Fourth quarter 2021 net sales of $4.5 billion
increased 2% year-over-year and were down 3% compared to 2019;
Comparable sales were up 3% year-over-year and increased 3% versus
2019
Fiscal year 2021 net sales of $16.7 billion
increased 21% year-over-year and were up 2% compared to fiscal year
2019; Comparable sales were up 6% year-over-year and increased 8%
versus 2019
Fiscal year 2021 reported diluted earnings per
share was $0.67 with adjusted diluted earnings per share of
$1.44
Returned over $400 million to shareholders in
fiscal 2021 through dividend program and share repurchase plan
Fiscal year 2022 reported diluted earnings per
share is expected to be in the range of $1.95 to $2.15 with
adjusted diluted earnings per share in the range of $1.85 to
$2.05
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 its financial results for the fourth quarter and fiscal
year ended January 29, 2022.
The company’s reported diluted loss per share for the fourth
quarter was $0.04. Excluding charges related to strategic changes
in the company’s European business, the fourth quarter adjusted
diluted loss per share was $0.02. Fiscal year 2021 reported diluted
earnings per share was $0.67. Excluding fees associated with
restructuring the company’s long-term debt, as well as charges
related to divestiture activity and strategic changes in the
company’s European business, adjusted diluted earnings per share
for fiscal year 2021 was $1.44.
Additional information regarding adjusted diluted earnings
(loss) per share, which is a non-GAAP financial measure, is
provided at the end of this press release along with a
reconciliation of this measure from the most directly comparable
GAAP financial measure for the applicable period.
“After two years of restructuring, including divesting smaller
non-strategic brands, transitioning our European market to an
asset-light partnership model and shedding underperforming North
American stores, our core business is strong and we are poised for
balanced growth across our four billion-dollar lifestyle brands,”
said Sonia Syngal, CEO, Gap Inc. “As our teams address near-term
disruption from the acute headwinds that muted our fourth quarter
performance, we are confident in our ability to execute against our
long-term strategy, capitalizing on our investments in
demand-generation, customer loyalty and artificial intelligence to
accelerate profitable growth.”
Due to the significant impact of COVID-19 on prior year figures,
financial comparisons in this release are being made primarily to
the same period in fiscal year 2019. Fourth quarter and full year
results for fiscal 2020 and 2019 can be found in the tables at the
end of this press release.
The company’s fourth quarter fiscal year 2021 net sales of $4.5
billion were down 3% compared to 2019. Strategic permanent store
closures and divestitures reduced net sales by approximately 9
percentage points versus 2019. Online sales grew 44% compared to
the fourth quarter of 2019 and represented 43% of the total
business. Fourth quarter comparable sales were up 3% versus 2019
and 3% year-over-year.
Fiscal year 2021 net sales of $16.7 billion represented a 2%
increase versus fiscal year 2019. Strategic permanent store
closures and divestitures reduced net sales by approximately 7
percentage points versus 2019. Fiscal year 2021 online sales grew
57% versus 2019 and represented 39% of total net sales. Comparable
sales for fiscal year 2021 grew 8% versus 2019 and were up 6%
year-over-year. The comparable sales calculation reflects online
sales and comparable sales days in stores that were open.
Net sales and comparable sales by global brand were as
follows:
- Old Navy: Fourth quarter net sales were muted in part
due to supply chain impacts, up 2% versus 2019 with comparable
sales flat versus 2019. For the year, the brand crossed $9 billion
in net sales, up 14% compared to fiscal year 2019 with comparable
sales up 12% versus 2019. Leaning into its market leadership in
Active, Denim and Kids and Baby, Old Navy is well-positioned as a
Value brand, offering the Democracy of Style for the whole family
at jaw-dropping prices.
- Gap: Fourth quarter net sales declined 13% versus 2019,
with permanent store closures contributing an estimated 17
percentage points of decline. Global comparable sales increased 3%
with North America comparable sales up 12% versus the fourth
quarter of 2019. Fiscal year 2021 net sales were down 12% compared
to fiscal year 2019, with permanent store closures reducing sales
by an estimated 15 percentage points. Global comparable sales for
fiscal year 2021 were up 2% with North America comparable sales up
12% versus 2019. Building on its base of a healthier core and
right-sized fleet, Gap is set to scale the strong partnerships it
established in 2021, from Gap Home with Walmart and Yeezy Gap to
its joint venture with NEXT in Europe, to further extend the
brand’s reach and relevancy around the globe.
