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.,
today reported financial results for its second quarter ended July
30, 2022.
“This is a pivotal moment in time. While we search for a new
leader, I am taking on the role as Interim President & CEO of
Gap Inc. with a deep commitment to the company’s success and
impatience for change. Having navigated the global retail industry
across brands and markets, I am not approaching this work from the
sidelines,” said Bob Martin, Executive Chairman and Interim CEO,
Gap Inc. “We are taking actions to better optimize profitability
and cash flow in the near term, reducing operating costs as well as
impairing unproductive inventory. While our elevated inventory and
pressured margins are current realities against unsettled market
conditions, they do not define our ability to capitalize on Gap
Inc.’s strengths to win.”
Mr. Martin continued, “Gap Inc.’s iconic brands, powerful
assets, well-established values and scaled omni-platform are
central to our strategic direction. Our team has the capabilities
to deliver what our customers, and our shareholders, expect --
what’s needed for profitable growth. Importantly, as we adopt
behaviors that enable sustainable change, I’m confident we will
unleash our potential and drive value creation over the long
term.”
Second Quarter Fiscal 2022 - Financial
Results
- Net sales of $3.86 billion, down 8% compared to last year.
- Comparable sales were down 10% year-over-year.
- Online sales declined 6% compared to last year and represented
34% of total net sales.
- Store sales declined 10% compared to last year. The company
ended the quarter with 3,390 store locations in over 40 countries,
of which 2,799 were company operated.
- Reported gross margin was 34.5%; adjusted gross margin,
excluding a $58 million charge related to the impairment of
unproductive inventory, was 36.0%, deleveraging 730 basis points
versus last year.
- On a reported basis, merchandise margins were down 850 basis
points versus last year; adjusted for the inventory impairment,
merchandise margins declined 700 basis points. Merchandise margins
were negatively impacted by an estimated $50 million, or 130 basis
points, of incremental transitory air freight costs, and the
remaining decline of approximately 570 basis points was driven by
higher discounting, primarily at Old Navy, and inflationary
commodity price increases. The declines were partially offset by
the benefit of lower discounting at Banana Republic.
- Rent, occupancy and depreciation deleveraged 30 basis points
versus last year primarily due to lower sales volume in the
quarter.
- Reported operating loss was $28 million in the quarter;
reported operating margin of (0.7%). Adjusted operating income was
$65 million; adjusted operating margin of 1.7%. Adjusted operating
income and margin exclude the inventory impairment and a $35
million charge related to the transition of Old Navy’s Mexico
business.
- Reported net loss of $49 million. Adjusted net income of $30
million, which excludes the inventory impairment and Old Navy
Mexico charge.
- Reported diluted loss per share was $0.13. Adjusted diluted
earnings per share of $0.08, which excludes the inventory
impairment and Old Navy Mexico charge. Reported and adjusted
diluted earnings per share includes an estimated $0.10 of impact
related to transitory elevated air freight expense during the
quarter.
Second Quarter Fiscal 2022 – Balance
Sheet and Cash Flow Highlights
- Ended the quarter with cash and cash equivalents of $708
million.
- Net cash from operating activities was negative $207 million.
Year-to-date free cash flow, defined as net cash from operating
activities less purchases of property and equipment, was negative
$613 million.
- Ending inventory of $3.1 billion was up 37% year-over-year.
This includes nearly 10 percentage points of pack and hold
inventory and 7 percentage points of in-transit. More than half of
the remaining balance of the increase is attributable to
basics.
- During the quarter, the company completed an amendment and
extension of its secured revolving credit facility, securing
modestly improved pricing while increasing flexibility and
liquidity within our capital structure.
- Year-to-date capital expenditures were $406 million.
- Share repurchases were $57 million, representing 5.7 million
shares.
- Paid second quarter dividend of $0.15 per share, totaling $55
million.
- Board of Directors approved third quarter fiscal 2022 dividend
of $0.15 per share.
Additional information regarding adjusted gross margin, adjusted
operating income, adjusted operating margin, adjusted net income,
adjusted diluted earnings per share, 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.
Second Quarter Fiscal 2022 – Global
Brand Results
Old Navy:
- Net sales of $2.1 billion, down 13% compared to last year.
Sales in the quarter were negatively impacted by size and
assortment imbalances, ongoing inventory delays, product acceptance
issues in some key categories as well as slowing demand stemming
from the lower-income consumer.
