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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 | |
---|---|---|---|---|---|---|---|---|
0.73 | 3.51% | 21.52 | 21.66 | 20.91 | 20.94 | 5,545,215 | 01:00:00 |
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
94-1697231
|
(State or other jurisdiction
of incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
Two Folsom Street, San Francisco, California
|
|
94105
|
(Address of principal executive offices)
|
|
(Zip code)
|
•
|
the impact of the adoption of new accounting standards;
|
•
|
recognition of unrealized gains and losses from designated cash flow hedges into net income;
|
•
|
the impact of the potential settlement of outstanding tax matters and the closing of audits;
|
•
|
the impact of losses due to indemnification obligations;
|
•
|
the outcome of proceedings, lawsuits, disputes, and claims;
|
•
|
continuing investment in our mobile digital capabilities;
|
•
|
further enhancing our shopping experience for our customers;
|
•
|
total store closures in fiscal 2016, including winding down Old Navy operations in Japan and closure of select Banana Republic stores, primarily internationally;
|
•
|
impact of store closures and streamlining measures, including annualized savings, lost sales, and restructuring costs;
|
•
|
the impact of foreign exchange rate fluctuations on our financial results;
|
•
|
current cash balances and cash flows being sufficient to support our business operations, including growth initiatives and planned capital expenditures;
|
•
|
ability to supplement near-term liquidity, if necessary, with our $500 million revolving credit facility or other available market instruments;
|
•
|
the impact of the seasonality of our operations;
|
•
|
dividend payments in fiscal 2016; and
|
•
|
the impact of changes in internal control over financial reporting.
|
•
|
the risk that adoption of new accounting pronouncements will impact future results;
|
•
|
the risk that we or our franchisees will be unsuccessful in gauging apparel trends and changing consumer preferences;
|
•
|
the risk that changes in global economic conditions or consumer spending patterns could adversely impact our results of operations;
|
•
|
the highly competitive nature of our business in the United States and internationally;
|
•
|
the risk that if we are unable to manage our inventory effectively, our gross margins will be adversely affected;
|
•
|
the risk that the failure to attract and retain key personnel, or effectively manage succession, could have an adverse impact on our results of operations;
|
•
|
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 risks to our efforts to expand internationally, including our ability to operate under a global brand structure and operating in regions where we have less experience;
|
•
|
the risk that foreign currency exchange rate fluctuations could adversely impact our financial results;
|
•
|
the risks to our business, including our costs and supply chain, associated with global sourcing and manufacturing;
|
•
|
the risks to our reputation or operations associated with importing merchandise from foreign countries, including failure of our vendors to adhere to our Code of Vendor Conduct;
|
•
|
the risk that 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 our franchisees’ operation of franchise stores is not directly within our control and could impair the value of our brands;
|
•
|
the risk that we or our franchisees will be unsuccessful in identifying, negotiating, and securing new store locations and renewing, modifying, or terminating leases for existing store locations effectively;
|
•
|
the risk that our investments in omni-channel shopping initiatives may not deliver the results we anticipate;
|
•
|
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 updates or changes to our information technology (“IT”) systems may disrupt our operations;
|
•
|
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 natural disasters, public health crises, political crises, or other catastrophic events could adversely affect our operations and financial results, or those of our franchisees or vendors;
|
•
|
the risk that changes in the regulatory or administrative landscape could adversely affect our financial condition, strategies, and results of operations;
|
•
|
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, claims, and audits.
|
|
|
Page
|
|
|
|
|
|
|
Item 1.
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
|
|
|
|
|
|
Item 1.
|
||
|
|
|
Item 1A.
