OCI into income, effective portion, net	(5)	2	2	15
Foreign Exchange Forward Contract | Operating Expenses [Member] | Not Designated as Hedging Instrument
Derivative Instruments, Gain (Loss) [Line Items]
Amounts of gain (loss) recognized in income on derivatives	10	12	(13)	(5)
Foreign Exchange Forward Contract | Operating Expenses [Member] | Derivatives in cash flow hedging relationships
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) reclassified from accumulated OCI into income, effective portion, net	$ 0	$ (2)	$ 0	$ (10)

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Derivative Financial Instruments - Additional Information (Details) - USD ($) $ in Millions	Oct. 28, 2017	Jan. 28, 2017	Oct. 29, 2016
Derivative [Line Items]
Amounts Subject to Enforceable Master Netting Arrangements	$ 8	$ 18	$ 9
Derivative assets, net of amount subject to master netting arrangement	23	40	53
Derivative liabilities, net of amount subject to master netting arrangement	$ 12	$ 3	$ 40

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Share Repurchase Activity (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions		3 Months Ended		9 Months Ended
		Oct. 28, 2017	Oct. 29, 2016	Oct. 28, 2017	Oct. 29, 2016
Disclosure Share Repurchase Activity [Abstract]
Number of shares repurchased	[1]	3.8	0.0	12.5	0.0
Total cost		$ 100	$ 0	$ 300	$ 0
Average per share cost including commissions (in dollars per share)		$ 26.64	$ 0.00	$ 24.21	$ 0.00

[1] Excludes shares withheld to settle employee statutory tax withholding related to the vesting of stock units.

XML

Share Repurchases - Additional Information (Details) - USD ($) $ in Millions	Oct. 28, 2017	Feb. 25, 2016
Disclosure Share Repurchases Additional Information [Abstract]
Stock Repurchase Program, Authorized Amount		$ 1,000
Share repurchases, remaining amount	$ 700
Stock Repurchase Program Amount Not Paid	$ 0

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Accumulated Other Comprehensive Income (Details) - USD ($) $ in Millions	3 Months Ended						9 Months Ended
	Oct. 28, 2017	Jul. 29, 2017	Apr. 29, 2017	Oct. 29, 2016	Jul. 30, 2016	Apr. 30, 2016	Oct. 28, 2017	Oct. 29, 2016	Jan. 28, 2017	Jan. 30, 2016
Foreign currency translation	$ (5)	$ 21	$ (4)	$ (10)	$ (22)	$ 31	$ 12	$ (1)
Change in fair value of derivative financial instruments	23	(43)	0	39	(7)	(89)	(20)	(57)
Amounts reclassified from accumulated other comprehensive income	(1)	(1)	(4)	0	8	(7)	(6)	1
Other comprehensive loss, net of tax	17	(23)	(8)	29	(21)	(65)	(14)	(57)
Accumulated Other Comprehensive Income (Loss), Net of Tax	40	23	46	28	(1)	20	40	28	$ 54	$ 85
Accumulated Translation Adjustment [Member]
Foreign currency translation	(5)	21	(4)	(10)	(22)	31
Change in fair value of derivative financial instruments	0	0	0	0	0	0
Amounts reclassified from accumulated other comprehensive income	0	0	0	0	0	0
Other comprehensive loss, net of tax	(5)	21	(4)	(10)	(22)	31
Accumulated Other Comprehensive Income (Loss), Net of Tax	41	46	25	21	31	53	41	21	29	22
Derivatives in cash flow hedging relationships
Foreign currency translation	0	0	0	0	0	0
Change in fair value of derivative financial instruments	23	(43)	0	39	(7)	(89)
Amounts reclassified from accumulated other comprehensive income	(1)	(1)	(4)	0	8	(7)
Other comprehensive loss, net of tax	22	(44)	(4)	39	1	(96)
Accumulated Other Comprehensive Income (Loss), Net of Tax	$ (1)	$ (23)	$ 21	$ 7	$ (32)	$ (33)	$ (1)	$ 7	$ 25	$ 63

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Share-Based Compensation Expense (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Oct. 28, 2017	Oct. 29, 2016	Oct. 28, 2017	Oct. 29, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 18	$ 19	$ 60	$ 55
Less: Income tax benefit	(7)	(8)	(23)	(25)
Share-based compensation expense, net of tax	11	11	37	30
Stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	14	14	47	43
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	3	4	10	9
Employee stock purchase plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 1	$ 1	$ 3	$ 3

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Income Taxes - Additional Information (Details) $ in Millions	9 Months Ended
	Oct. 28, 2017 USD ($)
Income Tax Disclosure [Abstract]
Decrease In Gross Unrecognized Tax Benefits Within The Next 12 Months	$ 6
Benefit To Income Taxes If Decrease In Gross Unrecognized Tax Benefits Within 12 Months Are Recognized	$ 0

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Earnings Per Share - Weighted Average Number of Shares (Details) - shares shares in Millions	3 Months Ended		9 Months Ended
	Oct. 28, 2017	Oct. 29, 2016	Oct. 28, 2017	Oct. 29, 2016
Earnings Per Share [Abstract]
Weighted-average number of shares - basic (in shares)	391	399	395	398
Common stock equivalents (in shares)	2	1	2	2
Weighted-average number of shares - diluted (in shares)	393	400	397	400

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Earnings Per Share - Additional Information (Details) - shares shares in Millions	3 Months Ended		9 Months Ended
	Oct. 28, 2017	Oct. 29, 2016	Oct. 28, 2017	Oct. 29, 2016
Earnings Per Share [Abstract]
Shares excluded from the computations of weighted-average number of shares - diluted	9	8	9	7

