Comparable sales were flat in the quarter,
including a 49% increase in online sales; Total net sales down 5%
due to store closures and COVID impacts
Digitally led business with over $6 billion in
annual online sales, fueled by 183M global known customer file1,
which grew 14% year over year
Fiscal year ending cash, cash equivalents, and
short-term investments balance of $2.4 billion
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Gap Inc. Q4 + 2020 Highlights (Graphic:
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The release reads:
GAP INC. REPORTS FOURTH QUARTER AND FISCAL
YEAR 2020 RESULTS; PROVIDES 2021 OUTLOOK
Comparable sales were flat in the quarter,
including a 49% increase in online sales; Total net sales down 5%
due to store closures and COVID impacts
Digitally led business with over $6 billion in
annual online sales, fueled by 183M global known customer file1,
which grew 14% year over year
Fiscal year ending cash, cash equivalents, and
short-term investments balance of $2.4 billion
Gap Inc. (NYSE: GPS), a collection of purpose-led, lifestyle
brands including Old Navy, Gap, Banana Republic and Athleta, and
the largest specialty apparel company in the U.S., reported its
financial results for the fourth quarter and fiscal year 2020,
ending January 30th, 2021.
The company’s diluted earnings per share was $0.61 for the
fourth quarter of fiscal year 2020, including approximately $0.45
for non-recurring tax benefits and approximately $0.12 in
impairment charges related to the Intermix business resulting from
a strategic review.
“We faced one of the most difficult years in our company’s
history and, throughout, our teams showed resilience and
determination as we navigated unprecedented disruption in our
industry to set a course for long-term growth. Our powerful brands
moved to offense with purpose-led marketing and strength in
relevant categories, like Active and Fleece, allowing us to gain
meaningful market share quarter-over-quarter in a fragmented
environment. This was enabled by our $6 billion online business and
advantaged digital capabilities allowing us to expand our reach to
more than 183 million customers this year,” said Sonia Syngal,
Chief Executive Officer, Gap Inc. “We are focused on executing
against our Power Plan 2023 and delivering profitable growth in
2021.”
Fiscal Year 2020 Business
Highlights
- Unveiled the company’s Power Plan 2023 strategy at its investor
event in October 2020.
- Delivered over $6 billion in sales online, reflecting 54%
annual sales growth. Online sales represented 45% of total sales
(versus 25% in 2019), leveraging the company’s competitive digital
platform and omnichannel capabilities.
- Grew market share by 0.2 percentage points, ending the year at
5.5% of total U.S. apparel sales2, supported by continued strategic
investments in marketing and other demand-driving initiatives.
- Leveraged the company’s sizeable Active and Fleece business to
respond to the casualization of style and meet changing customer
preferences.
- Increased the company’s global known customer file by 14% in
the fourth quarter, ending the year at over 183 million.
- Surpassed $1 billion in sales at Athleta with 16% annual sales
growth.
- Improved store fleet economics by closing a net of 228 Gap and
Banana Republic stores globally, ahead of its 225 target; refreshed
in-store environment in 71 Gap stores.
- Led the development of safe retailing practices and invested
approximately $158 million in health and safety measures to protect
employees and customers.
- Effectively managed liquidity during the COVID-19 pandemic to
emerge with a strong cash position of $2.4 billion at
year-end.
Full year 2020 financial results can be found in the tables at
the end of this press release.
Fourth Quarter 2020 Results
This press release includes the non-GAAP measures adjusted
operating expenses and adjusted operating income. 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.
Fourth quarter fiscal year 2020 net sales were $4.4 billion, a
decrease of 5% compared with last year. COVID-mandated store
closures in international markets and softer store traffic in
select U.S. regions with stay-at-home restrictions impacted sales
by an estimated 4 percentage points. In addition, strategically
planned permanent store closures had an estimated sales impact of
about 5 percentage points.
Online sales grew 49% compared with last year. Online
represented 46% of net sales in the fourth quarter, which was an
increase of over 17 percentage points versus last year. Store sales
declined by 28% in the quarter, with impacts from COVID and
strategic closures noted above.