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 6.
|
Item 1.
|
Financial Statements.
|
($ and shares in millions except par value)
|
April 30,
2016 |
|
January 30,
2016 |
|
May 2,
2015 |
||||||
ASSETS
|
|
|
|
|
|
||||||
Current assets:
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
1,313
|
|
|
$
|
1,370
|
|
|
$
|
1,234
|
|
Merchandise inventory
|
1,958
|
|
|
1,873
|
|
|
2,010
|
|
|||
Other current assets
|
674
|
|
|
742
|
|
|
874
|
|
|||
Total current assets
|
3,945
|
|
|
3,985
|
|
|
4,118
|
|
|||
Property and equipment, net of accumulated depreciation of $5,763, $5,644, and $5,599
|
2,864
|
|
|
2,850
|
|
|
2,790
|
|
|||
Other long-term assets
|
698
|
|
|
638
|
|
|
587
|
|
|||
Total assets
|
$
|
7,507
|
|
|
$
|
7,473
|
|
|
$
|
7,495
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
||||||
Current liabilities:
|
|
|
|
|
|
||||||
Current maturities of debt
|
$
|
424
|
|
|
$
|
421
|
|
|
$
|
21
|
|
Accounts payable
|
1,108
|
|
|
1,112
|
|
|
1,156
|
|
|||
Accrued expenses and other current liabilities
|
974
|
|
|
979
|
|
|
960
|
|
|||
Income taxes payable
|
49
|
|
|
23
|
|
|
37
|
|
|||
Total current liabilities
|
2,555
|
|
|
2,535
|
|
|
2,174
|
|
|||
Long-term liabilities:
|
|
|
|
|
|
||||||
Long-term debt
|
1,318
|
|
|
1,310
|
|
|
1,331
|
|
|||
Lease incentives and other long-term liabilities
|
1,112
|
|
|
1,083
|
|
|
1,111
|
|
|||
Total long-term liabilities
|
2,430
|
|
|
2,393
|
|
|
2,442
|
|
|||
Commitments and contingencies (see Note 11)
|
|
|
|
|
|
||||||
Stockholders’ equity:
|
|
|
|
|
|
||||||
Common stock $0.05 par value
|
|
|
|
|
|
||||||
Authorized 2,300 shares for all periods presented; Issued and Outstanding 398, 397, and 419 shares
|
20
|
|
|
20
|
|
|
21
|
|
|||
Additional paid-in capital
|
6
|
|
|
—
|
|
|
—
|
|
|||
Retained earnings
|
2,476
|
|
|
2,440
|
|
|
2,718
|
|
|||
Accumulated other comprehensive income
|
20
|
|
|
85
|
|
|
140
|
|
|||
Total stockholders’ equity
|
2,522
|
|
|
2,545
|
|
|
2,879
|
|
|||
Total liabilities and stockholders’ equity
|
$
|
7,507
|
|
|
$
|
7,473
|
|
|
$
|
7,495
|
|
|
13 Weeks Ended
|
||||||
($ and shares in millions except per share amounts)
|
April 30,
2016 |
|
May 2,
2015 |
||||
Net sales
|
$
|
3,438
|
|
|
$
|
3,657
|
|
Cost of goods sold and occupancy expenses
|
2,229
|
|
|
2,275
|
|
||
Gross profit
|
1,209
|
|
|
1,382
|
|
||
Operating expenses
|
987
|
|
|
996
|
|
||
Operating income
|
222
|
|
|
386
|
|
||
Interest expense
|
19
|
|
|
5
|
|
||
Interest income
|
(1
|
)
|
|
(1
|
)
|
||
Income before income taxes
|
204
|
|
|
382
|
|
||
Income taxes
|
77
|
|
|
143
|
|
||
Net income
|
$
|
127
|
|
|
$
|
239
|
|
Weighted-average number of shares - basic
|
398
|
|
|
421
|
|
||
Weighted-average number of shares - diluted
|
399
|
|
|
424
|
|
||
Earnings per share - basic
|
$
|
0.32
|
|
|
$
|
0.57
|
|
Earnings per share - diluted
|
$
|
0.32
|
|
|
$
|
0.56
|
|
Cash dividends declared and paid per share
|
$
|
0.23
|
|
|
$
|
0.23
|
|
|
13 Weeks Ended
|
||||||
($ in millions)
|
April 30,
2016 |
|
May 2,
2015 |
||||
Net income
|
$
|
127
|
|
|
$
|
239
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
||||
Foreign currency translation
|
31
|
|
|
6
|
|
||
Change in fair value of derivative financial instruments, net of tax benefit of $(36) and $(4)
|
(89
|
)
|
|
(10
|
)
|
||
Reclassification adjustment for realized gains on derivative financial instruments, net of tax of $(4) and $(9)
|
(7
