- Net sales of $4.2 billion were the highest second quarter sales
in over a decade, up 29% versus 2020 and up 5% compared to 2019
pre-COVID levels
- Second quarter comparable sales increased 12% versus 2019
- Reported earnings per share for the quarter were $0.67, and
$0.70 on an adjusted basis
- Reported operating margin for the quarter was 9.7%, and 10.2%
on an adjusted basis
- Company raising full year outlook for sales, operating margin,
and earnings per share
- Sales growth of about thirty percent versus 2020
- Reported operating margin of about 7.0%; Adjusted operating
margin of about 7.5%
- Reported earnings per share range of $1.90 - $2.05; Adjusted
earnings per share range of $2.10 - $2.25
Gap Inc. (NYSE: GPS), a portfolio of purpose-led, billion-dollar
lifestyle brands including Old Navy, Gap, Banana Republic, and
Athleta, and the largest specialty apparel company in the U.S.,
reported second quarter fiscal year 2021 diluted earnings per share
of $0.67. Excluding charges primarily associated with strategic
changes to its operating model in Europe, adjusted earnings per
share were $0.70. The company raised its full year reported diluted
earnings per share guidance to be in the range of $1.90 to $2.05,
and $2.10 to $2.25 on an adjusted basis.
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Gap Inc. reports Q2 Earnings (Graphic:
Business Wire)
"Our talented teams delivered our highest second quarter net
sales in over a decade. Our strategy is driving growth as evidenced
by continued strength at Old Navy and Athleta, Gap Brand’s second
consecutive quarter of positive 2-year comparable sales in North
America, and momentum gaining at Banana Republic. Stepped-up
marketing investments, improved brand management, and technology
enhancements are paying off as our brand power cuts through,” said
Sonia Syngal, CEO, Gap Inc. “I look forward to our Integrated
Loyalty Program and Old Navy's inclusive shopping experience,
BODEQUALITY, taking hold in the back half, both key components of
our Power Plan 2023, and important drivers of long-term sustainable
growth.”
Due to the impact of COVID-related store closures last year,
financial comparisons for the quarter are being made primarily
against 2019. Financial results for the second quarter of fiscal
2020 and 2019 can be found in the tables at the end of this press
release.
This press release includes the non-GAAP measures free cash
flow, adjusted operating expenses, adjusted operating income,
adjusted operating margin, and adjusted earnings per share. Please
see the reconciliation of these measures from the most directly
comparable GAAP financial measures in the tables at the end of this
press release.
Second Quarter 2021 Net Sales Results
The company’s second quarter fiscal year 2021 net sales of $4.2
billion were up 5% compared to 2019.
Strategic permanent store closures and the recent divestures of
the Janie & Jack and Intermix businesses reduced net sales by
approximately 8% versus 2019. In addition, the company estimates
that COVID-related closures in markets outside of the U.S. resulted
in approximately 2% of sales decline versus 2019.
Comparable sales were up 3% year-over-year, and up 12% versus
2019. The comparable sales calculation reflects online sales and
comparable sales days for stores that were open on the same days in
both the current and prior comparable period.
Net sales by brand for the second quarter were as follows:
- Old Navy Global: Net Sales were up 21% versus 2019, with
Old Navy maintaining its position as the #2 apparel brand in the
U.S.1 Comparable sales were flat to last year and up 18% versus
2019. A strong consumer response to the loyalty launch drove
customer acquisition, propelling Old Navy's customer file to an
all-time high in the quarter. As Fall approaches, the brand is
leveraging its position as the #2 Kids & Baby brand this
back-to-school season.1 In addition, category expansion, including
the brand’s recent inclusive sizing launch, BODEQUALITY,
demonstrates the brand’s focus on the Democracy of Style and
positions Old Navy as one of the largest retailers to address the
full size-range within the $120 billion women's apparel
market.
- Gap Global: Net Sales declined 10% versus 2019, with
permanent store closures resulting in an estimated 14% sales
decline, and international COVID-closures driving an estimated 1%
decline on a 2-year basis. Global comparable sales declined 5%
year-over-year and increased 3% versus 2019. In North America,
comparable sales growth of 12% on a 2-year basis was led by
strength in key categories, including sleep, active and fleece.