- Comparable sales were down 15%.
Gap:
- Net sales of $881 million, down 10% compared to last year. The
brand was impacted by category mix imbalances during the quarter.
The decrease in net sales was also driven by strategic store
closures. In addition, the Gap outlet business is experiencing
near-term softness stemming from inflationary pressures impacting
the lower-income consumer.
- Global comparable sales were down 7%. North America comparable
sales were down 10%.
Banana Republic:
- Net sales of $539 million, up 9% compared to last year. The
brand maintains its focus on delivering quality product through a
differentiated experience. It continues to capitalize on the
current shift in consumer trends while realizing ongoing benefits
since last year’s brand relaunch.
- Comparable sales were up 8%.
Athleta:
- Net sales of $344 million, up 1% compared to last year. While
the brand continues to make progress in driving awareness and
establishing authority in the women’s active and wellness category,
it is experiencing softness related to the shift in consumer
preference from athleisure to occasion and work-based categories as
well as modest spring/summer product acceptance challenges.
- Comparable sales were down 8%.
Fiscal Year 2022 Outlook
“We have four strong brands and leverage in the portfolio to
deliver over the long-term, however our recent execution challenges
combined with the uncertain macro trends requires us to manage the
levers in our control and take the actions necessary to drive
improvement across our entire business,” said Katrina O’Connell,
Executive Vice President and Chief Financial Officer, Gap Inc. “In
the near-term, we are taking actions to sequentially reduce
inventory, rebalance our assortments to better meet changing
consumer needs, aggressively manage and reevaluate investments, and
fortifying our balance sheet. While we have work to do, we believe
these are the right initial steps to position Gap Inc. back on its
path toward growth, margin expansion, and delivering value for our
shareholders over the long term.”
Given the actions the company has underway and in midst of a CEO
transition, combined with the uncertain macro-environment, the
company is withdrawing its prior fiscal 2022 outlook. The company
is providing the following commentary related to its outlook for
the remainder of fiscal 2022 and will share further details on its
second quarter fiscal 2022 results conference call today at 2:00 pm
Pacific Time.
Sales:
- Coming off of peak inflation and the higher gas prices
particularly impacting the lower-income consumer in June, the
company has seen an improvement in sales trends in July and into
August consistent with many other retailers. While the company is
making progress balancing its assortments, it remains cautiously
optimistic in light of the consumer environment as it relates to
its revenue in the second half of fiscal 2022.
Gross Margin and Inventory:
- In the second half of fiscal 2022, air freight expense is
expected to normalize and the company will be anniversarying last
year’s air freight investments resulting in roughly 400 basis
points of margin leverage versus last year. Roughly half of the air
freight leverage is expected to be offset by continued inflationary
cost deleverage and ROD is expected to be flat or deleverage
slightly in the second half of fiscal 2022.
- While the company is taking actions to balance its assortment
and right size inventory, the company has seen the most significant
variability versus its expectations in its discount rate. Further
limiting near-term discount rate visibility is the uncertain
consumer environment and increasingly promotional environment.
- The company expects third quarter ending inventory growth to
moderate substantially and is targeting negative inventories versus
last year by the end of fiscal 2022 as a result of its inventory
actions, reduction of receipts, and anniversary of higher
in-transit levels last year. By Spring, the company expects to
begin to lean into its responsive levers, providing the flexibility
to better align inventory levels with demand trends.
SG&A:
- The company is taking action to reduce operating expenses,
which is expected to have a more significant impact in fiscal 2023
and offset the normalized incentive compensation next year.
Capital Expenditures:
- The company has cut or deferred some capital spending and
reduced the number of Old Navy new stores slated for the back half
of the year and now expects capital expenditures of approximately
$650 million in fiscal 2022.
Other:
- The company expects to open about 30 to 40 Athleta stores and
20 to 30 Old Navy stores in fiscal year 2022. As part of its
350-store closure plan, the company continues to expect to close
about 50 Gap and Banana Republic stores in North America during the
year.
- The company continues to expect a net benefit to GAAP earnings
in the third quarter due to the sale of its UK distribution center
now that its European partnership model transition is complete.
This will be reflected in the company’s adjusted diluted earnings
per share in the third quarter fiscal 2022.