|
)
|
|
(21
|
)
|
||
Other comprehensive loss, net of tax
|
(65
|
)
|
|
(25
|
)
|
||
Comprehensive income
|
$
|
62
|
|
|
$
|
214
|
|
|
13 Weeks Ended
|
||||||
($ in millions)
|
April 30,
2016 |
|
May 2,
2015 |
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
127
|
|
|
$
|
239
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
148
|
|
|
148
|
|
||
Amortization of lease incentives
|
(16
|
)
|
|
(15
|
)
|
||
Share-based compensation
|
15
|
|
|
22
|
|
||
Tax benefit from exercise of stock options and vesting of stock units
|
(3
|
)
|
|
15
|
|
||
Excess tax benefit from exercise of stock options and vesting of stock units
|
(1
|
)
|
|
(17
|
)
|
||
Non-cash and other items
|
(6
|
)
|
|
(20
|
)
|
||
Deferred income taxes
|
(9
|
)
|
|
2
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Merchandise inventory
|
(53
|
)
|
|
(117
|
)
|
||
Other current assets and other long-term assets
|
9
|
|
|
(8
|
)
|
||
Accounts payable
|
(20
|
)
|
|
(20
|
)
|
||
Accrued expenses and other current liabilities
|
(67
|
)
|
|
(81
|
)
|
||
Income taxes payable, net of prepaid and other tax-related items
|
46
|
|
|
61
|
|
||
Lease incentives and other long-term liabilities
|
(2
|
)
|
|
2
|
|
||
Net cash provided by operating activities
|
168
|
|
|
211
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(139
|
)
|
|
(150
|
)
|
||
Other
|
(1
|
)
|
|
—
|
|
||
Net cash used for investing activities
|
(140
|
)
|
|
(150
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from issuances under share-based compensation plans
|
10
|
|
|
35
|
|
||
Withholding tax payments related to vesting of stock units
|
(17
|
)
|
|
(66
|
)
|
||
Repurchases of common stock
|
—
|
|
|
(232
|
)
|
||
Excess tax benefit from exercise of stock options and vesting of stock units
|
1
|
|
|
17
|
|
||
Cash dividends paid
|
(91
|
)
|
|
(97
|
)
|
||
Net cash used for financing activities
|
(97
|
)
|
|
(343
|
)
|
||
Effect of foreign exchange rate fluctuations on cash and cash equivalents
|
12
|
|
|
1
|
|
||
Net decrease in cash and cash equivalents
|
(57
|
)
|
|
(281
|
)
|
||
Cash and cash equivalents at beginning of period
|
1,370
|
|
|
1,515
|
|
||
Cash and cash equivalents at end of period
|
$
|
1,313
|
|
|
$
|
1,234
|
|
Non-cash investing activities:
|
|
|
|
||||
Purchases of property and equipment not yet paid at end of period
|
$
|
61
|
|
|
$
|
85
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid for interest during the period
|
$
|
39
|
|
|
$
|
38
|
|
Cash paid for income taxes during the period, net of refunds
|
$
|
43
|
|
|
$
|
63
|
|
($ in millions)
|
April 30,
2016 |
|
January 30,
2016 |
|
May 2,
2015 |
||||||
Notes
|
$
|
1,248
|
|
|
$
|
1,248
|
|
|
$
|
1,247
|
|
Japan Term Loan
|
94
|
|
|
83
|
|
|
105
|
|
|||
Total long-term debt
|
1,342
|
|
|
1,331
|
|
|
1,352
|
|
|||
Less: Current portion
|
(24
|
)
|
|
(21
|
)
|
|
(21
|
)
|
|||
Total long-term debt, less current portion
|
$
|
1,318
|
|
|
$
|
1,310
|
|
|
$
|
1,331
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||
($ in millions)
|
April 30, 2016
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
|
$
|
589
|
|
|
$
|
131
|
|
|
$
|
458
|
|
|
$
|
—
|
|
Derivative financial instruments
|
18
|
|
|
—
|
|
|
18
|
|
|
—
|
|
||||
Deferred compensation plan assets
|
40
|
|
|
40
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
647
|
|
|
$
|
171
|
|
|
$
|
476
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Derivative financial instruments