Gap’s Partner to Amplify strategy progressed during the quarter as
the Gap Home partnership with Walmart launched, reaching millions
of Walmart customers. Additionally, the brand completed the first
Yeezy Gap Presale with the Round Jacket generating a strong
response with 75% of pre-order customers being new to the
brand.
- Banana Republic Global: Net Sales declined 15% versus
2019, with permanent store closures resulting in an estimated 10%
sales decline, and international COVID-closures driving an
estimated 1% decline on a 2-year basis. Comparable sales were up
41% year-over-year and down 5% versus 2019. Both net sales and
comparable sales reflected meaningful improvement from the first
quarter of 2021. Strong execution and product assortment drove
brand relevance resulting in lower discounting. Moving into Fall,
the brand will focus on bringing affordable luxury to consumers
through an enhanced site and store experience.
- Athleta: Net Sales were up 35% versus 2019. Comparable
sales grew 13% year-over-year and 27% versus 2019. Performance
Lifestyle products performed well as customers went back to work
and engaged in more activities while still valuing comfort.
Inclusive sizing, which launched last quarter, continues to perform
well, building deep customer loyalty. Additionally, partnerships
with world-class athletes resulted in increased brand awareness,
which now sits at 33% according to YouGov. The brand looks to build
on the success of the second quarter with its launch of
AthletaWell, an immersive digital platform designed to build
loyalty, engagement and a community of empowered women. In
addition, following next week’s launch of Athleta online in Canada,
the brand will soon be opening stores in Toronto and
Vancouver.
Gap Inc. second quarter online sales grew 65% versus the second
quarter of 2019 and represented 33% of the total business. Store
sales declined 11% versus the second quarter of 2019, primarily due
to 11 points of impact from divestitures and strategic closures and
an estimated 2 point decline due to COVID-closures outside of the
U.S.
Second Quarter 2021 Additional Results:
Compared to the second quarter of fiscal 2019:
- Gross profit: $1.82 billion, an increase of $267 million
or 17%.
- Gross margin: 43.3%, an increase of 440 basis points.
Key drivers were:
- Rent, Occupancy and Depreciation (ROD) leverage of 330 basis
points primarily related to online growth, store closures and
renegotiated rent.
- Merchandise margin expanded 110 basis points due to strong
product acceptance and lower discounting, offsetting approximately
130 basis points in higher shipping costs related to strong growth
in the company’s online business.
- Operating Expenses: Reported operating expenses were
$1.4 billion or 33.6% of net sales. Costs primarily related
to changes in the company’s European operating model resulted in
charges of $19 million. Adjusted operating expenses for the quarter
were $1.4 billion or 33.1% of net sales, an increase of 260 basis
points versus 2019 adjusted operating expenses. Store expense
leverage of approximately 150 basis points helped to partially
offset investments in demand generation, such as marketing, which
drove an increase of 230 basis points versus 2019. Additionally,
compensation costs increased approximately 200 basis points
compared to 2019 due to improved performance. Please see the
reconciliation of adjusted operating expenses, a non-GAAP financial
measure, from the GAAP financial measure in the tables at the end
of this press release.
- Operating Margin: Second quarter operating margin was
9.7%. Adjusted operating margin was 10.2%, up 190 basis
points versus 2019’s second quarter adjusted operating margin.
Please see the reconciliation of adjusted operating margin, a
non-GAAP financial measure, from the GAAP financial measure in the
tables at the end of this press release.
- Tax Rate: The effective tax rate for the second quarter
was 28%.
- Shares Outstanding: The company ended the quarter with
376 million shares outstanding.
- Earnings Per Share: Diluted earnings per share were
$0.67. Excluding charges primarily related to changes in the
company’s European operating model, adjusted diluted earnings per
share were $0.70. Please see the reconciliation of adjusted diluted
earnings per share, a non-GAAP financial measure, from the GAAP
financial measure in the table at the end of this press
release.