- Banana Republic: Fourth quarter net sales declined 11%
versus 2019, with permanent store closures contributing an
estimated 10 percentage points of the decline. Comparable sales
were down 2% versus the fourth quarter of 2019. Fiscal year 2021
net sales were down 18% compared to fiscal year 2019, with
permanent store closures reducing sales by an estimated 10
percentage points. Comparable sales for fiscal year 2021 were down
9% versus 2019. Following the brand’s successful re-launch, Banana
Republic’s new premium positioning has resulted in Average Unit
Retail growth, higher basket size and an increase in higher income
shoppers. At the same time, the brand is expanding into new
adjacent categories such as the launch of BR Baby.
- Athleta: Fourth quarter net sales were up 52% versus
2019 with comparable sales up 42% versus the fourth quarter of
2019. Fiscal year 2021 net sales were up 48% compared to fiscal
year 2019 with comparable sales up 39% versus 2019. Athleta is on
track to hit $2 billion in net sales by fiscal year 2023 led by its
digital strength and capabilities, including its growth in the
wellness space six months into the launch of AthletaWell.
Fourth Quarter Fiscal 2021 Results:
- Gross margin was 33.7% in the fourth quarter, 260 basis points
lower than 2019 adjusted gross margin driven by:
- Merchandise margins down 500 basis points versus 2019 due to
nearly 600 basis points of estimated air freight costs which were
partially offset by higher Average Unit Retails through lower
discounting.
- Rent, Occupancy and Depreciation (ROD) leverage of 240 basis
points versus 2019 due to online growth, strategic store closures
and rent negotiations.
- Reported operating expenses were $1.5 billion or 33.5% of net
sales. Adjusted operating expenses were 33.3% of net sales, 300
basis points higher than the 2019 adjusted rate. The fourth quarter
rate reflects an increased investment in marketing to support
demand generation, investments in technology to build out digital
and supply chain capabilities, and higher incentive compensation
and fulfillment expenses, partially offset by reductions in store
expenses.
- Operating margin for the quarter was 0.2% on a reported basis.
Adjusted operating margin of 0.4% decreased 550 basis points
compared to adjusted operating margin in 2019 and includes an
estimated impact of nearly 600 basis points or $275 million in
transitory air freight expense.
- Net interest expense for the quarter was $16 million.
- Tax expense for the quarter was $8 million on a pre-tax loss of
$8 million resulting in an effective tax rate of negative
100%.
Fiscal Year 2021 Results:
- Gross margin of 39.8% improved 220 basis points versus 2019
adjusted gross margin driven by:
- Merchandise margins down 100 basis points versus 2019 as
Average Unit Retail growth was offset by an estimated 240 basis
points of air freight expense.
- Rent, Occupancy and Depreciation (ROD) leverage of 320 basis
points versus 2019 due to online growth, strategic store closures
and rent negotiations.
- Operating expenses were $5.8 billion or 35.0% of net sales on a
reported basis. Adjusted operating expenses were 34.3% of net
sales, 310 basis points higher than the 2019 adjusted rate. The
fiscal year 2021 rate reflects an increased investment in growth,
primarily through marketing and technology, as well as higher
incentive compensation costs.
- Operating margin for fiscal year 2021 was 4.9% on a reported
basis. Adjusted operating margin of 5.5% decreased 90 basis points
compared to 2019 adjusted operating margin and includes an
estimated impact of approximately 240 basis points or $430 million
in air freight expense.
- Net interest expense for fiscal year 2021 was $162
million.
- The effective tax rate for the fiscal year 2021 was 20.7%.
Excluding the net impact related to divestitures, strategic changes
in the company’s European business and loss on extinguishment of
debt, the full year adjusted effective tax rate was 26.2%.
- During the year, the company repurchased 9 million shares for a
total of $201 million and ended fiscal year 2021 with 371 million
shares outstanding.
- The company paid a dividend of $0.12 per share during the
fourth quarter of fiscal year 2021. In fiscal year 2021, the
company paid dividends totaling $226 million. In addition, on
February 24, 2022, the company announced that its Board of
Directors authorized a first quarter fiscal 2022 dividend of $0.15
per share, an increase of 25% versus the fourth quarter fiscal 2021
dividend.
- Fiscal year 2021 ending inventory was up 23% year-over-year
with about 15% of the growth driven by longer in-transit times. The
remaining increase was driven by higher Average Unit Cost resulting
from air expense that the company expects to sell through in the
first half of fiscal 2022 and from product mix shifts into higher
cost items.
- The company ended fiscal year 2021 with $0.9 billion in cash
and cash equivalents. Fiscal year 2021 free cash flow, defined as
net cash from operating activities less purchases of property and
equipment, was $115 million.