|
$
|
85
|
|
|
$
|
—
|
|
|
$
|
85
|
|
|
$
|
—
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||
($ in millions)
|
January 30, 2016
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
|
$
|
517
|
|
|
$
|
204
|
|
|
$
|
313
|
|
|
$
|
—
|
|
Derivative financial instruments
|
93
|
|
|
—
|
|
|
93
|
|
|
—
|
|
||||
Deferred compensation plan assets
|
37
|
|
|
37
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
647
|
|
|
$
|
241
|
|
|
$
|
406
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Derivative financial instruments
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||
($ in millions)
|
May 2, 2015
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
|
$
|
201
|
|
|
$
|
72
|
|
|
$
|
129
|
|
|
$
|
—
|
|
Derivative financial instruments
|
118
|
|
|
—
|
|
|
118
|
|
|
—
|
|
||||
Deferred compensation plan assets
|
45
|
|
|
45
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
364
|
|
|
$
|
117
|
|
|
$
|
247
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Derivative financial instruments
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
—
|
|
($ in millions)
|
April 30,
2016 |
|
January 30,
2016 |
|
May 2,
2015 |
||||||
Derivatives designated as cash flow hedges
|
$
|
1,441
|
|
|
$
|
1,220
|
|
|
$
|
1,687
|
|
Derivatives designated as net investment hedges
|
32
|
|
|
30
|
|
|
33
|
|
|||
Derivatives not designated as hedging instruments
|
422
|
|
|
324
|
|
|
293
|
|
|||
Total
|
$
|
1,895
|
|
|
$
|
1,574
|
|
|
$
|
2,013
|
|
($ in millions)
|
April 30,
2016 |
|
January 30,
2016 |
|
May 2,
2015 |
||||||
Derivatives designated as cash flow hedges:
|
|
|
|
|
|
||||||
Other current assets
|
$
|
15
|
|
|
$
|
71
|
|
|
$
|
89
|
|
Other long-term assets
|
$
|
2
|
|
|
$
|
8
|
|
|
$
|
19
|
|
Accrued expenses and other current liabilities
|
$
|
37
|
|
|
$
|
1
|
|
|
$
|
3
|
|
Lease incentives and other long-term liabilities
|
$
|
29
|
|
|
$
|
1
|
|
|
$
|
8
|
|
|
|
|
|
|
|
||||||
Derivatives designated as net investment hedges:
|
|
|
|
|
|
||||||
Other current assets
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
Other long-term assets
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued expenses and other current liabilities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Lease incentives and other long-term liabilities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
||||||
Other current assets
|
$
|
1
|
|
|
$
|
13
|
|
|
$
|
10
|
|
Other long-term assets
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued expenses and other current liabilities
|
$
|
19
|
|
|
$
|
1
|
|
|
$
|
2
|
|
Lease incentives and other long-term liabilities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||||
Total derivatives in an asset position
|
$
|
18
|
|
|
$
|
93
|
|
|
$
|
118
|
|
Total derivatives in a liability position
|
$
|
85
|
|
|
$
|
3
|
|
|
$
|
13
|
|
|
13 Weeks Ended
|
||||||
($ in millions)
|
April 30,
2016 |
|
May 2,
2015 |
||||
Derivatives in cash flow hedging relationships:
|
|
|
|
||||
Loss recognized in other comprehensive income
|
$
|
(125
|
)
|
|
$
|
(14
|
)
|
Gain reclassified into cost of goods sold and occupancy expenses
|
$
|
13
|
|
|
$
|
28
|
|
Gain (loss) reclassified into operating expenses
|
$
|
(2
|
)
|
|
$
|
2
|
|
|
|
|
|
||||
Derivatives in net investment hedging relationships:
|
|
|
|
||||
Loss recognized in other comprehensive income
|
$
|
(3
|
)
|
|
$
|
(1
|
)
|
|
