Chairman Robert J. Fisher to Serve as Interim
Chief Executive Officer
Company Also Provides Update on Third Quarter
and Fiscal 2019 Earnings Outlook
The Gap Inc. (NYSE: GPS) Board of Directors announced today that
president and chief executive officer Art Peck will step down from
his position and from the company’s Board. Mr. Peck will depart
from the company after a brief transition. Effective immediately,
Robert J. Fisher, the company's current non-executive chairman of
the Board, will also serve as president and chief executive officer
on an interim basis. Additionally, the Board has appointed Bobby
Martin, chair of its compensation and management development
committee, as lead independent director.
“On behalf of the entire Board, I want to thank Art for his many
contributions to Gap Inc., spanning a nearly 15-year career with
the company,” said Mr. Fisher. "Under Art’s tenure as CEO, we have
made progress investing in capabilities that bode well for the
future such as expanding the omni-channel customer experience and
building our digital capabilities.”
As a key member of the founding family, Mr. Fisher brings strong
leadership and invaluable perspective from his 35-year history with
Gap Inc., where he has served in a variety of senior executive
positions, including interim president and chief executive officer.
Mr. Fisher has served on the Board of Directors since 1990 and has
also served as non-executive chairman since February 2015.
Mr. Martin has served on the Board since 2002 including serving
as the lead independent director from 2003 to 2015. Mr. Martin is a
retail industry veteran with over 35 years of experience. As the
former chief executive officer of Wal-Mart International and chief
information officer for Wal-Mart Stores, Inc., Mr. Martin brings
extensive global governance and executive management
experience.
“As the Board evaluates potential successors, our focus will be
on strong leadership candidates with operational excellence to
drive greater efficiency, speed and profitability,” said Fisher.
“In the meantime, we will continue to focus on leveraging the power
of our brands and the talented teams that lead them to improve
execution and better position the portfolio for growth.”
Third Quarter and Fiscal Year 2019 Guidance
In conjunction with this announcement, the company also today
reported comparable sales and provided earnings per share guidance
for the third quarter ended November 2, 2019, and revised earnings
per share guidance for fiscal year 2019.
Comparable sales for the third quarter of 2019 were down 4%
versus flat last year. Comparable sales by global brand were as
follows:
- Gap Global: negative 7% versus negative 7% last
year
- Banana Republic Global: negative 3% versus positive 2%
last year
- Old Navy Global: negative 4% versus positive 4% last
year
Third Quarter and Fiscal Year 2019 Outlook
The company expects diluted earnings per share for the third
quarter of fiscal year 2019 to be approximately $0.50 to $0.52 and
adjusted diluted earnings per share to be approximately $0.34 to
$0.36.
The company updated its reported diluted earnings per share
guidance for fiscal year 2019 to be in the range of $1.38 to $1.47
and now expects 2019 adjusted diluted earnings per share guidance
range of $1.70 to $1.75 versus previous guidance of $2.05 to
$2.15.
“This was a challenging quarter, as macro impacts and slower
traffic further pressured results that have been hampered by
product and operating challenges across key brands,” said Teri
List-Stoll, executive vice president and chief financial officer,
Gap Inc. “We have tremendous confidence in our brands and the
talented organization that supports them, and we are seeing
progress in some key areas. However, there is more work to do to
leverage the capabilities we have invested in and deliver the
profitable growth we know these brands are capable of
delivering.”
Estimated adjusted earnings per share for the third quarter of
fiscal 2019 excludes costs associated with the company’s planned
separation, and costs related to the previously announced specialty
fleet restructuring.
Estimated adjusted earnings per share for fiscal year 2019
excludes costs associated with the company’s planned separation,
costs related to the previously announced specialty fleet
restructuring, the gain on the sale of a building, and the impact
of an adjustment to our fiscal 2017 tax liability for additional
guidance issued by the U.S. Treasury Department regarding the U.S.
Tax Cuts and Jobs Act of 2017. Please see the reconciliation of
adjusted diluted earnings per share, a non-GAAP financial measure,
from the GAAP financial measure in the tables at the end of this
press release.