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Commitments and Contingencies - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
	Oct. 28, 2017	Jul. 29, 2017	Oct. 28, 2017	Oct. 29, 2016	Jan. 28, 2017
Commitments and Contingencies [Line Items]
Loss Contingency, Estimate of Possible Loss	$ 0		$ 0	$ 0	$ 0
Insurance proceeds related to loss on property and equipment			60	$ 0
Fire [Member]
Commitments and Contingencies [Line Items]
Total fire-related costs	0		15		133
Partial Insurance Settlement					159
Insured Event, Gain (Loss)		$ 64			73
Insurance Proceeds	29		131		174
Insurance settlements receivable					$ 32
Business Interruption	20
Insurance Proceeds Excluding Business Interruption	9		111
Insurance proceeds received in excess of expected recoveries	$ 1		1
Insurance proceeds related to loss on property and equipment			$ 60

XML

Segment Information - Net Sales by Brand and Region (Details) - USD ($) $ in Millions		3 Months Ended				9 Months Ended
		Oct. 28, 2017		Oct. 29, 2016		Oct. 28, 2017		Oct. 29, 2016
Segment Reporting Information [Line Items]
Net sales		$ 3,838		$ 3,798		$ 11,077		$ 11,087
Percentage of Net Sales		100.00%		100.00%		100.00%		100.00%
U.S.
Segment Reporting Information [Line Items]
Net sales	[1]	$ 3,004		$ 2,914		$ 8,775		$ 8,544
Percentage of Net Sales	[1]	79.00%		77.00%		79.00%		77.00%
Canada
Segment Reporting Information [Line Items]
Net sales		$ 310		$ 289		$ 822		$ 783
Percentage of Net Sales		8.00%		8.00%		8.00%		7.00%
Europe
Segment Reporting Information [Line Items]
Net sales		$ 158		$ 164		$ 446		$ 498
Percentage of Net Sales		4.00%		4.00%		4.00%		5.00%
Asia
Segment Reporting Information [Line Items]
Net sales		$ 312		$ 376		$ 883		$ 1,107
Percentage of Net Sales		8.00%		10.00%		8.00%		10.00%
Other Regions
Segment Reporting Information [Line Items]
Net sales		$ 54		$ 55		$ 151		$ 155
Percentage of Net Sales		1.00%		1.00%		1.00%		1.00%
Gap
Segment Reporting Information [Line Items]
Net sales		$ 1,322		$ 1,340		$ 3,712		$ 3,876
Gap | U.S.
Segment Reporting Information [Line Items]
Net sales	[1]	750		756		2,137		2,203
Gap | Canada
Segment Reporting Information [Line Items]
Net sales		109		102		277		264
Gap | Europe
Segment Reporting Information [Line Items]
Net sales		154		150		435		453
Gap | Asia
Segment Reporting Information [Line Items]
Net sales		278		296		780		856
Gap | Other Regions
Segment Reporting Information [Line Items]
Net sales		31		36		83		100
Old Navy
Segment Reporting Information [Line Items]
Net sales		1,758		1,705		5,077		4,896
Old Navy | U.S.
Segment Reporting Information [Line Items]
Net sales	[1]	1,587		1,507		4,609		4,335
Old Navy | Canada
Segment Reporting Information [Line Items]
Net sales		143		131		387		358
Old Navy | Europe
Segment Reporting Information [Line Items]
Net sales		0		0		0		0
Old Navy | Asia
Segment Reporting Information [Line Items]
Net sales		13		55		34		171
Old Navy | Other Regions
Segment Reporting Information [Line Items]
Net sales		15		12		47		32
Banana Republic
Segment Reporting Information [Line Items]
Net sales		557		580		1,653		1,763
Banana Republic | U.S.
Segment Reporting Information [Line Items]
Net sales	[1]	467		479		1,396		1,456
Banana Republic | Canada
Segment Reporting Information [Line Items]
Net sales		57		55		156		159
Banana Republic | Europe
Segment Reporting Information [Line Items]
Net sales		4		14		11		45
Banana Republic | Asia
Segment Reporting Information [Line Items]
Net sales		21		25		69		80
Banana Republic | Other Regions
Segment Reporting Information [Line Items]
Net sales		8		7		21		23
Other
Segment Reporting Information [Line Items]
Net sales		201	[2]	173	[3]	635	[2]	552	[3]
Other | U.S.
Segment Reporting Information [Line Items]
Net sales	[1]	200	[2]	172	[3]	633	[2]	550	[3]
Other | Canada
Segment Reporting Information [Line Items]
Net sales		1	[2]	1	[3]	2	[2]	2	[3]
Other | Europe
Segment Reporting Information [Line Items]
Net sales		0	[2]	0	[3]	0	[2]	0	[3]
Other | Asia
Segment Reporting Information [Line Items]
Net sales		0	[2]	0	[3]	0	[2]	0	[3]
Other | Other Regions
Segment Reporting Information [Line Items]
Net sales		$ 0	[2]	$ 0	[3]	$ 0	[2]	$ 0	[3]

[1] U.S. includes the United States, Puerto Rico, and Guam.

[2] Includes Athleta, Intermix, and Weddington Way.

[3] Includes Athleta and Intermix.

XML

Segment Information - Additional Information (Details)	9 Months Ended
	Oct. 28, 2017 Segment
Segment Reporting [Abstract]
Number of reportable segments (in segments)	1