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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Gap Inc | NYSE:GPS | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.055 | -0.25% | 21.885 | 21.99 | 21.47 | 21.78 | 1,529,437 | 17:57:17 |
Gap Inc. (NYSE: GPS) today reported first quarter fiscal year 2017 diluted earnings per share of $0.36 compared with diluted earnings per share of $0.32 in the first quarter of fiscal year 2016. The company also reaffirmed its full-year diluted earnings per share guidance to be in the range of $1.95 to $2.05.
“We are pleased with our positive comp and earnings growth this quarter,” said Art Peck, president and chief executive officer, Gap Inc. “We’ve made substantial improvements in product quality and fit, and our increasing responsive capabilities are enabling us to better react to trends and demand."
“While the retail environment continues to be challenging, we are focused on delivering the best possible product and customer experience, and our ability to leverage a portfolio of iconic brands and operating scale uniquely positions the company for long-term growth,” Peck continued.
First Quarter 2017 Comparable Sales Results
Gap Inc.’s comparable sales for the first quarter of fiscal year 2017 were up 2 percent versus a 5 percent decrease last year. Comparable sales by global brand for the first quarter were as follows:
Net Sales Results
Net sales for the first quarter of fiscal year 2017 were $3.4 billion, about flat to the first quarter of fiscal year 2016. The translation of foreign currencies into U.S. dollars negatively impacted the company’s net sales for the first quarter of fiscal year 2017 by about $11 million. First quarter net sales details appear in the tables at the end of this press release.
Additional First Quarter of Fiscal 2017 Results and 2017 Outlook
Earnings per Share
The company reaffirmed its full year diluted earnings per share guidance to be in the range of $1.95 to $2.05.
The company updated its diluted earnings per share guidance for the first half of fiscal year 2017 to be down mid-single digits when compared with the adjusted diluted earnings per share for the first half of fiscal year 2016, an improvement from the company’s previous guidance of down high-single digits.
The company noted that foreign currency fluctuations negatively impacted earnings per share for the first quarter of fiscal year 2017 by an estimated $0.03, or about 9 percentage points of earnings per share growth.1___________________________1 In calculating earnings per share excluding the impact of foreign exchange, the company estimates current gross margins using the appropriate prior year rates (including the impact of merchandise-related hedges), translates current period foreign earnings at prior year rates, and excludes the year-over-year earnings impact of balance sheet remeasurement and gains or losses from non-merchandise-related foreign currency hedges. This is done in order to enhance the visibility of business results excluding the direct impact of foreign currency exchange rate fluctuations.
Comparable and Net Sales
The company continues to expect comparable sales for fiscal year 2017 to be flat to up slightly.
Net sales for fiscal year 2017 are expected to be slightly below this range driven by an expected negative impact from foreign currency fluctuations year-over-year.
Operating Margin
The company’s operating margin for the first quarter of fiscal year 2017 was 7.4 percent compared with 6.5 percent last year.
Operating Expenses
First quarter fiscal year 2017 operating expenses were $1.05 billion compared with $987 million last year.
Effective Tax Rate
The effective tax rate was 39.9 percent for the first quarter of fiscal year 2017. The first quarter tax rate was negatively impacted by the adoption of a new accounting standard related to share-based compensation which requires all excess tax benefits and deficiencies to be recognized as a component of the income tax provision.
The company continues to expect its fiscal year 2017 effective tax rate to be about 39 percent, including the impact of the new accounting standard related to share-based compensation.
Inventory
At the end of the first quarter of fiscal year 2017, total inventory was about flat year-over-year.
The company now expects total inventory to be about flat at the end of the first half of fiscal year 2017 when compared with the end of the first half of fiscal year 2016.
Cash and Cash Equivalents
The company ended the first quarter of fiscal year 2017 with $1.6 billion in cash and cash equivalents. Year-to-date free cash flow, defined as net cash provided by operating activities less purchases of property and equipment, net of insurance proceeds related to loss of property and equipment, was negative $5 million, reflecting the timing of lease payments and a larger increase in inventory from the beginning of the quarter to the end of the quarter when compared to the same period in fiscal 2016. Please see the reconciliation of free cash flow, a non-GAAP financial measure, from the GAAP financial measure in the tables at the end of this press release.