- Dividends and Share Repurchases: In the second quarter,
the company paid a dividend of $0.12 per share. In addition, the
company repurchased $55 million of shares in the quarter, as part
of its plan to repurchase up to a total of $200 million of shares
in fiscal year 2021.
- Inventory: Ending inventory was up 2% compared to the
second quarter of 2020. Versus the second quarter of 2019,
inventory was down 2%.
- Cash Flow: The company ended the second quarter of
fiscal year 2021 with $2.7 billion in cash, cash equivalents, and
short-term investments. Year-to-date free cash flow, defined as net
cash from operating activities less purchases of property and
equipment, was $523 million. Please see the reconciliation of free
cash flow, a non-GAAP financial measure, from the GAAP financial
measure in the tables at the end of this press release.
- Capital Expenditures: Fiscal year-to-date capital
expenditures were $269 million.
- Real Estate: The company ended the second quarter of
fiscal year 2021 with 3,494 store locations in over 40 countries,
of which 2,937 were company operated.
2021 Outlook
The company raised its reported full-year diluted earnings per
share guidance to be in the range of $1.90 to $2.05. This outlook
reflects charges incurred related to the divestiture of the Janie
& Jack and Intermix businesses, as well as estimated charges
related to strategic changes in the company’s European business.
Excluding these charges, full year earnings per share on an
adjusted basis are expected to be in the range of $2.10 to $2.25.
The company’s full year outlook reflects the impact of expected
headwinds in its global supply chain, potential inflationary
pressures, and current COVID environment. The company continues to
leverage the scale and strength of its advantaged platform to
navigate through near-term volatility.
Net Sales: The company now expects net sales growth for
fiscal year 2021 to be about 30% versus 2020. This outlook reflects
lost revenue related to the company’s decision to change its
European operating model, as well as the completed divestitures of
its Janie & Jack and Intermix businesses.
Operating Margin: Reported operating margin is expected
to be approximately 7.0%. Adjusted operating margin guidance has
been increased to about 7.5%, representing accelerated progress
toward the company’s objective of achieving a 10% operating margin
by the end of 2023.
Effective Tax Rate: The company expects its fiscal year
2021 reported effective tax rate to be about 25%. Excluding the
impact of divestiture activity and estimated charges related to
strategic changes in its European business, the company expects its
adjusted effective tax rate to be about 26%.
Inventory: The company expects third quarter inventory
levels to be up mid-single digits relative to the third quarter of
fiscal year 2020.
Capital Expenditures: The company continues to expect
capital spending to be approximately $800 million in fiscal year
2021. Consistent with the company’s Power Plan 2023 strategy,
capital spending will primarily support higher-return projects
including digital, loyalty, and supply chain capacity projects
along with investment in store growth for Old Navy and Athleta.
Real Estate: The company continues to expect to open
about 30-40 Old Navy and 20-30 Athleta stores in 2021, as well as
close approximately 75 Gap and Banana Republic stores in North
America.
"Our strong second quarter performance, demand for our
purpose-led, billion-dollar lifestyle brands, and ongoing strength
of the customer gives us confidence to raise our sales and earnings
outlook for the second consecutive quarter," said Katrina
O’Connell, Executive Vice President and Chief Financial Officer,
Gap Inc. “As we fuel profitable growth for the back half and
beyond, we are focused on strategic expansion of addressable
markets to take share, building customer lifetime value and
launching new initiatives to digitally transform Gap Inc. for the
future."
Webcast and Conference Call Information
Steve Austenfeld, Head of Investor Relations at Gap Inc., will
host a summary of the company’s second quarter fiscal year 2021
results during a conference call and webcast from approximately
2:00 p.m. to 3:00 p.m. Pacific Time today. Mr. Austenfeld will be
joined by Chief Executive Officer Sonia Syngal and Chief Financial
Officer Katrina O’Connell.
To access the conference call, please use the “Click to Join”
link below to have the conference call you. The link becomes active
15 minutes prior to the scheduled start time.
Click to Join
If you prefer to dial in, you can join by calling 1-855-5000-GPS
or 1-855-500-0477 (participant passcode: 3760202). International
callers may dial 1-323-794-2078. The webcast can be accessed at
investors.gapinc.com.