13 Weeks Ended
|
||||||
($ in millions)
|
April 30,
2016 |
|
May 2,
2015 |
||||
Loss recognized in operating expenses
|
$
|
(27
|
)
|
|
$
|
—
|
|
|
13 Weeks Ended
|
||||||
($ and shares in millions except average per share cost)
|
April 30,
2016 |
|
May 2,
2015 |
||||
Number of shares repurchased
|
—
|
|
|
5.6
|
|
||
Total cost
|
$
|
—
|
|
|
$
|
230
|
|
Average per share cost including commissions
|
$
|
—
|
|
|
$
|
41.01
|
|
|
13 Weeks Ended
|
||||||
($ in millions)
|
April 30,
2016 |
|
May 2,
2015 |
||||
Stock units
|
$
|
12
|
|
|
$
|
18
|
|
Stock options
|
2
|
|
|
3
|
|
||
Employee stock purchase plan
|
1
|
|
|
1
|
|
||
Share-based compensation expense
|
15
|
|
|
22
|
|
||
Less: Income tax benefit
|
(6
|
)
|
|
(8
|
)
|
||
Share-based compensation expense, net of tax
|
$
|
9
|
|
|
$
|
14
|
|
($ in millions)
|
Foreign Currency Translation
|
|
Cash Flow Hedges
|
|
Total
|
||||||
Balance at January 30, 2016
|
$
|
22
|
|
|
$
|
63
|
|
|
$
|
85
|
|
Foreign currency translation
|
31
|
|
|
—
|
|
|
31
|
|
|||
Change in fair value of derivative financial instruments
|
—
|
|
|
(89
|
)
|
|
(89
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
|
(7
|
)
|
|
(7
|
)
|
|||
Other comprehensive income (loss), net
|
31
|
|
|
(96
|
)
|
|
(65
|
)
|
|||
Balance at April 30, 2016
|
$
|
53
|
|
|
$
|
(33
|
)
|
|
$
|
20
|
|
|
|
|
|
|
|
||||||
($ in millions)
|
Foreign Currency Translation
|
|
Cash Flow Hedges
|
|
Total
|
||||||
Balance at January 31, 2015
|
$
|
60
|
|
|
$
|
105
|
|
|
$
|
165
|
|
Foreign currency translation
|
6
|
|
|
—
|
|
|
6
|
|
|||
Change in fair value of derivative financial instruments
|
—
|
|
|
(10
|
)
|
|
(10
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
|
(21
|
)
|
|
(21
|
)
|
|||
Other comprehensive income (loss), net
|
6
|
|
|
(31
|
)
|
|
(25
|
)
|
|||
Balance at May 2, 2015
|
$
|
66
|
|
|
$
|
74
|
|
|
$
|
140
|
|
|
13 Weeks Ended
|
||||
(shares in millions)
|
April 30,
2016 |
|
May 2,
2015 |
||
Weighted-average number of shares - basic
|
398
|
|
|
421
|
|
Common stock equivalents
|
1
|
|
|
3
|
|
Weighted-average number of shares - diluted
|
399
|
|
|
424
|
|
(1)
|
U.S. includes the United States, Puerto Rico, and Guam.
|
(2)
|
Includes Athleta and Intermix.
|
(3)
|
Includes Athleta, Intermix, and Piperlime.
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations.
|
•
|
Net sales for the
first quarter of fiscal 2016
decreased 6 percent compared with the
first quarter of fiscal 2015
.
|
•
|
Comparable sales for the
first quarter of fiscal 2016
decreased 5 percent compared with a 4 percent decrease for the
first quarter of fiscal 2015
.
|
•
|
Operating margin for the
first quarter of fiscal 2016
was
6.5 percent
compared with
10.6 percent
for the
first quarter of fiscal 2015
. Operating margin is defined as operating income as a percentage of net sales.
|
•
|
Net income for the
first quarter of fiscal 2016
was
$127 million
compared with
$239 million
for the
first quarter of fiscal 2015
, and diluted earnings per share was
$0.32
for the
first quarter of fiscal 2016
compared with
$0.56
for the
first quarter of fiscal 2015
.
|
•
|
During the
first quarter of fiscal 2016
, we distributed
$91 million
to shareholders through dividends.
|
|
13 Weeks Ended
|
||||
|
April 30,
2016 |
|
May 2,
2015 |
||
Gap Global
|
(3
|
)%
|
|
(10
|
)%
|
Old Navy Global
|
(6
|
)%
|
|
3
|
%
|
Banana Republic Global
|
(11
|
)%
|
|
(8
|
)%
|
The Gap, Inc.