- Fiscal year 2021 capital expenditures were $694 million.
- The company ended fiscal year 2021 with 3,399 store locations
in over 40 countries, of which 2,835 were company operated.
Additional information regarding adjusted gross margin, adjusted
operating expenses, adjusted operating margin, adjusted effective
tax rate, and free cash flow, all of which are non-GAAP financial
measures, is provided at the end of this press release along with a
reconciliation of these measures from the most directly comparable
GAAP financial measures for the applicable period.
Fiscal Year 2022 Outlook:
For fiscal year 2022, the company expects its reported diluted
earnings per share to be in the range of $1.95 to $2.15. Excluding
a net benefit expected from international initiatives, the company
expects its adjusted diluted earnings per share to be in the range
of $1.85 to $2.05.
The company provided the following additional guidance:
Net Sales: The company expects fiscal year 2022 revenue
growth to be in the low single-digit range versus fiscal year 2021
with first quarter net sales expected to be down mid to high-single
digits versus the first quarter of 2021.
Operating Margin: The company expects to deliver
operating margin of 6.3% to 6.8% on a reported basis and 6.0% to
6.5% on an adjusted basis in fiscal year 2022.
Net Interest Expense: The company expects net interest
expense of about $70 million for fiscal year 2022.
Effective Tax Rate: The company expects its fiscal year
2022 effective tax rate to be about 27%.
Inventory: The company expects first quarter ending
inventory to be up in the mid-twenty percent range relative to the
first quarter of fiscal year 2021 as a result of earlier booking to
offset longer in-transit times.
Capital Expenditures: The company expects capital
spending to be approximately $700 million in fiscal year 2022.
Capital spending is expected to primarily support growth
investments including digital, loyalty, and supply chain capacity
projects, along with investment in store growth for Old Navy and
Athleta.
Real Estate: The company expects to open about 30 to 40
stores each for Old Navy and Athleta in fiscal year 2022. In
addition, as part of its 350-store closure plan, the company
expects to close about 50 to 60 Gap and Banana Republic stores in
North America during the year.
“As we transition to 2022, we are focused on delivering value to
shareholders through our economic model, enabled by the progress
we’ve made against our strategy through repositioning unprofitable
areas of the business and building brand relevance,” said Katrina
O’Connell, Executive Vice President and Chief Financial Officer,
Gap Inc. “Our primary focus is on the long-term health of the
business and delivering profitable growth year after year. We are
clear on our 2022 priorities and are acutely focused on realizing
increased operational efficiency and, most importantly, driving
sustainable, profitable growth.”
Webcast and Conference Call Information Joe Scheeline,
Head of Corporate Finance and Investor Relations at Gap Inc., will
host a summary of the company’s fourth quarter and fiscal year 2021
results during a conference call and webcast from approximately
2:00 p.m. to 3:00 p.m. Pacific Time today. Joe 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: 7571387). International
callers may dial 1-323-794-2078. The webcast can be accessed at
investors.gapinc.com.
Non-GAAP Disclosure This press release includes financial
measures that have not been calculated in accordance with U.S.
generally accepted accounting principles (GAAP) and are therefore
referred to as non-GAAP financial measures. The non-GAAP measures
described below are intended to provide investors with additional
useful information about the company’s financial performance, to
enhance the overall understanding of its past performance and
future prospects and to allow for greater transparency with respect
to important metrics used by management for financial and operating
decision-making. The company presents these non-GAAP financial
measures to assist investors in seeing its financial performance
from management's view and because it believes they provide an
additional tool for investors to use in computing the company's
core financial performance over multiple periods with other
companies in its industry. Additional information regarding the
intended use of each non-GAAP measure included in this press
release is provided in the tables to this press release.
The non-GAAP measures included in this press release are
adjusted gross margin, adjusted operating expenses, adjusted
operating margin, adjusted effective tax rate, adjusted diluted
earnings (loss) per share, and free cash flow. These non-GAAP
measures exclude the impact of certain items that are set forth in
the tables to this press release.
The non-GAAP measures used by the company should not be
considered as a substitute for, or superior to, measures of
financial performance prepared in accordance with GAAP and may not
be the same as similarly titled measures used by other companies
due to possible differences in method and in items or events being
adjusted. The company urges investors to review the reconciliation
of these non-GAAP financial measures to the most directly
comparable GAAP financial measures included in the tables to this
press release below, and not to rely on any single financial
measure to evaluate its business. The non-GAAP financial measures
used by the company have limitations in their usefulness to
investors because they have no standardized meaning prescribed by
GAAP and are not prepared under any comprehensive set of accounting
rules or principles.