Forward-Looking Statements
This press release and related conference call and webcast
contain 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 statements regarding the
following: sales growth in 2021; reported and adjusted operating
margin in 2021; reported and adjusted earnings per share in 2021;
our Power Plan 2023 strategy and our ability to execute against it;
our investments in demand generation; Old Navy’s category expansion
strategy; Athleta’s expansion into Canada; Banana Republic’s
enhanced site and store experience; future share repurchases,
including the potential timing and amounts thereof; the expected
timing, cost and scope of the strategic review of our operating
model in Europe and estimated cost impacts associated therewith;
the impact of the divestiture of the Janie & Jack and Intermix
businesses; operating margin in 2023; reported and adjusted
effective tax rate in 2021; capital expenditures in 2021; store
openings and closings in 2021; product acceptance by our customers;
our key initiatives, strategies and business priorities; demand and
customer spending trends; our strategic expansion into addressable
markets; our use of data science to improve profitability; market
share gains; sourcing optimization; our omni-channel capabilities;
apparel trends; our marketing investments’ ability to attract and
maintain customers; our digital transformation and its impact on
our growth strategy and operating cost structure; our Gap Home
venture with Walmart.com and other existing and potential future
partnerships; the impact of our store closures, lease negotiations
and projected online sales; rationalizing the Gap and Banana
Republic brands; the impact of COVID-19 on market volatility, raw
material availability and wages; rent, occupancy and depreciation
leverage and its impact on 2021 gross margin; our level of SG&A
spend; marketing spend in 2021; inventory growth and third quarter
2021 ending inventory; our dividend policy, including the potential
timing and amounts of future dividends; Old Navy and Athleta store
openings; the impact of supply chain and raw material challenges,
including port congestion; our cash flows from operations; our
loyalty programs, including our recently launched integrated
loyalty program; our fixed cost structure; and our ability to
increase productivity.
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 risks, any of which could have an adverse
effect on our financial condition, results of operations, and
reputation: the risk that additional information may arise during
our close process or as a result of subsequent events that would
require us to make adjustments to our financial information; the
overall global economic environment and risks associated with the
COVID-19 pandemic; the risk that we or our franchisees will be
unsuccessful in gauging apparel trends and changing consumer
preferences; the risk that failure to maintain, enhance and protect
our brand image could have an adverse effect on our results of
operations; the highly competitive nature of our business in the
United States and internationally; engaging in or seeking to engage
in strategic transactions that are subject to various risks and
uncertainties; the risk that our investments in customer, digital,
and omni-channel shopping initiatives may not deliver the results
we anticipate; the risk that the failure to manage key executive
succession and retention and to continue to attract qualified
personnel could have an adverse impact on our results of
operations; the risk that if we are unable to manage our inventory
effectively, our gross margins will be adversely affected; the
risks to our business, including our costs and supply chain,
associated with global sourcing and manufacturing; the risks to our
reputation or operations associated with importing merchandise from
foreign countries, including failure of our vendors to adhere to
our Code of Vendor Conduct; the risk that 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 a failure of, or updates or changes to, our information
technology systems may disrupt our operations; the risks to our
efforts to expand internationally, including our ability to operate
in regions where we have less experience; 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 our franchisees’ operation of franchise stores is not
directly within our control and could impair the value of our
brands; 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 foreign currency exchange rate fluctuations could
adversely impact our financial results; the risk that comparable
sales and margins will experience fluctuations; the risk that
natural disasters, public health crises (similar to and including
the ongoing COVID-19 pandemic), political crises, negative global
climate patterns, or other catastrophic events could adversely
affect our operations and financial results, or those of our
franchisees or vendors; the risk that changes in global economic
conditions or consumer spending patterns could adversely impact our
results of operations; the risk that we will not be successful in
defending various proceedings, lawsuits, disputes, and claims; the
risk that changes in the regulatory or administrative landscape
could adversely affect our financial condition and results of
operations; the risk that reductions in income and cash flow from
our credit card arrangement related to our private label and
co-branded credit cards could adversely affect our operating
results and cash flows; 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 the adoption of new accounting
pronouncements will impact future results; and the risk that we do
not repurchase some or all of the shares we anticipate purchasing
pursuant to our repurchase program.