Comparable sales for the quarter were flat. The comparable sales
calculation reflects online sales and comparable sales days in
stores that were open.
Net sales and comparable sales by brand for the fourth quarter
2020 compared to the fourth quarter 2019 were as follows:
- Old Navy Global: Net sales increased 5%, with comparable
sales up 7%. Old Navy growth continued in the quarter despite the
impact of COVID-related store closures and operating restrictions.
Online growth and significant improvements to last year in both
markdown rate and units per transaction offset store traffic
challenges. Momentum continued in casual and cozy categories with
strong performance compared to last year in Active, Fleece, and
Sleep.
- Gap Global: Net sales were down 19% and comparable sales
were down 6%, as Gap Brand’s global footprint was meaningfully
impacted by COVID-mandated store closures and restrictions in
Canada, China, Europe and Japan. Importantly, North America
comparable sales were positive.
- Banana Republic Global: Net sales were down 27% and
comparable sales were down 22%. The new brand leadership team is
moving quickly to ensure brand assortment addresses consumer needs
in the current, casual environment, as well as closely aligning
inventory with demand.
- Athleta: Net sales increased 29% with comparable sales
up 26%. Promotional activity was well below last year, driving
margin expansion in the quarter. As part of Athleta’s long-term
growth strategy, new product launches in the quarter, specifically
inclusive sizing and sleep, continued to drive brand awareness and
customer engagement. New customer acquisition increased 70% versus
last year.
Gross margin was 37.7%, an increase of 190 basis points versus
last year, well ahead of the company’s prior outlook of being flat
versus the year-ago quarter. Rent, occupancy and depreciation
savings leveraged 400 basis points, as online sales increased and
as the company continued to close unprofitable stores, favorably
settle lease liabilities and derive benefit from rent
negotiations.
Merchandise margins deleveraged 210 basis points driven by 300
basis points of higher shipping costs associated with increased
online sales and carrier surcharges. There were also increases in
freight costs that put pressure on the product margin, but despite
these increases product margin expanded due to lower promotional
activities.
Reported operating expenses were $1.5 billion or 34.7% of sales,
a decrease of 640 basis points compared with last year. The
significant leverage versus prior year is primarily related to
charges of $501 million last year in flagship store impairment and
costs related to the previously planned separation of Old Navy.
The company noted it is undergoing a strategic review of its
Intermix business. As a result, the company recorded a $56 million
impairment charge related to the Intermix trade name as well as
store and operating lease assets.
Excluding the impact of impairment charges during the quarter
related to Intermix, adjusted operating expenses were 33.4% of
sales, in line with the prior guidance range of 33-34% of sales.
Store expense savings largely offset the investment in demand
generation, with the nominal increase in expenses over last year
being mostly driven by real estate termination fees and higher
distribution center costs.
- During the quarter, operating expenses included:
- Store expense savings of approximately $93 million, leveraging
210 basis points, as approximately $133 million of savings related
to store closures and productivity efforts were partially offset by
approximately $40 million in higher COVID-related health and safety
costs to keep our employees and customers safe;
- Increased marketing investment of $66 million, deleveraging
approximately 150 basis points, which resulted in 0.7 percentage
points of market share gain in the quarter;3
- Elevated distribution center fulfillment costs of approximately
$40 million, deleveraging about 90 basis points, associated with
the increased online channel shift as well as higher health and
safety costs; and
- $19 million, deleveraging approximately 40 basis points, in
store closure costs, consistent with the company’s strategy.
Reported operating income was $134 million, or 3.0% of sales,
leveraging 820 basis points versus last year’s operating margin,
due to prior year flagship store impairments and separation-related
costs. Adjusted operating income, excluding the $56 million
impairment charge for Intermix, was $190 million, or 4.3% of sales,
a decrease of 160 basis points compared with adjusted operating
income for the fourth quarter fiscal year 2019.