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: the health, strength and relevance of our business
and brands; growing our business and brands; building brand
relevance; executing against our strategy; initiatives to
reposition unprofitable business areas and the expected benefits
therefrom; accelerating and delivering sustainable and profitable
growth; delivering value to shareholders; realizing increased
operational efficiency; Old Navy’s market leadership and brand
positioning; Gap’s core health and fleet size; partnering Gap’s
business and scaling partnerships to drive Gap’s sales in 2022;
extending Gap’s reach and relevancy; Banana Republic’s relaunch and
brand positioning; Banana Republic’s Average Unit Retail growth,
basket size, pricing authority and customer file; Banana Republic’s
expansion into new categories; Athleta’s net sales growth through
2023; Athleta’s digital strength and capabilities; Athleta’s growth
in the wellness space and AthletaWell; investments in growth,
marketing, demand generation, artificial intelligence, technology,
digital, customer loyalty and supply chain and the expected
benefits therefrom; online growth; reported and adjusted diluted
earnings per share in 2022; the net benefit of international
initiatives in 2022; revenue growth in 2022; first quarter 2022 net
sales; reported and adjusted operating margin in 2022; net interest
expense in 2022; effective tax rate in 2022; ending inventory for
the first quarter of 2022; inventory in-transit times for the first
quarter of 2022; capital spending in 2022; store openings and
closures in 2022; competing in 2022; partnerships and the expected
benefits therefrom; revenue growth; our online business; our
integrated loyalty program and the expected benefits therefrom;
customer behavior and the impact on our business; offering
versatile and on-trend product; our market leadership in certain
areas; improving profitability and on-time deliveries delays in
2022; expected transit times and booking deadlines; diversifying
port exposure; optimizing manufacturing and proximate sourcing;
digital product creation across our brands; product delays and air
freight costs in 2022 and the first quarter of 2022; selling
through air freight costs in 2022; the profitability of our brands
in 2022; Old Navy revenue in 2022 and the first quarter of 2022;
Old Navy comparable sales in 2022; Old Navy product categories and
balance in 2022; weakness at Old Navy in the first quarter of 2022;
Gap’s product and pricing authority; Gap’s distribution points in
2022; optimizing our core business; changes in the media landscape
and media consumption habits; increasing personalization for
loyalty customers; monetizing relationships with loyalty customers;
transitioning our credit card program; initiatives to transform and
de-risk our supply chain and the expected benefits therefrom;
inventory management initiatives and the expected benefits
therefrom; product category mix; the power and versatility of our
portfolio; executing against our long-term economic model;
delivering total shareholder return; operating margin leverage; EPS
growth; the sale of our UK distribution center and the expected
benefits therefrom; gross margins in 2022; merchandise margins in
2022; ROD in 2022; Average Unit Cost, commodity prices and product
mix changes in 2022; discount rates in 2022; SG&A in 2022;
driving efficiencies in operations in 2022; our dividend and share
repurchase programs; expected share repurchases in 2022; cash
inflows and cash generation in 2022; and achieving our long-term
operating margin goal.
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 overall global economic and geopolitical
environment, consumer spending patterns and risks associated with
the COVID-19 pandemic; the risk that economic conditions worsen
beyond what is currently estimated by management; the risk that
inflationary pressures increase beyond our ability to control,
which may increase our expenses and negatively impact consumer
demand; 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
risk that we may be unable to mitigate the impact of global supply
chain disruptions on our business and operations and maintain
inventory commensurate with customer demand; the risk that supply
chain delays will result in receiving inventory after the intended
selling season and lead to significant impairment charges; the risk
that we or our franchisees may be unsuccessful in gauging apparel
trends and changing consumer preferences; the risk that we fail to
maintain, enhance and protect our brand image; 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, loyalty, supply
chain and omni-channel shopping initiatives may not deliver the
results we anticipate; the risk that we fail to manage key
executive succession and retention and to continue to attract
qualified personnel; the risk that we may be unable to manage our
inventory effectively and the impact on our gross margins; 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 of 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; the risk of failures of, or updates or
changes to, our information technology systems; the risk that our
efforts to expand internationally may not be successful; the risk
that our arrangements with franchise partners to operate stores in
Europe and elsewhere will not be successful in growing our brands
and amplifying our reach; the risk that our franchisees and
licensees 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; the risk of exposure to foreign currency exchange
rate fluctuations; the risk that comparable sales and margins will
experience fluctuations; natural disasters, public health crises
(including the ongoing COVID-19 pandemic), political crises,
negative global climate patterns, or other catastrophic events; the
risk that we or our franchisees may be unsuccessful in identifying,
negotiating, and securing new store locations and renewing,
modifying, or terminating leases for existing store locations
effectively; the risk that we will not be successful in defending
various proceedings, lawsuits, disputes, and claims; our failure to
comply with applicable laws and regulations and changes in the
regulatory or administrative landscape; reductions in income and
cash flow from our credit card arrangement related to our private
label and co-branded credit cards and our new credit card
arrangement; the risk that our level of indebtedness may impact our
ability to operate and expand our business; the risk that we and
our subsidiaries may be unable to meet our obligations under our
outstanding long-term debt; the risk that changes in our credit
profile or deterioration in market conditions may limit our access
to the capital markets; 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
March 3, 2022. 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 2021 net sales were $16.7 billion. For more
information, please visit www.gapinc.com.