Third Quarter Earnings
Gap Inc. will release its third quarter earnings results via
press release on November 21, 2019 at 1:15 p.m. Pacific Time. In
addition, the company will host a summary of Gap Inc.’s third
quarter results during a live conference call and webcast on
Thursday, November 21, 2019 from approximately 2:00 p.m. to 3:00
p.m. Pacific Time. The conference call can be accessed by calling
1-855-5000-GPS or 1-855-500-0477 (participant passcode: 1359664).
International callers may dial 1-323-794-2078. The webcast can be
accessed at www.gapinc.com.
Forward-Looking Statements
This press release 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,” and similar
expressions also identify forward-looking statements.
Forward-looking statements include, without limitation, statements
regarding earnings per share for the third quarter and fiscal year
2019.
Because these forward-looking statements involve risks and
uncertainties, there are important factors that could cause the
company’s actual results to differ materially from those in the
forward-looking statements. These factors include, without
limitation, the following risks, any of which could have an adverse
effect on the company’s financial condition, results of operations,
and reputation; the risk that additional information may arise
during the company’s close process or as a result of subsequent
events that would require the company to make adjustments to its
financial information; the risks associated with our plan to
separate into two independent publicly-traded companies, including
that the separation may not be completed in accordance with the
expected plans or anticipated timeframe, or at all; the risk that
the company or its franchisees will be unsuccessful in gauging
apparel trends and changing consumer preferences; the highly
competitive nature of the company’s business in the United States
and internationally; the risk of failure to attract and retain key
personnel, or effectively manage succession; the risk that the
company’s investments in customer, digital, and omni-channel
shopping initiatives may not deliver the results the company
anticipates; the risk if the company is unable to manage its
inventory effectively; the risk that the company is subject to data
or other security breaches that may result in increased costs,
violations of law, significant legal and financial exposure, and a
loss of confidence in the company’s security measures; the risk
that a failure of, or updates or changes to, the company’s
information technology systems may disrupt its operations; the
risks to the company’s business, including its costs and supply
chain, associated with global sourcing and manufacturing; the risk
of changes in global economic conditions or consumer spending
patterns; the risks to the company’s reputation or operations
associated with importing merchandise from foreign countries,
including failure of the company’s vendors to adhere to its Code of
Vendor Conduct; the risk that the company’s franchisees’ operation
of franchise stores is not directly within the company’s control
and could impair the value of its brands; the risk that the company
or its franchisees will be unsuccessful in identifying,
negotiating, and securing new store locations and renewing,
modifying, or terminating leases for existing store locations
effectively; the risk of foreign currency exchange rate
fluctuations; the risk that comparable sales and margins will
experience fluctuations; the risk that changes in the company’s
credit profile or deterioration in market conditions may limit the
company’s access to the capital markets; the risk that trade
matters could increase the cost or reduce the supply of apparel
available to the company; the risk of changes in the regulatory or
administrative landscape; the risk of natural disasters, public
health crises, political crises, negative global climate patterns,
or other catastrophic events; the risk of reductions in income and
cash flow from the company’s credit card arrangement related to its
private label and co-branded credit cards; the risk that the
adoption of new accounting pronouncements will impact future
results; the risk that the company does not repurchase some or all
of the shares it anticipates purchasing pursuant to its repurchase
program; and the risk that the company will not be successful in
defending various proceedings, lawsuits, disputes, and claims.
Additional information regarding factors that could cause
results to differ can be found in the company’s Annual Report on
Form 10-K for the fiscal year ended February 2, 2019, as well as
the company’s subsequent filings with the Securities and Exchange
Commission.
These forward-looking statements are based on information as of
November 7, 2019. The company assumes no obligation to publicly
update or revise its forward-looking statements even if experience
or future changes make it clear that any projected results
expressed or implied therein will not be realized.
About Gap Inc.
Gap Inc. is a leading global retailer offering clothing,
accessories, and personal care products for men, women, and
children under the Old Navy, Gap, Banana Republic, Athleta,
Intermix, Janie and Jack, and Hill City brands. Fiscal year 2018
net sales were $16.6 billion. Gap Inc. products are available for
purchase in more than 90 countries worldwide through
company-operated stores, franchise stores, and e-commerce sites.