Cash Distribution
During the quarter, Gap Inc. repurchased 4.2 million shares for about $100 million and ended the first quarter of fiscal year 2017 with 396 million shares outstanding.
The company expects to spend about $100 million on share repurchases in the second quarter of fiscal 2017.
The company paid a dividend of $0.23 per share during the first quarter of fiscal year 2017. In addition, the company announced today that its Board of Directors authorized a second quarter dividend of $0.23 per share.
Capital Expenditures
First quarter fiscal year 2017 capital expenditures were $110 million. The company continues to expect capital spending to be approximately $625 million for fiscal year 2017, excluding an estimated $200 million associated with the rebuilding of the company’s Fishkill, New York distribution center campus and related supply chain spend. The company noted the majority of these costs are expected to be covered by insurance proceeds.
Real Estate
The company ended the first quarter of fiscal year 2017 with 3,652 store locations in 50 countries, of which 3,186 were company-operated.
The company now expects store count to be about flat at the end of fiscal year 2017 compared with fiscal year 2016, down from previous guidance of 40 net store openings.
Webcast and Conference Call Information
Jennifer Fall, senior vice president of Corporate Finance and Investor Relations at Gap Inc., will host a summary of the company’s first quarter fiscal year 2017 results during a conference call and webcast from approximately 2:00 p.m. to 3:00 p.m. Pacific Time today. Ms. Fall will be joined by Art Peck, Gap Inc. president and chief executive officer, and Teri List-Stoll, Gap Inc. executive vice president and chief financial officer.
The conference call can be accessed by calling 1-855-5000-GPS or 1-855-500-0477 (participant passcode: 4151797). International callers may dial 913-643-0954. The webcast can be accessed at www.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:
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:
Additional information regarding factors that could cause results to differ can be found in the company’s Annual Report on Form 10-K for the fiscal year ended January 28, 2017, as well as the company’s subsequent filings with the Securities and Exchange Commission.
These forward-looking statements are based on information as of May 18, 2017. The company assumes no obligation to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.
About Gap Inc.
Gap Inc. is a leading global retailer offering clothing, accessories, and personal care products for men, women, and children under the Gap, Banana Republic, Old Navy, Athleta, Intermix, and Weddington Way brands. Fiscal year 2016 net sales were $15.5 billion. Gap Inc. products are available for purchase in more than 90 countries worldwide through about 3,200 company-operated stores, about 450 franchise stores, and e-commerce sites. For more information, please visit www.gapinc.com.
The Gap, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS UNAUDITED ($ in millions)April 29,2017
April 30,2016
ASSETS Current assets: Cash and cash equivalents $ 1,583 $ 1,313 Merchandise inventory 1,961 1,958 Other current assets 575 674 Total current assets 4,119 3,945 Property and equipment, net 2,605 2,864 Other long-term assets 687 698 Total assets $ 7,411 $ 7,507 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of debt $ 67 $ 424 Accounts payable 1,119 1,108 Accrued expenses and other current liabilities 1,088 974 Income taxes payable 28 49 Total current liabilities 2,302 2,555 Long-term liabilities: Long-term debt 1,248 1,318 Lease incentives and other long-term liabilities 999 1,112 Total long-term liabilities 2,247 2,430 Total stockholders' equity 2,862 2,522 Total liabilities and stockholders' equity $ 7,411 $ 7,507 The Gap, Inc. CONDENSED CONSOLIDATED STATEMENTS OF INCOME UNAUDITED 13 Weeks Ended ($ and shares in millions except per share amounts)April 29,2017
April 30,2016