The Gap, Inc. CONDENSED CONSOLIDATED BALANCE
SHEETS UNAUDITED ($ in millions)
January 29, 2022
January 30, 2021
February 1, 2020 (a)
ASSETS Current assets: Cash and cash equivalents
$
877
$
1,988
$
1,364
Short-term investments
-
410
290
Merchandise inventory
3,018
2,451
2,156
Other current assets
1,270
1,159
706
Total current assets
5,165
6,008
4,516
Property and equipment, net
3,037
2,841
3,122
Operating lease assets
3,675
4,217
5,402
Other long-term assets
884
703
639
Total assets
$
12,761
$
13,769
$
13,679
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable
$
1,951
$
1,743
$
1,174
Accrued expenses and other current liabilities
1,367
1,276
1,067
Current portion of operating lease liabilities
734
831
920
Income taxes payable
25
34
48
Total current liabilities
4,077
3,884
3,209
Long-term liabilities: Long-term debt
1,484
2,216
1,249
Long-term operating lease liabilities
4,033
4,617
5,508
Other long-term liabilities
445
438
397
Total long-term liabilities
5,962
7,271
7,154
Total stockholders' equity
2,722
2,614
3,316
Total liabilities and stockholders' equity
$
12,761
$
13,769
$
13,679
____________________
(a)
Fiscal 2019 information provided
for comparability.
The Gap, Inc. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS UNAUDITED
13 Weeks Ended
52 Weeks Ended
($ and shares in millions except per share amounts)
January 29, 2022
January 30, 2021
February 1, 2020 (a)
January 29, 2022
January 30, 2021
February 1, 2020 (a)
Net sales
$
4,525
$
4,424
$
4,674
$
16,670
$
13,800
$
16,383
Cost of goods sold and occupancy expenses
3,002
2,756
3,000
10,033
9,095
10,250
Gross profit
1,523
1,668
1,674
6,637
4,705
6,133
Operating expenses
1,515
1,534
1,919
5,827
5,567
5,559
Operating income (loss)
8
134
(245
)
810
(862
)
574
Loss on extinguishment of debt
-
-
-
325
58
-
Interest, net
16
57
9
162
182
46
Income (loss) before income taxes
(8
)
77
(254
)
323
(1,102
)
528
Income taxes
8
(157
)
(70
)
67
(437
)
177
Net income (loss)
$
(16
)
$
234
$
(184
)
$
256
$
(665
)
$
351
Weighted-average number of shares - basic
373
375
373
376
374
376
Weighted-average number of shares - diluted
373
382
373
383
374
378
Earnings (loss) per share - basic
$
(0.04
)
$
0.62
$
(0.49
)
$
0.68
$
(1.78
)
$
0.93
Earnings (loss) per share - diluted
$
(0.04
)
$
0.61
$
(0.49
)
$
0.67
$
(1.78
)
$
0.93
____________________
(a)
Fourth quarter of fiscal 2019
quarter-to-date and year-to-date information provided for
comparability.