- The company has completed its goal of offsetting dilution in
fiscal 2022 and does not anticipate further share repurchases for
the remainder of the year.
Webcast and Conference Call Information
Cammeron McLaughlin, Head of Investor Relations at Gap Inc.,
will host a summary of the company’s second quarter fiscal 2022
results during a conference call and webcast from approximately
2:00 p.m. to 3:00 p.m. Pacific Time today. Ms. McLaughlin will be
joined by Interim Chief Executive Officer Bob Martin and Chief
Financial Officer Katrina O’Connell.
To access the conference call, please pre-register using this
link. Registrants will receive confirmation with dial-in
details.
A live webcast of the event can be accessed using this link. A
replay will also be made available 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 income, adjusted
operating margin, adjusted net income, adjusted diluted earnings
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: winning in any macroenvironment; Old Navy’s growth
potential; Athleta’s growth potential; Athleta’s long-term revenue
CAGR; delivering long-term value and profitable growth; leveraging
our portfolio to compete and win; reducing inventory in the second
half of 2022; impairing unproductive inventory; reducing future
receipts; rebalancing our assortments; reducing overhead/operating
costs and related actions; reevaluating technology, digital and
marketing investments; fortifying our balance sheet; expected
Athleta and Old Navy store openings in 2022; expected Gap and
Banana Republic store closures in 2022; maintaining core category
leadership in the second half of 2022; Old Navy’s value positioning
to attract customers; adding balance and relevance to Old Navy’s
assortment; maintaining Old Navy’s leadership in Denim, Active, and
Kids & Baby; optimizing Old Navy’s BODEQUALITY offering in
stores; stocking core sizes at Old Navy; fixing category mix
imbalances at Gap; market share gains for Athleta; Athleta’s
positioning for the second half of 2022; capitalizing on secular
shifts and growth in health and wellness at Athleta; driving
outsized growth at Athleta in the long-term; the expected benefits
of having cleared unproductive inventory in the second quarter of
2022; air freight expense in the second half of 2022; inflationary
cost deleverage in the second half of 2022; ROD in the second half
of 2022; inventory growth in the second half of 2022; leaning into
our responsive levers in 2023 to align inventory with demand; the
timing of expected benefits from operating expense reductions; the
expected benefit of the planned sale of our UK Distribution Center;
our pack and hold strategy and its expected benefits; our ability
to integrate pack and hold inventory with future assortments;
inventory improvement and productivity; our brands taking advantage
of reinstated responsive capabilities and chasing into demand in
2022 and 2023; ending inventories for the third and fourth quarters
of 2022; cash levels in the second half of 2022 and 2023; expected
capital expenditures in 2022; our dividend policy; our share
repurchase program; delivering growth, margin expansion, and
long-term shareholder value; optimizing profitability and cash flow
in the near term; our strategic direction and potential; and
revenue expectations generally in the second half of 2022.
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 we may be unable to manage our
inventory effectively and the resulting impact on our gross margins
and sales; the risk that inflation continues to rise, which could
increase our expenses and negatively impact consumer demand; the
risk that global economic conditions worsen beyond what we
currently estimate; the risk that global supply chain delays will
result in receiving inventory after the applicable selling season;
the risk that we or our franchisees may be unsuccessful in gauging
apparel trends and changing consumer preferences or responding with
sufficient lead time; the risk that inventory delays and product
acceptance issues will result in significant impairment charges;
the risk that we fail to manage key executive succession and
retention and to continue to attract qualified personnel; the risk
that we fail to maintain, enhance and protect our brand image and
reputation; the risk that increased public focus on our ESG
initiatives or our inability to meet our stated ESG goals could
affect our brand image and reputation; 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 risks to
our business, including our costs and global 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 or vulnerabilities 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 that failures
of, or updates or changes to, our IT systems may disrupt our
operations; the risk that our efforts to expand internationally may
not be successful; 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 foreign currency exchange rate fluctuations; the
risk that our comparable sales and margins may experience
fluctuations or that we may fail to meet financial market
expectations; natural disasters, public health crises (similar to
and including the ongoing COVID-19 pandemic), political crises
(such as the ongoing conflict between Russia and Ukraine), 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; 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 indebtedness agreements; 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; 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 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.
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 15,
2022, as well as our subsequent filings with the Securities and
Exchange Commission.