|
(5
|
)%
|
|
(4
|
)%
|
|
13 Weeks Ended
|
||||||
|
April 30,
2016 |
|
May 2,
2015 |
||||
Net sales per average square foot (1)
|
$
|
74
|
|
|
$
|
78
|
|
(1)
|
Excludes net sales associated with our online and franchise businesses.
|
|
January 30, 2016
|
|
13 Weeks Ended April 30, 2016
|
|
April 30, 2016
|
|||||||||
|
Number of
Store Locations
|
|
Number of
Stores Opened
|
|
Number of
Stores Closed
|
|
Number of
Store Locations
|
|
Square Footage
(in millions)
|
|||||
Gap North America
|
866
|
|
|
2
|
|
|
6
|
|
|
862
|
|
|
9.0
|
|
Gap Asia
|
305
|
|
|
7
|
|
|
—
|
|
|
312
|
|
|
3.1
|
|
Gap Europe
|
175
|
|
|
1
|
|
|
3
|
|
|
173
|
|
|
1.4
|
|
Old Navy North America
|
1,030
|
|
|
2
|
|
|
3
|
|
|
1,029
|
|
|
17.3
|
|
Old Navy Asia
|
65
|
|
|
4
|
|
|
—
|
|
|
69
|
|
|
1.0
|
|
Banana Republic North America
|
612
|
|
|
—
|
|
|
5
|
|
|
607
|
|
|
5.1
|
|
Banana Republic Asia
|
51
|
|
|
—
|
|
|
—
|
|
|
51
|
|
|
0.2
|
|
Banana Republic Europe
|
10
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
0.1
|
|
Athleta North America
|
120
|
|
|
2
|
|
|
—
|
|
|
122
|
|
|
0.5
|
|
Intermix North America
|
41
|
|
|
—
|
|
|
—
|
|
|
41
|
|
|
0.1
|
|
Company-operated stores total
|
3,275
|
|
|
18
|
|
|
17
|
|
|
3,276
|
|
|
37.8
|
|
Franchise
|
446
|
|
|
21
|
|
|
16
|
|
|
451
|
|
|
N/A
|
|
Total
|
3,721
|
|
|
39
|
|
|
33
|
|
|
3,727
|
|
|
37.8
|
|
Decrease over prior year
|
|
|
|
|
|
|
(0.6
|
)%
|
|
(1.3
|
)%
|
|||
|
|
|
|
|
|
|
|
|
|
|||||
|
January 31, 2015
|
|
13 Weeks Ended May 2, 2015
|
|
May 2, 2015
|
|||||||||
|
Number of
Store Locations
|
|
Number of
Stores Opened
|
|
Number of
Stores Closed
|
|
Number of
Store Locations
|
|
Square Footage
(in millions)
|
|||||
Gap North America
|
960
|
|
|
10
|
|
|
7
|
|
|
963
|
|
|
10.1
|
|
Gap Asia
|
266
|
|
|
15
|
|
|
—
|
|
|
281
|
|
|
2.8
|
|
Gap Europe
|
189
|
|
|
1
|
|
|
2
|
|
|
188
|
|
|
1.6
|
|
Old Navy North America
|
1,013
|
|
|
4
|
|
|
7
|
|
|
1,010
|
|
|
17.1
|
|
Old Navy Asia
|
43
|
|
|
7
|
|
|
—
|
|
|
50
|
|
|
0.8
|
|
Banana Republic North America
|
610
|
|
|
6
|
|
|
4
|
|
|
612
|
|
|
5.1
|
|
Banana Republic Asia
|
44
|
|
|
2
|
|
|
—
|
|
|
46
|
|
|
0.2
|
|
Banana Republic Europe
|
11
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
0.1
|
|
Athleta North America
|
101
|
|
|
4
|
|
|
—
|
|
|
105
|
|
|
0.4
|
|
Intermix North America
|
42
|
|
|
1
|
|
|
—
|
|
|
43
|
|
|
0.1
|
|
Piperlime North America
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
Company-operated stores total
|
3,280
|
|
|
50
|
|
|
21
|
|
|
3,309
|
|
|
38.3
|
|
Franchise
|
429
|
|
|
14
|
|
|
3
|
|
|
440
|
|
|
N/A
|
|
Total
|
3,709
|
|
|
64
|
|
|
24
|
|
|
3,749
|
|
|
38.3
|
|
Increase over prior year
|
|
|
|
|
|
|
5.2
|
%
|
|
3.0
|
%
|
|
13 Weeks Ended
|
||||||
($ in millions)
|
April 30,
2016 |
|
May 2,
2015 |
||||
Cost of goods sold and occupancy expenses
|
$
|
2,229
|
|
|
$
|
2,275
|
|
Gross profit
|
$
|
1,209
|
|
|
$
|
1,382
|
|
Cost of goods sold and occupancy expenses as a percentage of net sales
|
64.8
|
%
|
|
62.2
|
%
|
||
Gross margin
|
35.2
|
%
|
|
37.8
|
%
|
•
|
Cost of goods sold increased 1.7 percent as a percentage of net sales in the
first quarter of fiscal 2016
compared with the
first quarter of fiscal 2015
primarily driven by increased markdown activities at Old Navy and Banana Republic.