The Gap, Inc. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS UNAUDITED 52 Weeks Ended ($
in millions) January 29,2022 (a) January 30,2021
(a) Cash flows from operating activities: Net income (loss)
$
256
$
(665
)
Depreciation and amortization
504
507
Impairment of operating lease assets
8
391
Impairment of store assets
1
135
Loss on extinguishment of debt
325
58
Loss on divestiture activity
59
-
Change in merchandise inventory
(593
)
(305
)
Change in accounts payable
186
564
Change in income taxes payable, net of receivables and other
tax-related items
(85
)
(304
)
Other, net
148
(144
)
Net cash provided by operating activities
809
237
Cash flows from investing activities: Purchases of property
and equipment
(694
)
(392
)
Purchases of short-term investments
(753
)
(508
)
Proceeds from sales and maturities of short-term investments
1,162
388
Net cash paid for divestiture activity
(21
)
-
Payments for acquisition activity, net of cash acquired
(135
)
-
Other
(5
)
2
Net cash used for investing activities
(446
)
(510
)
Cash flows from financing activities: Proceeds from
revolving credit facility
-
500
Payments for revolving credit facility
-
(500
)
Proceeds from issuance of long-term debt
1,500
2,250
Payments to extinguish debt
(2,546
)
(1,307
)
Payments for debt issuance costs
(16
)
(61
)
Proceeds from issuances under share-based compensation plans
54
22
Withholding tax payments related to vesting of stock units
(36
)
(9
)
Repurchases of common stock
(201
)
-
Cash dividends paid
(226
)
-
Net cash provided by (used for) financing activities
(1,471
)
895
Effect of foreign exchange rate fluctuations on cash, cash
equivalents, and restricted cash
(6
)
13
Net increase (decrease) in cash, cash equivalents, and restricted
cash
(1,114
)
635
Cash, cash equivalents, and restricted cash at beginning of period
2,016
1,381
Cash, cash equivalents, and restricted cash at end of period
$
902
$
2,016
____________________
(a)
For the fifty-two weeks ended
January 29, 2022 and January 30, 2021, total cash, cash
equivalents, and restricted cash includes $25 million and $28
million, respectively, of restricted cash recorded in other current
assets and other long-term assets on the Consolidated Balance
Sheets.
The Gap, Inc. NON-GAAP FINANCIAL MEASURES UNAUDITED
FREE CASH FLOW
Free cash flow is a non-GAAP financial measure. We believe free
cash flow is an important metric because it represents a measure of
how much cash a company has available for discretionary and
non-discretionary items after the deduction of capital
expenditures. We require regular capital expenditures including
technology improvements to automate processes, engage with
customers, and optimize our supply chain in addition to building
and maintaining stores. We use this metric internally, as we
believe our sustained ability to generate free cash flow is an
important driver of value creation. However, this non-GAAP
financial measure is not intended to supersede or replace our GAAP
results.
52 Weeks Ended ($ in millions) January 29,
2022 January 30, 2021 Net cash provided by operating
activities
$
809
$
237
Less: Purchases of property and equipment
(694
)
(392
)
Free cash flow
$
115
$
(155
)
The Gap, Inc. NON-GAAP FINANCIAL MEASURES UNAUDITED
ADJUSTED STATEMENT OF OPERATIONS METRICS FOR THE FOURTH
QUARTER AND 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 impacts of strategic changes related to our operating
model in Europe, the loss on extinguishment of debt, and the loss
on divestiture activity. 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 January 29, 2022
OperatingExpenses OperatingExpenses asa % of NetSales
OperatingIncome OperatingMargin IncomeTaxes
NetIncome(Loss) Earnings(Loss) perShare - Diluted
GAAP metrics, as reported
$
1,515
33.5
%
$
8
0.2
%
$
8
$
(16
)
$
(0.04
)
Adjustments for: Strategic actions in Europe (a)
(8
)
(0.2
)%
8
0.2
%
-
8
0.02
Non-GAAP metrics
$
1,507
33.3
%
$
16
0.4
%
$
8
$
(8
)
$
(0.02
)
($ in millions)52 Weeks Ended January 29, 2022
GrossProfit GrossMargin (c) OperatingExpenses
OperatingExpenses asa % of NetSales OperatingIncome
OperatingMargin Loss onExtinguishmentof Debt
IncomeTaxes NetIncome Earnings perShare -Diluted
(c) GAAP metrics, as reported
$
6,637
39.8
%
$
5,827
35.0
%
$
810
4.9
%
$
325
$
67
$
256
$
0.67
Adjustments for: Strategic actions in Europe (a)
(9
)
(0.1
)%
(50
)
(0.3
)%
41
0.2
%
-
9
32
0.08
Loss on extinguishment of debt
-
-
%
-
-
%
-
-
%
(325
)
83
242
0.63
Loss on divestiture activity (b)
-
-
%
(59
)
(0.4
)%
59
0.4
%
-
37
22
0.06
Non-GAAP metrics
$
6,628
39.8
%
$
5,718
34.3
%
$
910
5.5
%
$
-
$
196
$
552
$
1.44
____________________
(a)
Represents the net impacts from
changes to our European operating model. These impacts primarily
include employee-related and lease-related costs.