These forward-looking statements are based on information as of
August 25, 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) July 30, 2022
July 31, 2021 ASSETS Current assets: Cash and cash
equivalents
$
708
$
2,375
Short-term investments
-
337
Merchandise inventory
3,135
2,281
Other current assets
1,106
1,201
Total current assets
4,949
6,194
Property and equipment, net
2,809
2,897
Operating lease assets
3,532
3,975
Other long-term assets
881
693
Total assets
$
12,171
$
13,759
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable
$
1,640
$
1,583
Accrued expenses and other current liabilities
1,216
1,252
Current portion of operating lease liabilities
717
789
Income taxes payable
41
27
Total current liabilities
3,614
3,651
Long-term liabilities: Revolving credit facility
350
-
Long-term debt
1,485
2,220
Long-term operating lease liabilities
3,857
4,348
Other long-term liabilities
560
520
Total long-term liabilities
6,252
7,088
Total stockholders' equity
2,305
3,020
Total liabilities and stockholders' equity
$
12,171
$
13,759
The Gap, Inc. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS UNAUDITED 13 Weeks Ended 26
Weeks Ended ($ and shares in millions except per share
amounts) July 30, 2022 July 31, 2021 July 30,
2022 July 31, 2021 Net sales
$
3,857
$
4,211
$
7,334
$
8,202
Cost of goods sold and occupancy expenses
2,527
2,388
4,908
4,749
Gross profit
1,330
1,823
2,426
3,453
Operating expenses
1,358
1,414
2,651
2,804
Operating income (loss)
(28
)
409
(225
)
649
Interest expense
21
51
41
105
Interest income
(1
)
(1
)
(2
)
(2
)
Income (loss) before income taxes
(48
)
359
(264
)
546
Income taxes
1
101
(53
)
122
Net income (loss)
$
(49
)
$
258
$
(211
)
$
424
Weighted-average number of shares - basic
367
378
369
377
Weighted-average number of shares - diluted
367
386
369
385
Earnings (loss) per share - basic
$
(0.13
)
$
0.68
$
(0.57
)
$
1.12
Earnings (loss) per share - diluted
$
(0.13
)
$
0.67
$
(0.57
)
$
1.10
The Gap, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS UNAUDITED 26 Weeks Ended ($ in
millions) July 30,2022 (a) July 31,2021 (a) Cash
flows from operating activities: Net income (loss)
$
(211
)
$
424
Depreciation and amortization
262
244
Loss on divestiture activity
35
59
Change in merchandise inventory
(140
)
156
Change in accounts payable
(292
)
(168
)
Change in accrued expenses and other current liabilities
(191
)
83
Change in income taxes payable, net of receivables and other
tax-related items
372
(55
)
Other, net
(42
)
49
Net cash provided by (used for) operating activities
(207
)
792
Cash flows from investing activities: Purchases of property
and equipment
(406
)
(269
)
Purchases of short-term investments
-
(427
)
Proceeds from sales and maturities of short-term investments
-
500
Net cash paid for divestiture activity
-
(21
)
Net proceeds from sale of building
333
-
Net cash provided by (used for) investing activities
(73
)
(217
)
Cash flows from financing activities: Proceeds from
revolving credit facility
350
-
Payments for debt issuance costs
(6
)
-
Proceeds from issuances under share-based compensation plans
15
41
Withholding tax payments related to vesting of stock units
(15
)
(32
)
Repurchases of common stock
(111
)
(55
)
Cash dividends paid
(111
)
(137
)
Net cash provided by (used for) financing activities
122
(183
)
Effect of foreign exchange rate fluctuations on cash, cash
equivalents, and restricted cash
(9
)
(1
)
Net increase (decrease) in cash, cash equivalents, and restricted
cash
(167
)
391
Cash, cash equivalents, and restricted cash at beginning of period
902
2,016
Cash, cash equivalents, and restricted cash at end of period
$
735
$
2,407
____________________
(a)
For the twenty-six weeks ended July 30, 2022 and July 31, 2021,
total cash, cash equivalents, and restricted cash includes $26
million and $32 million, respectively, of restricted cash recorded
in other long-term assets on the Condensed Consolidated Balance
Sheets.