The effective tax rate was negative 204% for the fourth quarter
of fiscal year 2020. The fourth quarter effective tax rate
primarily reflects changes in the estimated benefit associated with
the enactment of the Coronavirus Aid, Relief, and Economic Security
(CARES) Act and non-recurring tax benefits related to legal entity
structure changes that occurred in the quarter. The non-recurring
tax items in the quarter delivered a benefit of approximately $0.45
of EPS.
The effective tax rate for fiscal year 2020 was 40%. The fiscal
year 2020 effective tax rate reflects the estimated benefit
associated with the enactment of the Coronavirus Aid, Relief, and
Economic Security (CARES) Act and non-recurring tax benefits
related to legal entity structure changes. Excluding these items,
there would be a decrease in the effective tax rate of
approximately 21 percentage points.
Balance Sheet
Gap Inc. ended fiscal year 2020 with $2.4 billion in cash, cash
equivalents, and short-term investments, compared to $1.7 billion
at the end of fiscal year 2019, providing sufficient liquidity to
address remaining challenges from the COVID pandemic, support the
company’s long-term growth strategy, and return cash to
shareholders.
As of the end of fiscal year 2020, while Gap Inc. inventory was
up 14% versus the year-ago quarter, markdown inventory ownership
was below last year. Despite the higher year over year inventory,
the company is pleased with its current inventory composition and
is confident that first half assortments and the quality of the
inventory composition will enable product margins in the first half
of 2021 to be above last year’s levels.
The increase in inventory was driven primarily by:
- About 10 percentage points resulting from inventory the company
strategically held back in the first half of fiscal year 2020 due
to COVID-related store closures, which will be introduced for sale
during the first half of fiscal year 2021. This inventory was
contemplated in our first half receipt plan for 2021, but does
drive a temporary increase in our inventory balance;
- Higher in-transit inventory due to COVID-related U.S. port
congestion and the impact on shipping timelines; and
- Ownership of COVID-related inventory, such as masks and hand
sanitizer, that the company will continue to sell through the first
half of FY21.
Full year free cash flow, defined as net cash from operating
activities less purchases of property and equipment, was negative
$155 million compared with positive $709 million last year.
Following the pinnacle of the COVID impact during the first quarter
of fiscal year 2020, free cash flow during the last three quarters
of the year was approximately $900 million.
Please see the reconciliation of free cash flow, a non-GAAP
financial measure, in the tables at the end of this press
release.
Capital expenditures were $392 million compared to $702 million
last year, reflecting reduced spending in light of COVID, including
a reduction in store capital spending of over 50%.
Gap Inc. ended the year with 3,715 store locations in 45
countries, of which 3,100 were company operated. This compares to
3,345 company-operated stores at the end of last year.
Fiscal Year 2021 Financial Outlook
Despite the uncertainty remaining as a result of COVID, the
company is providing a fiscal year 2021 financial outlook. This
outlook is informed by known COVID conditions and does not
incorporate potential unknown and future impacts, including
possible further spread in other regions, meaningful deterioration
from current trends, and potential disruption from any supply-chain
impacts. In addition, this outlook does not include any financial
impacts stemming from ongoing strategic reviews, including our
Europe and Intermix businesses.
For fiscal year 2021, the company expects diluted earnings per
share to be in the range of $1.20 to $1.35.
The company provided the following additional guidance:
- Net Sales: The company expects fiscal year 2021 net
sales to reflect mid- to high-teens growth versus fiscal year 2020,
which assumes COVID impacts persisting in the first half of 2021
and a return to a more normalized, pre-pandemic level of net sales
in the second half of 2021.
- Operating Margin: The company expects to deliver
operating margin of approximately 5% in 2021. The outlook for 2021
is consistent with the company’s Power Plan 2023 objective of
achieving at least a 10% operating margin by the end of 2023.
- Net Interest Expense is expected to be approximately
$210 million.
- Effective Tax Rate is expected to be approximately
25%.
- Inventory: Longer in-transit times, due to port
congestion, are expected to continue in the first half of 2021. As
a result, end of second quarter 2021 inventory is anticipated to be
up high-single digits versus last year.
