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SAN FRANCISCO - August 23, 2013 - (BUSINESS WIRE) - Gap Inc. (NYSE:GPS) today reported that second quarter diluted earnings per share increased to $0.64, compared with $0.49 last year. Given its progress year-to-date, the company raised its estimate for fiscal year 2013 diluted earnings per share to be in the range of $2.57 to $2.65.
“We delivered strength in both our top and bottom lines this quarter,” said Glenn Murphy, chairman and chief executive officer of Gap Inc. “As we move into the second half of the year, we remain focused on growing revenue and driving continued momentum across our portfolio of brands.”
Positive customer response to our assortments drove net sales for the second quarter, which ended August 3, 2013, to increase 8 percent to $3.87 billion compared with $3.58 billion for the second quarter last year. Net sales increased 10 percent on a constant currency basis. In calculating net sales growth on a constant currency basis, current year foreign exchange rates are applied to both current year and prior year net sales. This is done to enhance the visibility of underlying business trends, excluding the impact of foreign currency exchange rate fluctuations.
Due to the 53rd week in fiscal year 2012, comparable sales for the second quarter of fiscal year 2013 are compared with the 13-week period ended August 4, 2012. On this basis, the company’s second quarter comparable sales increased 5 percent compared with a 4 percent increase in the second quarter last year.
Second Quarter Comparable Sales Results
Comparable sales by global brand for the second quarter of fiscal year 2013 were as follows:
Net Sales Results
The following table details the company’s second quarter net sales:
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(1) U.S. includes the United States, Puerto Rico, and Guam.
(2) Includes Piperlime, Athleta, and fiscal year 2013 includes Intermix.
Total online sales were $466 million and $367 million for the thirteen weeks ended August 3, 2013 and July 28, 2012, respectively.
Second quarter diluted earnings per share of $0.64 increased 31 percent compared with $0.49 for the second quarter last year. Given its progress to date, the company raised its estimate for full year 2013 diluted earnings per share to be in the range of $2.57 to $2.65.
The company continues to expect depreciation and amortization expense, net of amortization of lease incentives, for fiscal year 2013 to be about $475 million.
Second quarter operating expenses were $1 billion, up $44 million compared with the second quarter of last year.
Marketing expenses for the quarter were $148 million, up $1 million compared with the second quarter of last year.
The company’s operating margin was 13.5 percent in the second quarter versus 11.9 percent last year.
The company continues to expect that operating margin for fiscal year 2013 will be about 13 percent.
The effective tax rate was 39.8 percent for the second quarter of fiscal year 2013. The company continues to expect its full year tax rate to be about 39 percent in fiscal year 2013.
On a year-over-year basis, inventory dollars per store were up 6 percent at the end of the second quarter of fiscal year 2013.
The company expects inventory dollars per store to be up in the mid-single digits at the end of the third quarter of fiscal year 2013 compared with the third quarter last year.
The company ended the second quarter of fiscal year 2013 with $1.9 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, was an inflow of $542 million compared with an inflow of $673 million last year. 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.
Second quarter share repurchases were $27 million and the company ended the second quarter of fiscal year 2013 with 468 million shares outstanding.
The company paid a dividend of $0.15 per share during the second quarter of fiscal year 2013. Reinforcing its commitment to returning cash to shareholders, the company announced today its intention to increase its annual dividend, beginning in the third quarter of 2013, from $0.60 per share to $0.80 per share. This represents a 60 percent increase over the fiscal 2012 dividend per share of $0.50.
Fiscal year-to-date, capital expenditures were $315 million.
For fiscal year 2013, the company continues to expect capital spending to be approximately $675 million in support of its outlined strategies.
The company ended the second quarter of fiscal year 2013 with a total of 3,444 store locations, 3,106 of which were company-operated.
During the second quarter of fiscal year 2013, the company opened 34 and closed 33 company-operated stores. Square footage of company-operated stores was flat compared with the second quarter of fiscal year 2012.
In fiscal year 2013, the company expects to open about 160 company-operated stores, focused on Athleta, Gap China, Old Navy Japan, and global outlet stores. The company expects that it will close about 80 company-operated stores. The closures are weighted towards Gap North America, consistent with the company’s previously stated strategy. Given its focus on growing through new channels and geographies, the company continues to expect square footage to increase about 1 percent in fiscal year 2013.
Store count, openings, closings, and square footage for our stores are as follows:
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Katrina O'Connell, vice president of Corporate Finance and Investor Relations at Gap Inc., will host a summary of the company’s second quarter fiscal year 2013 results during a conference call and webcast at approximately 2:00 p.m. Pacific Time today. Ms. O’Connell will be joined by Glenn Murphy, Gap Inc. chairman and chief executive officer, and Sabrina Simmons, Gap Inc. chief financial officer.
The conference call can be accessed by calling 1-855-5000-GPS or 1-855-500-0477 (participant passcode: 7045156). International callers may dial 913-643-0954. The webcast can be accessed at www.gapinc.com.
The company will report August sales on September 5, 2013.
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 February 2, 2013, as well as the company’s subsequent filings with the Securities and Exchange Commission.
These forward-looking statements are based on information as of August 22, 2013. 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.
Gap Inc. is a leading global retailer offering clothing, accessories, and personal care products for men, women, children, and babies under the Gap, Banana Republic, Old Navy, Piperlime, Athleta, and Intermix brands. Fiscal year 2012 net sales were $15.7 billion. Gap Inc. products are available for purchase in more than 90 countries worldwide through about 3,100 company-operated stores, over 300 franchise stores, and e-commerce sites. For more information, please visit www.gapinc.com.
Gap Inc.
David Davick
415-427-2164
Investor Relations
Investor_relations@gap.com
Kari Shellhorn
415-427-1805
Media Relations
Press@gap.com
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, and Intermix brands.