Net sales $ 3,440 $ 3,438 Cost of goods sold and occupancy expenses 2,137 2,229 Gross profit 1,303 1,209 Operating expenses 1,049 987 Operating income 254 222 Interest, net 16 18 Income before income taxes 238 204 Income taxes 95 77 Net income $ 143 $ 127 Weighted-average number of shares - basic 399 398 Weighted-average number of shares - diluted 400 399 Earnings per share - basic $ 0.36 $ 0.32 Earnings per share - diluted $ 0.36 $ 0.32 The Gap, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED 13 Weeks Ended ($ in millions)April 29,2017
April 30,2016
Cash flows from operating activities: Net income $ 143 $ 127 Depreciation and amortization (a) 123 132 Change in merchandise inventory (133 ) (53 ) Other, net (42 ) (38 ) Net cash provided by operating activities 91 168 Cash flows from investing activities: Purchases of property and equipment (110 ) (139 ) Insurance proceeds related to loss on property and equipment 14 - Other (3 ) (1 ) Net cash used for investing activities (99 ) (140 ) Cash flows from financing activities: Proceeds from issuances under share-based compensation plans 8 10 Withholding tax payments related to vesting of stock units (13 ) (17 ) Repurchases of common stock (96 ) - Excess tax benefit from exercise of stock options and vesting of stock units - 1 Cash dividends paid (92 ) (91 ) Net cash used for financing activities (193 ) (97 ) Effect of foreign exchange rate fluctuations on cash and cash equivalents 1 12 Net decrease in cash and cash equivalents (200 ) (57 ) Cash and cash equivalents at beginning of period 1,783 1,370 Cash and cash equivalents at end of period $ 1,583 $ 1,313 (a) Depreciation and amortization is net of amortization of lease incentives. 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, net of insurance proceeds related to loss on property and equipment, as we require regular capital expenditures to build and maintain stores and purchase new equipment to improve our business. 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. 13 Weeks Ended ($ in millions)April 29,2017
April 30,2016
Net cash provided by operating activities $ 91 $ 168 Less: Purchases of property and equipment (110 ) (139 )Add: Insurance proceeds related to loss on property and equipment (a)
14 - Free cash flow $ (5 ) $ 29 ____________________ (a) Represents advance payments of insurance proceeds related to loss on property and equipment from the fire that occurred on the company-owned distribution center campus in Fishkill, New York on August 29, 2016. The Gap, Inc. NET SALES RESULTS UNAUDITED The following table details the company’s first quarter fiscal year 2017 net sales: ($ in millions)Gap Global
Old NavyGlobal
BananaRepublic Global
Other (2)
Total
Percentage ofNet Sales
13 Weeks Ended April 29, 2017
U.S. (1) $ 668$ 1,426
$ 437
$ 202
$
2,733 79% Canada 77 111 45 1 234 7% Europe 133 - 4 - 137 4% Asia 250 9 24 - 283 8% Other regions 30 16 7 - 53 2% Total $ 1,158 $ 1,562 $ 517 $ 203 $ 3,440 100% ($ in millions)Gap Global
Old NavyGlobal
BananaRepublic Global
Other (3)
TotalPercentage ofNet Sales
13 Weeks Ended April 30, 2016
U.S. (1) $ 698 $ 1,328 $ 454$
178$
2,658 77% Canada 70 98 47 1 216 6% Europe 144 - 14 - 158 5% Asia 280 50 26 - 356 11% Other regions 31 10 9 - 50 1% Total $ 1,223 $ 1,486 $ 550 $ 179 $ 3,438 100% (1) U.S. includes the United States, Puerto Rico, and Guam. (2) Includes Athleta, Intermix, and Weddington Way. (3) Includes Athleta and Intermix.The Gap, Inc.
REAL ESTATE Store count, openings, closings, and square footage for our stores are as follows: 13 Weeks Ended April 29, 2017Store LocationsBeginning of Q1
Store LocationsOpened
Store LocationsClosed
Store LocationsEnd of Q1
Square Feet(millions)
Gap North America 844 - 9 835 8.6 Gap Asia 311 2 6 307 2.9 Gap Europe 164 - 1 163 1.4 Old Navy North America 1,043 5 1 1,047 17.5 Old Navy Asia 13 - - 13 0.2 Banana Republic North America 601 - 4 597 5.0 Banana Republic Asia 48 1 - 49 0.2 Banana Republic Europe 1 - 1 - - Athleta North America 132 1 - 133 0.6 Intermix North America 43 - 1 42 0.1Company-operated stores total
3,200 9 23 3,186 36.5 Franchise 459 15 8 466 N/ATotal
3,659 24 31 3,652 36.5
View source version on businesswire.com: http://www.businesswire.com/news/home/20170518006281/en/
Gap Inc.Investor Relations Contact:Tina Romani, 415-427-5264Investor_relations@gap.comorMedia Relations Contact:Jennifer Poppers, 415-427-1729Press@gap.com
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