- Capital Expenditures: Capital spending is expected to be
approximately $800 million in fiscal year 2021. Consistent with
Power Plan 2023, the 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.
- Cash Returned to Shareholders: The company announced
this week that its Board of Directors authorized the payment of its
previously approved and deferred first quarter fiscal year 2020
dividend of $0.2425 per share. In addition, the company intends to
initiate a quarterly dividend in the second quarter of fiscal year
2021 at a level that balances return of capital to shareholders
while maintaining the financial flexibility to monitor the ongoing
pandemic impacts and invest in growth initiatives. The outlook does
not include any share repurchases in fiscal year 2021.
- Real Estate: In fiscal year 2021, the company plans to
open 30 to 40 Old Navy stores and 20 to 30 Athleta stores, as well
as close approximately 100 Gap and Banana Republic stores globally
- 75 of those in North America, consistent with the company’s store
rationalization plans outlined in the Power Plan 2023
strategy.
“I’m very pleased with our strong finish to the fiscal year even
in the face of uncertainty from the ongoing pandemic,” said Katrina
O’Connell, Chief Financial Officer, Gap Inc. “Our
sequentially-improving performance, financial discipline and focus
on operational excellence have given us confidence in our ability
to execute our strategies in 2021, as reflected in the guidance we
provided today. And, consistent with Power Plan 2023, we are
focused on sales growth, further advancement on fleet restructuring
initiatives, customer-facing investments, digital technologies to
support our fast-growing online business, and brand marketing in
support of our long-term growth aspirations.”
Webcast and Conference Call Information
Steve Austenfeld, Head of Investor Relations at Gap Inc., will
host a summary of the company’s fourth quarter fiscal year 2020
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.
The conference call can be accessed by calling 1-855-5000-GPS or
1-855-500-0477 (participant passcode: 1582503). 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: our ability to deliver profitable growth in 2021; our
ability to align Banana Republic inventory with demand; our
expectation that the cash ended fiscal year 2020 provides
sufficient liquidity to address remaining challenges from the COVID
pandemic, support the company’s long-term growth strategy, and
return cash to shareholders; our expectation that the first half
assortments and the quality of the inventory composition will
enable product margins in the first half of 2021 to be above last
year’s levels; our ability to meet our target that Old Navy and
Athleta sales will represent 70% of our company sales by the end of
2023; the timing of the launch of the YZY partnership the impact of
entering into several licensing deals in our Europe market our
apparel market share gain; earnings per share in 2021; Athleta
achieving $2B in sales by the end of 2023; product margins in the
first half of 2021; the impact of our ability to leverage our
responsive supply chain to adjust replenishment Gap and Banana
Republic store closures in North America in 2021; operating margin
in 2021; annual effective tax rate in fiscal year 2021; EBIT margin
by the end of 2023; continuing to invest in growth in 2021;
reintroducing inventory held back in 2020 for sale during the first
half of fiscal year 2021; our ability to annualize pretax savings
of approximately $100M at the end of 2023; our ability to use our
cash as currently planned; Old Navy and Athleta store openings in
2021; targeted closures of North American stores by the end of
fiscal year 2021; capital expenditures in fiscal year 2021; and
initiating a regular quarterly dividend.
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 risk that we or our franchisees will be
unsuccessful in gauging apparel trends and changing consumer
preferences; 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 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 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 our investments in customer, digital, and
omni-channel shopping 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
risks to our business, including our costs and supply chain,
associated with global sourcing and manufacturing; 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
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 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 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 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 changes in our credit profile or deterioration in market
conditions may limit our access to the capital markets and
adversely impact our financial results or our business initiatives;
the risk that changes in the regulatory or administrative landscape
could adversely affect our financial condition and results of
operations; the risk that natural disasters, public health crises,
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 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 the 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, and claims.
Additional information regarding factors that could cause
results to differ can be found in the company’s Quarterly Report on
Form 10-Q filed with the Securities and Exchange Commission on June
9, 2020, as well as the company’s subsequent filings with the
Securities and Exchange Commission.