(b)
Represents the impact of the loss
on divestiture activity for the Janie and Jack and Intermix
brands.
(c)
Metrics were computed
individually for each line item; therefore, the sum of the
individual lines may not equal the total. Earnings per share is
calculated individually for each quarter; therefore, the sum of the
quarters may not equal the fiscal year total.
The Gap, Inc. NON-GAAP FINANCIAL MEASURES UNAUDITED
ADJUSTED STATEMENT OF OPERATIONS METRICS FOR THE FOURTH
QUARTER AND FISCAL YEAR 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 impacts of separation-related costs, specialty fleet
restructuring costs, flagship impairment charges, a gain on sale of
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
("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 February 1, 2020
GrossProfit GrossMargin (e) OperatingExpenses
OperatingExpenses asa % of NetSales (e)
OperatingIncome(loss) OperatingMargin
IncomeTaxes NetIncome(loss) Earnings(loss)
perShare -Diluted GAAP metrics, as reported
$
1,674
35.8
%
$
1,919
41.1
%
$
(245
)
(5.2
)%
$
(70
)
$
(184
)
$
(0.49
)
Adjustments for: Separation-related costs (a)
1
0.0
%
(188
)
(4.0
)%
189
4.0
%
48
141
0.38
Specialty fleet restructuring costs (b)
21
0.4
%
(17
)
(0.4
)%
38
0.8
%
-
38
0.10
Flagship impairment charges (c)
-
-
%
(296
)
(6.3
)%
296
6.3
%
74
222
0.59
Non-GAAP metrics
$
1,696
36.3
%
$
1,418
30.3
%
$
278
5.9
%
$
52
$
217
$
0.58
($ in millions)52 Weeks Ended February 1, 2020
GrossProfit GrossMargin (e) OperatingExpenses
OperatingExpenses asa % of NetSales (e)
OperatingIncome OperatingMargin IncomeTaxes
NetIncome Earningsper Share -Diluted GAAP metrics, as
reported
$
6,133
37.4
%
$
5,559
33.9
%
$
574
3.5
%
$
177
$
351
$
0.93
Adjustments for: Separation-related costs (a)
1
0.0
%
(300
)
(1.8
)%
301
1.8
%
77
224
0.59
Specialty fleet restructuring costs (b)
22
0.1
%
(39
)
(0.2
)%
61
0.4
%
3
58
0.15
Flagship impairment charges (c)
-
-
%
(296
)
(1.8
)%
296
1.8
%
74
222
0.59
Gain on sale of building
-
-
%
191
1.2
%
(191
)
(1.2
)%
(50
)
(141
)
(0.37
)
U.S. Federal tax reform adjustment (d)
-
-
%
-
-
%
-
-
%
(30
)
30
0.08
Non-GAAP metrics
$
6,156
37.6
%
$
5,115
31.2
%
$
1,041
6.4
%
$
251
$
744
$
1.97
____________________
(a)
Represents the impact of costs
related to the Old Navy spin-off transaction that was subsequently
cancelled. Separation-related amounts primarily consist 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 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.
(d)
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.
(e)
Metrics were 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
EXPECTED ADJUSTED EARNINGS PER SHARE FOR FISCAL YEAR
2022
Expected adjusted diluted earnings per share is a non-GAAP
financial measure. Expected adjusted diluted earnings per share for
fiscal year 2022 is provided to enhance visibility into the
Company's expected underlying results for the period excluding the
estimated impact of strategic changes to our operating model in
Mexico and the sale of the Company's U.K. distribution center. This
non-GAAP financial measure is not intended to supersede or replace
the GAAP measure.
52 Weeks EndingJanuary 28, 2023 Low End High
End Expected earnings per share - diluted
$
1.95
$
2.15
Add: Estimated impact of strategic actions (a)
0.09
0.09
Less: Estimated gain on sale of building (b)
(0.19
)
(0.19
)
Expected adjusted earnings per share - diluted
$
1.85
$
2.05
____________________
(a)
Represents the estimated earnings
per share impact, calculated net of tax at the expected effective
tax rate, of estimated net costs related to strategic changes to
our operating model in Mexico.
(b)
Represents the estimated earnings
per share impact, calculated net of tax at the expected effective
tax rate, of an expected gain on the sale of our U.K. distribution
center.