Additional information regarding factors that could cause
results to differ can be found in our Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 16,
2021, as well as our subsequent filings with the Securities and
Exchange Commission.
These forward-looking statements are based on information as of
August 26, 2021. 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.
About Gap Inc.
Gap Inc., a collection of purpose-led lifestyle brands, is the
largest American specialty apparel company offering clothing,
accessories, and personal care products for men, women, and
children under the Old Navy, Gap, Banana Republic, and Athleta
brands. The company uses omni-channel capabilities to bridge the
digital world and physical stores to further enhance its shopping
experience. Gap Inc. is guided by its purpose, Inclusive, by
Design, and takes pride in creating products and experiences its
customers love while doing right by its employees, communities, and
planet. Gap Inc. products are available for purchase worldwide
through company-operated stores, franchise stores, and e-commerce
sites. Fiscal year 2020 net sales were $13.8 billion. For more
information, please visit www.gapinc.com.
1 The NPD Group / Consumer Tracking Service / U.S. Dollar Share,
3 months ending July 2021
The Gap, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED ($ in millions) July 31, 2021
August 1, 2020 August 3, 2019 (a) ASSETS Current
assets: Cash and cash equivalents
$
2,375
$
2,188
$
1,177
Short-term investments
337
25
294
Merchandise inventory
2,281
2,242
2,326
Other current assets
1,201
882
770
Total current assets
6,194
5,337
4,567
Property and equipment, net
2,897
2,895
3,141
Operating lease assets
3,975
4,689
5,807
Other long-term assets
693
795
528
Total assets
$
13,759
$
13,716
$
14,043
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable
1,583
1,629
1,246
Accrued expenses and other current liabilities
1,252
1,124
908
Current portion of operating lease liabilities
789
856
946
Income taxes payable
27
40
34
Total current liabilities
3,651
3,649
3,134
Long-term liabilities: Long-term debt
2,220
2,212
1,249
Long-term operating lease liabilities
4,348
5,179
5,644
Other long-term liabilities
520
423
391
Total long-term liabilities
7,088
7,814
7,284
Total stockholders' equity
3,020
2,253
3,625
Total liabilities and stockholders' equity
$
13,759
$
13,716
$
14,043
____________________
(a)
Second quarter of fiscal 2019 information provided for
comparability.
The Gap, Inc. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS UNAUDITED 13 Weeks
Ended 26 Weeks Ended ($ and shares in millions except
per share amounts) July 31, 2021 August 1, 2020
August 3, 2019 (a) July 31, 2021 August 1,
2020 August 3, 2019 (a) Net sales
$
4,211
$
3,275
$
4,005
$
8,202
$
5,382
$
7,711
Cost of goods sold and occupancy expenses
2,388
2,126
2,449
4,749
3,965
4,811
Gross profit
1,823
1,149
1,556
3,453
1,417
2,900
Operating expenses
1,414
1,076
1,274
2,804
2,588
2,302
Operating income (loss)
409
73
282
649
(1,171
)
598
Loss on extinguishment of debt
-
58
-
-
58
-
Interest, net
50
56
11
103
71
25
Income (loss) before income taxes
359
(41
)
271
546
(1,300
)
573
Income taxes
101
21
103
122
(306
)
178
Net income (loss)
$
258
$
(62
)
$
168
$
424
$
(994
)
$
395
Weighted-average number of shares - basic
378
374
378
377
373
378
Weighted-average number of shares - diluted
386
374
379
385
373
380
Earnings (loss) per share - basic
$
0.68
$
(0.17
)
$
0.44
$
1.12
$
(2.66
)
$
1.04
Earnings (loss) per share - diluted
$
0.67
$
(0.17
)
$
0.44
$
1.10
$
(2.66
)
$
1.04
____________________
(a)
Second quarter and first half of fiscal 2019 information provided
for comparability.