These forward-looking statements are based on information as of
March 4, 2021. 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., 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, Athleta,
Intermix, and Janie and Jack 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 $13.8
billion. For more information, please visit www.gapinc.com.
1 183 million refers to total number of recognized customers
directly accessible for marketing outreach as of the end of fiscal
year 2020
2 The NPD Group / Consumer Tracking Service / U.S. Dollar Share,
12 months ending January 2021
3 The NPD Group / Consumer Tracking Service / U.S. Dollar Share,
3 months ending January 2021
The Gap, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED ($ in millions) January
30,2021 February 1,2020 ASSETS Current assets: Cash and
cash equivalents
$
1,988
$
1,364
Short-term investments
410
290
Merchandise inventory
2,451
2,156
Other current assets
1,159
706
Total current assets
6,008
4,516
Property and equipment, net
2,841
3,122
Operating lease assets
4,217
5,402
Other long-term assets
703
639
Total assets
$
13,769
$
13,679
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable
$
1,743
$
1,174
Accrued expenses and other current liabilities
1,276
1,067
Current portion of operating lease liabilities
831
920
Income taxes payable
34
48
Total current liabilities
3,884
3,209
Long-term liabilities: Long-term debt
2,216
1,249
Long-term operating lease liabilities
4,617
5,508
Other long-term liabilities
438
397
Total long-term liabilities
7,271
7,154
Total stockholders' equity
2,614
3,316
Total liabilities and stockholders' equity
$
13,769
$
13,679
The Gap, Inc. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS UNAUDITED 13 Weeks Ended 52
Weeks Ended ($ and shares in millions except per share
amounts) January 30,2021 February 1,2020
January 30,2021 February 1,2020 Net sales
$
4,424
$
4,674
$
13,800
$
16,383
Cost of goods sold and occupancy expenses
2,756
3,000
9,095
10,250
Gross profit
1,668
1,674
4,705
6,133
Operating expenses
1,534
1,919
5,567
5,559
Operating income (loss)
134
(245
)
(862
)
574
Loss on extinguishment of debt
-
-
58
-
Interest, net
57
9
182
46
Income (loss) before income taxes
77
(254
)
(1,102
)
528
Income taxes
(157
)
(70
)
(437
)
177
Net income (loss)
$
234
$
(184
)
$
(665
)
$
351
Weighted-average number of shares - basic
375
373
374
376
Weighted-average number of shares - diluted
382
373
374
378
Earnings (loss) per share - basic
$
0.62
$
(0.49
)
$
(1.78
)
$
0.93
Earnings (loss) per share - diluted
$
0.61
$
(0.49
)
$
(1.78
)
$
0.93
The Gap, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS UNAUDITED 52 Weeks Ended ($ in
millions) January 30,2021 (a) February 1,2020 (a)
Cash flows from operating activities: Net income (loss)
$
(665
)
$
351
Depreciation and amortization
507
557
Impairment of operating lease assets
391
239
Impairment of store assets
135
98
Loss on extinguishment of debt
58
-
Gain on sale of building
-
(191
)
Change in merchandise inventory
(305
)
4
Change in accounts payable
564
66
Change in income taxes payable, net of receivables and other
tax-related items
(304
)
86
Other, net
(144
)
201
Net cash provided by operating activities
237
1,411
Cash flows from investing activities: Purchases of property
and equipment
(392
)
(702
)
Purchase of building
-
(343
)
Proceeds from sale of building
-
220
Purchases of short-term investments
(508
)
(293
)
Proceeds from sales and maturities of short-term investments
388
293
Purchase of Janie and Jack
-
(69
)
Other
2
-
Net cash used for investing activities
(510
)
(894
)
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
22
25
Withholding tax payments related to vesting of stock units
(9
)
(21
)
Repurchases of common stock
-
(200
)
Cash dividends paid
-
(364
)
Net cash provided by (used for) financing activities
895
(560
)
Effect of foreign exchange rate fluctuations on cash, cash
equivalents, and restricted cash
13
4
Net increase (decrease) in cash, cash equivalents, and restricted
cash
635
(39
)
Cash, cash equivalents, and restricted cash at beginning of period
1,381
1,420
Cash, cash equivalents, and restricted cash at end of period
$
2,016
$
1,381
____________________ (a) For the fifty-two weeks ended January 30,
2021 and February 1, 2020, total cash, cash equivalents, and
restricted cash includes $28 million and $17 million, respectively,
of restricted cash recorded in other current assets and other
long-term assets on the Consolidated Balance Sheets.