The Gap, Inc. NET SALES RESULTS UNAUDITED
The following table details the Company’s fourth quarters and
fiscal years 2021, 2020, and 2019 net sales (unaudited):
($ in millions)
Old Navy Global
Gap Global
Banana Republic Global
Athleta (2)
Other (3)
Total
13 Weeks Ended January 29, 2022
U.S. (1)
$
2,097
$
761
$
532
$
428
$
2
$
3,820
Canada
178
100
54
9
-
341
Europe
1
54
2
1
-
58
Asia
1
219
21
-
-
241
Other regions
30
30
4
1
-
65
Total
$
2,307
$
1,164
$
613
$
439
$
2
$
4,525
($ in millions)
Old Navy Global
Gap Global
Banana Republic Global
Athleta (2)
Other (3)
Total
13 Weeks Ended January 30, 2021
U.S. (1)
$
2,189
$
704
$
438
$
371
$
86
$
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
$
371
$
86
$
4,424
($ in millions)
Old Navy Global
Gap Global
Banana Republic Global
(5)
Athleta (2)
Other (4)
Total
13 Weeks Ended February 1, 2020
U.S. (1)
$
2,055
$
781
$
642
$
288
$
46
$
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
$
288
$
46
$
4,674
($ in millions)
Old Navy Global
Gap Global
Banana Republic Global
Athleta (2)
Other (3)
Total
52 Weeks Ended January 29, 2022
U.S. (1)
$
8,272
$
2,608
$
1,703
$
1,432
$
102
$
14,117
Canada
713
349
178
12
-
1,252
Europe
2
328
8
2
-
340
Asia
2
658
70
-
-
730
Other regions
93
120
17
1
-
231
Total
$
9,082
$
4,063
$
1,976
$
1,447
$
102
$
16,670
($ in millions)
Old Navy Global
Gap Global
Banana Republic Global
Athleta (2)
Other (3)
Total
52 Weeks Ended January 30, 2021
U.S. (1)
$
6,898
$
2,099
$
1,242
$
1,135
$
276
$
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
$
1,135
$
279
$
13,800
($ in millions)
Old Navy Global
Gap Global
Banana Republic Global
(5)
Athleta (2)
Other (4)
Total
52 Weeks Ended February 1, 2020
U.S. (1)
$
7,259
$
2,723
$
2,191
$
978
$
247
$
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
$
978
$
249
$
16,383
____________________
(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)
Primarily consists of net sales
for the Intermix, Janie and Jack, and Hill City brands. The
divestiture of Janie and Jack was completed on April 8, 2021. The
divestiture of Intermix was completed on May 21, 2021. Hill City
brand was closed in January 2021. Additionally, beginning in the
second quarter of fiscal 2020, net sales from the
business-to-business program and beginning in the fourth quarter of
fiscal 2021, other revenue generating initiatives are also
included.
(4)
Primarily consists of net sales
for Intermix and Hill City brands as well as a portion of income
related to our credit card agreement.
(5)
Banana Republic Global fiscal
year 2019 net sales include the Janie and Jack brand.
The Gap, Inc. REAL ESTATE
Store count, openings, closings, and square footage for our
stores are as follows:
January 30, 2021
52 Weeks Ended January 29,
2022
January 29, 2022
Number of Store
Locations
Number of Stores
Opened
Number of Stores
Closed
Number of Store
Locations
Square Footage (in
millions)
Old Navy North America
1,220
44
12
1,252
20.1
Gap North America
556
2
38
520
5.5
Gap Asia
340
12
23
329
2.8
Gap Europe (2)
117
1
86
11
0.1
Banana Republic North America
471
2
27
446
3.7
Banana Republic Asia
47
6
3
50
0.2
Athleta North America
199
30
2
227
0.9
Intermix North America (1)
31
-
-
-
-
Janie and Jack North America (1)
119
-
-
-
-
Company-operated stores total
3,100
97
191
2,835
33.3
Franchise (2)
615
78
150
564
N/A
Total
3,715
175
341
3,399
33.3
____________________
(1)
On April 8, 2021, the Company
completed the divestiture of the Janie and Jack brand. On May 21,
2021, the Company completed the divestiture of the Intermix
business. The 150 stores divested are not included as store
closures or in the ending balance for fiscal 2021.
(2)
The 21 Gap France stores that
were transitioned to Hermione People & Brands during the period
are not included as store closures or openings for Company-operated
and Franchise store activity. The ending balance for Gap Europe
excludes these stores and the ending balance for Franchise includes
these stores.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220303005297/en/
Investor Relations Contact: Emily Gacka (415) 427-1972
Investor_relations@gap.com Media Relations Contact: Jason
Allen Press@gap.com
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