|
•
|
Occupancy expenses increased 0.9 percentage points in the
first quarter of fiscal 2016
compared with the
first quarter of fiscal 2015
, primarily driven by the decrease in net sales without a corresponding decrease in occupancy expenses.
|
|
13 Weeks Ended
|
||||||
($ in millions)
|
April 30,
2016 |
|
May 2,
2015 |
||||
Operating expenses
|
$
|
987
|
|
|
$
|
996
|
|
Operating expenses as a percentage of net sales
|
28.7
|
%
|
|
27.2
|
%
|
||
Operating margin
|
6.5
|
%
|
|
10.6
|
%
|
|
13 Weeks Ended
|
||||||
($ in millions)
|
April 30,
2016 |
|
May 2,
2015 |
||||
Income taxes
|
$
|
77
|
|
|
$
|
143
|
|
Effective tax rate
|
37.7
|
%
|
|
37.4
|
%
|
•
|
a decrease of $112 million in net income; partially offset by
|
•
|
an increase of $64 million related to merchandise inventory, primarily due to the volume and timing of receipts.
|
•
|
No repurchases of common stock in the
first quarter of fiscal 2016
compared with $232 million cash outflows related to repurchases of common stock in the
first quarter of fiscal 2015
; and
|
•
|
$24 million less net cash outflows related to issuances under share-based compensation plans and withholding tax payments related to vesting of stock units.
|
|
13 Weeks Ended
|
||||||
($ in millions)
|
April 30,
2016 |
|
May 2,
2015 |
||||
Net cash provided by operating activities
|
$
|
168
|
|
|
$
|
211
|
|
Less: Purchases of property and equipment
|
(139
|
)
|
|
(150
|
)
|
||
Free cash flow
|
$
|
29
|
|
|
$
|
61
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
Item 4.
|
Controls and Procedures.
|
Item 1.
|
Legal Proceedings.
|
Item 1A.
|
Risk Factors.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
|
Total
Number of
Shares
Purchased
|
|
Average
Price Paid
Per Share
Including
Commissions
|
|
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs
|
|
Maximum
Number (or
approximate
dollar amount) of
Shares that May
Yet be Purchased
Under the Plans
or Programs (1)
|
||||||
Month #1 (January 31 - February 27)
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
1,000
|
million
|
Month #2 (February 28 - April 2)
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
1,000
|
million
|
Month #3 (April 3 - April 30)
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
1,000
|
million
|
Total
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
|
(1)
|
On February 26, 2015, we announced that the Board of Directors approved a $1 billion share repurchase authorization. On February 25, 2016, we announced that the Board of Directors approved a new $1 billion share repurchase authorization. The February 2015 repurchase program, which had $302 million remaining, was superseded and replaced by the February 2016 repurchase program, which has no expiration date.
|
Item 6.
|
Exhibits.