The Gap, Inc. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS UNAUDITED 26 Weeks
Ended ($ in millions) July 31,2021 (a) August
1,2020 (a) Cash flows from operating activities: Net income
(loss)
$
424
$
(994
)
Depreciation and amortization
244
256
Impairment of operating lease assets
6
361
Impairment of store assets
1
127
Loss on extinguishment of debt
-
58
Loss on divestiture activity
59
-
Change in merchandise inventory
156
(91
)
Other, net
(98
)
196
Net cash provided by (used for) operating activities
792
(87
)
Cash flows from investing activities: Purchases of property
and equipment
(269
)
(208
)
Purchases of short-term investments
(427
)
(59
)
Proceeds from sales and maturities of short-term investments
500
325
Net cash paid for divestiture activity
(21
)
-
Other
-
2
Net cash provided by (used for) investing activities
(217
)
60
Cash flows from financing activities: Proceeds from
revolving credit facility
-
500
Payments for revolving credit facility
-
(500
)
Proceeds from issuance of long-term debt
-
2,250
Payments to extinguish debt
-
(1,307
)
Payments for debt issuance costs
-
(61
)
Proceeds from issuances under share-based compensation plans
41
12
Withholding tax payments related to vesting of stock units
(32
)
(8
)
Repurchases of common stock
(55
)
-
Cash dividends paid
(137
)
-
Net cash provided by (used for) financing activities
(183
)
886
Effect of foreign exchange rate fluctuations on cash, cash
equivalents, and restricted cash
(1
)
1
Net increase in cash, cash equivalents, and restricted cash
391
860
Cash, cash equivalents, and restricted cash at beginning of period
2,016
1,381
Cash, cash equivalents, and restricted cash at end of period
$
2,407
$
2,241
____________________
(a)
For the twenty-six weeks ended July 31, 2021 and August 1, 2020,
total cash, cash equivalents, and restricted cash includes $32
million and $53 million, respectively, of restricted cash recorded
in other current assets and other long-term assets on the Condensed
Consolidated Balance Sheets.
The Gap, Inc. NON-GAAP
FINANCIAL MEASURES UNAUDITED FREE CASH
FLOW Free cash flow is a non-GAAP financial measure. We
believe free cash flow is an important metric because it represents
a measure of how much cash a company has available for
discretionary and non-discretionary items after the deduction of
capital expenditures as we require regular capital expenditures
including technology improvements to automate processes, engage
with customers, and optimize our supply chain in addition to
building and maintaining stores. We use this metric internally, as
we believe our sustained ability to generate free cash flow is an
important driver of value creation. However, this non-GAAP
financial measure is not intended to supersede or replace our GAAP
results.
26 Weeks Ended ($ in millions)
July 31, 2021 August 1, 2020 Net cash provided by
(used for) operating activities
$
792
$
(87
)
Less: Purchases of property and equipment
(269
)
(208
)
Free cash flow
$
523
$
(295
)
The Gap, Inc. NON-GAAP FINANCIAL MEASURES
UNAUDITED ADJUSTED STATEMENT OF OPERATIONS METRICS
FOR THE SECOND QUARTER OF FISCAL YEAR 2021 The following
adjusted statement of operations metrics are non-GAAP financial
measures. These measures are provided to enhance visibility into
the Company's underlying results for the period excluding the
impact of a loss on divestiture activity and strategic changes
related to our operating model in Europe. Management believes that
excluding certain items from statement of operations metrics that
are not part of the Company's core operations provides additional
information to investors to facilitate the comparison of results
against past and future years. However, these non-GAAP financial
measures are not intended to supersede or replace the GAAP
measures.
($ in millions)13 Weeks Ended July 31, 2021
OperatingExpenses OperatingExpenses as a% of Net
Sales OperatingIncome OperatingMargin
IncomeTaxes NetIncome Earnings perShare -Diluted
(c) GAAP metrics, as reported
$
1,414
33.6
%
$
409
9.7
%
$
101
$
258
$
0.67
Adjustments for: Strategic actions in Europe (a)
(16
)
(0.4
)%
16
0.4
%
4
12
0.03
Loss on divestiture activity (b)
(3
)
(0.1
)%
3
0.1
%
1
2
0.01
Non-GAAP metrics
$
1,395
33.1
%
$
428
10.2
%
$
106
$
272
$
0.70
____________________
(a)
Represents the impact of costs related to the decision to close
stores in the United Kingdom and Ireland. These costs primarily
include employee related costs.