The Gap,
Inc. NON-GAAP FINANCIAL MEASURES UNAUDITED
FREE CASH FLOW Free cash flow is a non-GAAP financial
measure. We believe free cash flow is an important metric because
it represents a measure of how much cash a company has available
for discretionary and non-discretionary items after the deduction
of capital expenditures as we require regular capital expenditures
to build and maintain stores and purchase new equipment to improve
our business and infrastructure. We use this metric internally, as
we believe our sustained ability to generate free cash flow is an
important driver of value creation. Additionally, we provided free
cash flow excluding the impact of the first quarter of fiscal 2020
which was significantly impacted by the sales decline as a result
of the COVID-19 pandemic. However, this non-GAAP financial measure
is not intended to supersede or replace our GAAP results.
52 Weeks Ended January 30,
2021
13 Weeks Ended May 2,
2020
39 Weeks Ended January 30,
2021
($ in millions)
Derived (a)
Net cash provided by (used for) operating activities
$
237
$
(940
)
$
1,177
Less: Purchases of property and equipment
(392
)
(122
)
(270
)
Free cash flow
$
(155
)
$
(1,062
)
$
907
52 Weeks EndedFebruary 1, 2020 ($ in
millions) Net cash provided by operating activities
$
1,411
Less: Purchases of property and equipment (b)
(702
)
Free cash flow
$
709
____________________ (a) The free cash flow for the thirty-nine
weeks ended January 30, 2021 is derived from the reported cash flow
statement for the fifty-two weeks ended January 30, 2021 less the
reported cash flow for the thirteen weeks ended May 2, 2020. (b)
Excludes purchase of building in the first quarter of fiscal 2019.
The Gap, Inc. NON-GAAP FINANCIAL MEASURES
UNAUDITED ADJUSTED STATEMENT OF OPERATIONS METRICS
FOR THE FOURTH QUARTER OF FISCAL YEAR 2020 AND 2019 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 charges resulting from a strategic review
of the Intermix business during fiscal 2020 and impacts of
separation-related costs, specialty fleet restructuring costs, and
flagship impairment charges during fiscal 2019. Management believes
that excluding certain items from operating expenses and operating
income that are not part of its 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 January
30, 2021 Operating Expenses Operating Expensesas a %
of Net Sales Operating expenses, as reported
$
1,534
34.7
%
Less: Non-cash impairment charges related to Intermix (a)
(56
)
(1.3
)%
Adjusted operating expenses
$
1,478
33.4
%
($ in millions) 13 Weeks Ended January 30,
2021 Operating Income Operating Income as a% of Net
Sales Operating income, as reported
$
134
3.0
%
Add: Non-cash impairment charges related to Intermix (a)
56
1.3
%
Adjusted operating income
$
190
4.3
%
($ in millions) 13 Weeks Ended February 1,
2020 Operating Income (loss) Operating income, as
reported
$
(245
)
Add: Separation-related costs (b)
189
Add: Specialty fleet restructuring costs (c)
38
Add: Flagship impairment charges (d)
296
Adjusted operating income
$
278
______________________________ (a) Represents trade name impairment
of $31 million as well as store asset and operating lease asset
impairment of $25 million. (b) Represents the impact of costs
related to preparing for the Old Navy spin-off transaction and
subsequent cancellation of this transaction. Separation-related
amounts primarily consist of costs associated with information
technology and fees for consulting and advisory services. (c)
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. (d) Represents non-cash impairment charges related to global
flagship stores. Flagship impairment charges related to operating
lease assets and store assets were $223 million and $73 million,
respectively.