For more information, please visit www.gapinc.com.
The Gap, Inc. NON-GAAP FINANCIAL MEASURES
UNAUDITED EXPECTED ADJUSTED EARNINGS PER SHARE FOR
THE THIRD QUARTER OF FISCAL YEAR 2019 Expected adjusted
diluted earnings per share is a non-GAAP financial measure.
Expected adjusted diluted earnings per share for the third quarter
of fiscal year 2019 is provided to enhance visibility into the
Company's expected underlying results for the period excluding the
estimated impact of specialty fleet restructuring costs and related
tax, and separation-related costs. However, this non-GAAP financial
measure is not intended to supersede or replace the GAAP measure.
13 Weeks Ending November 2,
2019
Low End
High End
Expected earnings per share - diluted
$
0.34
$
0.36
Add: Estimated impact of specialty fleet restructuring costs (a)
0.02
0.02
Add: Estimated incremental tax on restructuring costs (b)
0.01
0.01
Add: Estimated impact of separation-related costs (c)
0.13
0.13
Expected adjusted earnings per share - diluted
$
0.50
$
0.52
____________________ (a) Represents the estimated earnings
per share impact of estimated costs related to previously announced
plans to restructure the specialty fleet and revitalize Gap brand,
calculated net of tax at the expected adjusted effective tax rate.
(b) Represents certain non-cash tax impacts related to
expected restructuring charges discussed above. (c)
Represents the estimated earnings per share impact of estimated
costs associated with the planned Old Navy spin-off transaction,
calculated net of tax at the expected adjusted effective tax rate.
The Gap, Inc. NON-GAAP FINANCIAL MEASURES
UNAUDITED EXPECTED ADJUSTED EARNINGS PER SHARE FOR
FISCAL YEAR 2019 Expected adjusted diluted earnings per
share is a non-GAAP financial measure. Expected adjusted diluted
earnings per share for fiscal year 2019 is provided to enhance
visibility into the Company's expected underlying results for the
period excluding the estimated impact of specialty fleet
restructuring costs and related tax, separation-related costs, a
gain on the sale of a building, and the impact of an adjustment to
our fiscal 2017 tax liability for additional guidance issued by the
U.S. Treasury Department regarding the TCJA. However, this non-GAAP
financial measure is not intended to supersede or replace the GAAP
measure.
52 Weeks Ending February 1,
2020
Low End
High End
Expected earnings per share - diluted
$
1.38
$
1.47
Add: Estimated impact of specialty fleet restructuring costs (a)
0.14
0.14
Add: Estimated incremental tax on restructuring costs (b)
0.03
0.03
Add: Estimated impact of separation-related costs (c)
0.44
0.40
Less: Gain on sale of building (d)
(0.37
)
(0.37
)
Add: U.S. Federal tax reform adjustment (e)
0.08
0.08
Expected adjusted earnings per share - diluted
$
1.70
$
1.75
____________________
(a) Represents the estimated
earnings per share impact of estimated costs related to previously
announced plans to restructure the specialty fleet and revitalize
Gap brand, calculated net of tax at the expected adjusted effective
tax rate. (b) Represents certain non-cash tax impacts
related to expected restructuring charges discussed above.
(c) Represents the estimated earnings per share impact of estimated
costs associated with the planned Old Navy spin-off transaction,
calculated net of tax at the expected adjusted effective tax rate.
(d) The estimated earnings per share impact of the gain on
the sale of a building in the first quarter of fiscal 2019,
calculated net of tax at the expected adjusted effective tax rate.
(e) Represents the impact of an adjustment to our fiscal
2017 tax liability for additional guidance issued by the U.S.
Treasury Department regarding the TCJA.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191107006098/en/
Investor Relations Contact: Tina Romani (415) 427-5264
Investor_relations@gap.com
Media Relations Contact: Sarah Meron (347) 891-1770
Press@gap.com
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