(b)
Represents the impact of the loss on divestiture activity for the
Janie and Jack and Intermix brands.
(c)
Earnings per share was computed individually for each line item;
therefore, the sum of the individual lines may not equal the total.
The Gap, Inc. NON-GAAP FINANCIAL MEASURES
UNAUDITED ADJUSTED STATEMENT OF OPERATIONS METRICS
FOR THE SECOND QUARTER OF FISCAL YEAR 2019 The following
adjusted income statement metrics are non-GAAP financial measures.
These measures are provided to enhance visibility into the
Company's underlying results for the period excluding the impacts
of separation-related costs, specialty fleet restructuring costs,
and the impact of an adjustment to our fiscal 2017 tax liability
for additional guidance issued by the U.S. Treasury Department
regarding the Tax Cuts and Jobs Act of 2017 ("TCJA"). Management
believes that excluding certain items from statement of operations
metrics that are not part of the Company's core operations provides
additional information to investors to facilitate the comparison of
results against past and future years. However, these non-GAAP
financial measures are not intended to supersede or replace the
GAAP measures.
($ in millions)13 Weeks Ended August 3,
2019 OperatingExpenses OperatingExpenses as a %of Net
Sales (d) OperatingIncome OperatingMargin (d)
Earnings perShare - Diluted GAAP metrics, as reported
$
1,274
31.8
%
$
282
7.0
%
$
0.44
Adjustments for: Separation-related costs (a)
(38
)
(0.9
)%
38
0.9
%
0.08
Specialty fleet restructuring costs (b)
(14
)
(0.3
)%
14
0.3
%
0.03
U.S. federal tax reform adjustment (c)
-
0.0
%
-
0.0
%
0.08
Non-GAAP metrics
$
1,222
30.5
%
$
334
8.3
%
$
0.63
____________________
(a)
Represents the impact of costs related to the Old Navy spin-off
transaction that was subsequently cancelled. Separation-related
amounts primarily consists of costs associated with information
technology and fees for consulting and advisory services.
(b)
Represents the impact of costs related to previously announced
plans to restructure the specialty fleet and revitalize the Gap
brand. These costs primarily include lease and employee-related
costs.
(c)
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.
(d)
Operating expense as a percentage of net sales and operating margin
were computed individually for each line item; therefore, the sum
of the percentages may not equal the total.
The Gap, Inc.
NON-GAAP FINANCIAL MEASURES UNAUDITED
EXPECTED ADJUSTED EARNINGS PER SHARE FOR FISCAL YEAR 2021
Expected adjusted diluted earnings per share is a non-GAAP
financial measure. Expected adjusted diluted earnings per share for
fiscal year 2021 is provided to enhance visibility into the
Company's expected underlying results for the period excluding the
expected impact of strategic changes to the operating model in
Europe and the loss on divestiture activity for the Janie and Jack
and Intermix brands. Future expected costs related to Europe
primarily include employee-related costs and lease-related costs.
This non-GAAP financial measure is not intended to supersede or
replace the GAAP measure.
52 Weeks EndingJanuary 29,
2022 Low End High End Expected earnings per share
- diluted
$
1.90
$
2.05
Add: Estimated impact of strategic actions and divestiture activity
(a)
0.26
0.26
Less: Estimated incremental tax benefit (b)
(0.06
)
(0.06
)
Expected adjusted earnings per share - diluted
$
2.10
$
2.25
____________________
(a)
Represents the earnings per share impact, calculated net of tax at
the adjusted effective tax rate, of estimated costs related to
strategic changes to our operating model in Europe and the loss on
divestiture activity for the Janie and Jack and Intermix brands.
Future expected costs related to Europe primarily include
employee-related costs and lease-related costs.