The Gap, Inc. NET SALES RESULTS
UNAUDITED The following table details the Company’s
fourth quarter and fiscal year 2020 net sales (unaudited):
($ in millions) Old NavyGlobal Gap Global
BananaRepublic Global Other (2) Total 13
Weeks Ended January 30, 2021 U.S. (1)
$
2,189
$
704
$
438
$
457
$
3,788
Canada
163
78
40
-
281
Europe
-
80
2
-
82
Asia
-
207
20
-
227
Other regions
23
19
4
-
46
Total
$
2,375
$
1,088
$
504
$
457
$
4,424
($ in millions) Old NavyGlobal Gap
Global BananaRepublic Global (3) Other (4)
Total 13 Weeks Ended February 1, 2020 U.S. (1)
$
2,055
$
781
$
642
$
334
$
3,812
Canada
160
98
60
-
318
Europe
-
145
4
-
149
Asia
15
289
26
-
330
Other regions
35
25
5
-
65
Total
$
2,265
$
1,338
$
737
$
334
$
4,674
($ in millions) Old NavyGlobal Gap
Global BananaRepublic Global Other (2)
Total 52 Weeks Ended January 30, 2021 U.S. (1)
$
6,898
$
2,099
$
1,242
$
1,411
$
11,650
Canada
578
261
130
3
972
Europe
-
319
10
-
329
Asia
4
642
64
-
710
Other regions
56
67
16
-
139
Total
$
7,536
$
3,388
$
1,462
$
1,414
$
13,800
($ in millions) Old NavyGlobal Gap
Global BananaRepublic Global (3) Other (4)
Total 52 Weeks Ended February 1, 2020 U.S. (1)
$
7,259
$
2,723
$
2,191
$
1,225
$
13,398
Canada
587
349
215
2
1,153
Europe
-
525
14
-
539
Asia
45
943
96
-
1,084
Other regions
92
94
23
-
209
Total
$
7,983
$
4,634
$
2,539
$
1,227
$
16,383
____________________ (1) U.S. includes the United States, Puerto
Rico, and Guam. (2) Primarily consists of net sales for the
Athleta, Intermix, and Hill City brands. Beginning in fiscal year
2020, Janie and Jack net sales are also included. Net sales for
Athleta for the thirteen and fifty-two weeks ended January 30, 2021
were $371 million and $1,135 million, respectively. (3) Beginning
on March 4, 2019, Banana Republic Global includes net sales for the
Janie and Jack brand. (4) Primarily consists of net sales for the
Athleta, Intermix, and Hill City brands as well as a portion of
income related to our credit card agreement. Net sales for Athleta
for the thirteen and fifty-two weeks ended February 1, 2020 were
$288 million and $978 million, respectively.
The Gap, Inc.
REAL ESTATE Store count, openings, closings, and
square footage for our stores are as follows:
February 1, 2020
52 Weeks Ended January 30,
2021
January 30, 2021
Store Locations
Store Locations Opened
Store Locations Closed
(1)
Store Locations
Square Feet (millions)
Old Navy North America
1,207
32
19
1,220
19.6
Old Navy Asia
17
-
17
-
-
Gap North America
675
2
121
556
5.8
Gap Asia
358
16
34
340
2.9
Gap Europe
137
4
24
117
1.0
Banana Republic North America
541
3
73
471
4.0
Banana Republic Asia
48
5
6
47
0.2
Athleta North America
190
11
2
199
0.8
Intermix North America
33
-
2
31
0.1
Janie and Jack North America
139
-
20
119
0.2
Company-operated stores total
3,345
73
318
3,100
34.6
Franchise
574
67
26
615
N/A
Total
3,919
140
344
3,715
34.6
____________________ (1) Represents stores that have been
permanently closed, not stores temporarily closed as a result of
COVID-19.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210304006013/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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