The Gap, Inc. NON-GAAP FINANCIAL MEASURES
UNAUDITED
FREE CASH FLOW
Free cash flow is a non-GAAP financial measure. We believe free
cash flow is an important metric because it represents a measure of
how much cash a company has available for discretionary and
non-discretionary items after the deduction of capital
expenditures. We require regular capital expenditures including
technology improvements to automate processes, engage with
customers, and optimize our supply chain in addition to building
and maintaining stores. We use this metric internally, as we
believe our sustained ability to generate free cash flow is an
important driver of value creation. However, this non-GAAP
financial measure is not intended to supersede or replace our GAAP
results.
26 Weeks Ended ($ in millions) July 30, 2022
July 31, 2021 Net cash provided by (used for) operating
activities
$
(207
)
$
792
Less: Purchases of property and equipment
(406
)
(269
)
Free cash flow
$
(613
)
$
523
The Gap, Inc. NON-GAAP FINANCIAL MEASURES
UNAUDITED
ADJUSTED STATEMENT OF OPERATIONS METRICS FOR THE SECOND
QUARTER OF FISCAL YEAR 2022
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 impairment of unproductive inventory and a
loss on divestiture activity. Management believes the adjusted
metrics are useful for the assessment of ongoing operations as we
believe the adjusted items are not indicative of our ongoing
operations, and provide 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 30, 2022 Gross
Profit Gross Margin Operating Expenses
Operating Expenses as a % of Net Sales Operating Income
(loss) Operating Income as a % of Net Sales Income
Taxes Net Income (loss) Earnings (loss) per Share -
Diluted GAAP metrics, as reported
$
1,330
34.5
%
$
1,358
35.2
%
$
(28
)
(0.7
)%
$
1
$
(49
)
$
(0.13
)
Adjustments for: Inventory impairment charges (a)
58
1.5
%
-
-
%
58
1.5
%
9
49
0.13
Loss on divestiture activity (b)
-
-
%
(35
)
(0.9
)%
35
0.9
%
5
30
0.08
Non-GAAP metrics
$
1,388
36.0
%
$
1,323
34.3
%
$
65
1.7
%
$
15
$
30
$
0.08
____________________
(a)
Represents the non-cash inventory impairment charges for seasonal
product and extended size product, primarily at Old Navy.
(b)
Represents the impact of the loss on divestiture activity related
to the transition of the Old Navy Mexico business.
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 Operating
Expenses Operating Expenses as a % of Net Sales
Operating Income Operating Margin Income Taxes
Net Income Earnings per Share - 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. NET SALES RESULTS
UNAUDITED
The following table details the Company’s second quarter fiscal
year 2022 and 2021 net sales (unaudited):
($ in millions)13 Weeks Ended July 30, 2022 Old Navy
Global Gap Global Banana Republic Global
Athleta Global Other (2) Total U.S. (1)
$
1,880
$
565
$
460
$
335
$
3
$
3,243
Canada
183
82
53
7
-
325
Europe
-
51
2
-
-
53
Asia
1
141
18
-
-
160
Other regions
26
42
6
2
-
76
Total
$
2,090
$
881
$
539
$
344
$
3
$
3,857
($ in millions)13 Weeks Ended July 31, 2021 Old
Navy Global Gap Global Banana Republic Global
Athleta Global Other (3) Total 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
____________________
(1)
U.S. includes the United States and Puerto Rico.
(2)
Primarily consists of net sales from revenue generating strategic
initiatives.
(3)
Primarily consists of net sales for the Intermix brand, which was
divested on May 21, 2021.
The Gap, Inc. REAL ESTATE
Store count, openings, closings, and square footage for our
stores are as follows:
January 29, 2022 26 Weeks Ended July 30, 2022 July
30, 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
1,252
16
5
1,263
20.2
Gap North America
520
2
12
510
5.4
Gap Asia
329
4
31
302
2.5
Gap Europe (1)
11
-
-
-
-
Banana Republic North America
446
2
11
437
3.7
Banana Republic Asia
50
1
-
51
0.2
Athleta North America
227
13
4
236
1.0
Company-operated stores total
2,835
38
63
2,799
33.0
Franchise (1)
564
30
14
591
N/A
Total
3,399
68
77
3,390
33.0
____________________
(1)
The 11 Gap Italy stores that were transitioned to OVS S.p.A. 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/20220824005782/en/
Investor Relations Contact: Emily Gacka (415) 427-1972
Investor_relations@gap.com
Media Relations Contact: Megan Foote (415) 832-1989
Press@gap.com
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