(b)
Represents the incremental tax benefit related to divestiture
activity.
The Gap, Inc. NET SALES RESULTS
UNAUDITED The following table details the Company’s
second quarter net sales for the fiscal years 2021, 2020, and 2019
(unaudited):
($ in millions) Old NavyGlobal
Gap Global BananaRepublic Global Athleta (2)
Other (3) Total 13 Weeks Ended July 31, 2021
U.S. (1)
$
2,177
$
615
$
428
$
340
$
11
$
3,571
Canada
191
79
43
-
-
313
Europe
-
116
1
1
-
118
Asia
-
135
19
-
-
154
Other regions
22
29
4
-
-
55
Total
$
2,390
$
974
$
495
$
341
$
11
$
4,211
($ in millions) Old NavyGlobal Gap
Global BananaRepublic Global Athleta (2) Other
(3) Total 13 Weeks Ended August 1, 2020 U.S. (1)
$
1,726
$
473
$
236
$
267
$
61
$
2,763
Canada
145
63
27
-
-
235
Europe
-
70
2
-
-
72
Asia
2
158
14
-
-
174
Other regions
8
19
4
-
-
31
Total
$
1,881
$
783
$
283
$
267
$
61
$
3,275
($ in millions) Old NavyGlobal Gap
Global BananaRepublic Global (4) Athleta (2)
Other (5) Total 13 Weeks Ended August 3, 2019
U.S. (1)
$
1,794
$
645
$
530
$
252
$
79
$
3,300
Canada
148
85
53
-
-
286
Europe
-
131
4
-
-
135
Asia
11
201
23
-
-
235
Other regions
19
24
6
-
-
49
Total
$
1,972
$
1,086
$
616
$
252
$
79
$
4,005
____________________
(1)
U.S. includes the United States, Puerto Rico, and Guam.
(2)
Previously, net sales for the Athleta brand were grouped within the
"Other" column. Beginning in fiscal 2021, we have made a change for
all periods presented to break out Athleta net sales into its own
column.
(3)
The "Other" column primarily consists of net sales for the Intermix
and Janie and Jack brands, as well as sales from the
business-to-business program. The sale of Janie and Jack was
completed on April 8, 2021. The sale of Intermix was completed on
May 21, 2021. Net sales for the thirteen weeks ended August 1, 2020
also included net sales for the Hill City brand, which was closed
in January 2021.
(4)
Banana Republic Global fiscal year 2019 net sales include the Janie
and Jack brand beginning March 4, 2019.
(5)
Primarily consists of net sales for the Intermix and Hill City
brands as well as a portion of income related to our credit card
agreement.
The Gap, Inc. REAL ESTATE Store
count, openings, closings, and square footage for our stores are as
follows:
January 30, 2021
26 Weeks Ended July 31,
2021
July 31, 2021
Store Locations
Store Locations Opened
Store Locations Closed
(1)
Store Locations
Square Feet (millions)
Old Navy North America
1,220
30
5
1,245
20.0
Gap North America
556
1
15
542
5.7
Gap Asia
340
9
10
339
2.9
Gap Europe
117
1
28
90
0.7
Banana Republic North America
471
1
11
461
3.9
Banana Republic Asia
47
3
2
48
0.2
Athleta North America
199
13
-
212
0.9
Intermix North America (2)
31
-
-
-
-
Janie and Jack North America (2)
119
-
-
-
-
Company-operated stores total
3,100
58
71
2,937
34.3
Franchise
615
40
98
557
N/A
Total
3,715
98
169
3,494
34.3
____________________
(1)
Represents stores that have been permanently closed.
(2)
On May 21, 2021, the Company completed the sale of the Intermix
brand. The 31 stores sold are not included as store closures or in
the ending balance for fiscal 2021. On April 8, 2021, the Company
completed the sale of the Janie and Jack brand. The 119 stores sold
are not included as store closures or in the ending balance for
fiscal 2021.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210826005712/en/
Investor Relations Contact: Steve Austenfeld (415)
427-1807 Investor_relations@gap.com
Media Relations Contact: Megan Foote (415) 832-1989
Press@gap.com
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