|
10.1
|
|
Fourth Amendment to Amended and Restated Consumer Credit Card Program Agreement by and among the
Registrant, Gap (Puerto Rico), Inc., GPS Consumer Direct, Inc., Gap (Apparel), LLC, Gap (ITM) Inc., Synchrony
Bank (f/k/a GE Capital Retail Bank) and Synchrony Financial, dated as of April 29, 2016. (1) (2)
|
10.2
|
|
Deferred Compensation Plan, amended and restated effective March 24, 2016. (2)
|
10.3
|
|
Agreement with Julie Gruber dated February 1, 2016 and confirmed on February 4, 2016. (2)
|
10.4
|
|
Agreement with Sonia Syngal dated April 11, 2016 and confirmed on April 11, 2016, filed as Exhibit 10.1 to
Registrant's Form 8-K on April 13, 2016.
|
10.5
|
|
Form of Non-Qualified Stock Option Agreement under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.60 to
Registrant's Form 10-K for the year ended January 30, 2016.
|
10.6
|
|
Form of Performance Share Agreement under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.69 to
Registrant's Form 10-K for the year ended January 30, 2016.
|
10.7
|
|
Form of Restricted Stock Unit Award Agreement under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.75 to
Registrant's Form 10-K for the year ended January 30, 2016.
|
10.8
|
|
Form of Director Stock Unit Agreement and Stock Unit Deferral Election Form under the 2011 Long-Term
Incentive Plan, filed as Exhibit 10.79 to Registrant's Form 10-K for the year ended January 30, 2016.
|
31.1
|
|
Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002). (2)
|
31.2
|
|
Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002). (2)
|
32.1
|
|
Certification of the Chief Executive Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (3)
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32.2
|
|
Certification of the Chief Financial Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (3)
|
101
|
|
The following materials from The Gap, Inc.’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. (2)
|
(1)
|
Pursuant to a request for confidential treatment, confidential portions of this Exhibit have been redacted and have been filed separately with the Securities and Exchange Commission.
|
(2)
|
Filed herewith.
|
(3)
|
Furnished herewith.
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|
|
THE GAP, INC.
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|
|
|
|
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Date:
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June 3, 2016
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By
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/s/ Arthur Peck
|
|
|
|
Arthur Peck
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|
|
|
Chief Executive Officer
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|
|
|
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Date:
|
June 3, 2016
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By
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/s/ Sabrina L. Simmons
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|
|
|
Sabrina L. Simmons
|
|
|
|
Executive Vice President and Chief Financial Officer
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|
|
|
10.1
|
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Fourth Amendment to Amended and Restated Consumer Credit Card Program Agreement by and among the Registrant, Gap (Puerto Rico), Inc., GPS Consumer Direct, Inc., Gap (Apparel), LLC, Gap (ITM) Inc., Synchrony Bank (f/k/a GE Capital Retail Bank) and Synchrony Financial, dated as of April 29, 2016. (1) (2)
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10.2
|
|
Deferred Compensation Plan, amended and restated effective March 24, 2016. (2)
|
10.3
|
|
Agreement with Julie Gruber dated February 1, 2016 and confirmed on February 4, 2016. (2)
|
10.4
|
|
Agreement with Sonia Syngal dated April 11, 2016 and confirmed on April 11, 2016, filed as Exhibit 10.1 to Registrant's Form 8-K on April 13, 2016.
|
10.5
|
|
Form of Non-Qualified Stock Option Agreement under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.60 to Registrant's Form 10-K for the year ended January 30, 2016.
|
10.6
|
|
Form of Performance Share Agreement under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.69 to Registrant's Form 10-K for the year ended January 30, 2016.
|
10.7
|
|
Form of Restricted Stock Unit Award Agreement under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.75 to Registrant's Form 10-K for the year ended January 30, 2016.
|
10.8
|
|
Form of Director Stock Unit Agreement and Stock Unit Deferral Election Form under the 2011 Long-Term Incentive Plan, filed as Exhibit 10.79 to Registrant's Form 10-K for the year ended January 30, 2016.
|
31.1
|
|
Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002). (2)
|
31.2
|
|
Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002). (2)
|
32.1
|
|
Certification of the Chief Executive Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (3)
|
32.2
|
|
Certification of the Chief Financial Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (3)
|
101
|
|
The following materials from The Gap, Inc.’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. (2)
|
(1)
|
Pursuant to a request for confidential treatment, confidential portions of this Exhibit have been redacted and have been filed separately with the Securities and Exchange Commission.
|
(2)
|
Filed herewith.
|
(3)
|
Furnished herewith.
|
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