SAN FRANCISCO - November 21, 2013 - (BUSINESS WIRE) - Gap Inc. (NYSE:GPS) today reported that third quarter diluted earnings per share increased 14 percent, to $0.72, compared with $0.63 last year, as the company continues to deliver on its goal of top-line and bottom-line growth. The company reaffirmed its estimate for full year 2013 diluted earnings per share to be in the range of $2.57 to $2.65.
Net sales for the third quarter, which ended November 2, 2013, increased 3 percent to $3.98 billion compared with $3.86 billion for the third quarter last year. Net sales increased 5 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.
“This quarter marks our seventh consecutive quarter of positive comp sales growth,” said Glenn Murphy, chairman and chief executive officer of Gap Inc. “We are pleased to maintain our momentum of growing sales and earnings per share this quarter.”
The company’s third quarter of fiscal 2013 comparable sales increased 1 percent versus a 6 percent increase last year. Due to the 53rd week in fiscal year 2012, comparable sales for the third quarter of fiscal year 2013 are compared with the 13-week period ended November 3, 2012.
Comparable sales by global brand for the third quarter of fiscal year 2013 were as follows:
The following table details the company’s third quarter net sales:
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Total online sales were $589 million for the thirteen weeks ended November 2, 2013 compared with $491 million for the third quarter last year.
Third quarter diluted earnings per share increased 14 percent to $0.72 compared with $0.63 for the third quarter last year. The company reaffirmed 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.
Third quarter operating expenses were $1 billion, down $60 million compared with the third quarter of last year. The company tightly managed operating expenses and achieved 230 basis points of leverage as a percentage of net sales.
Marketing expenses for the quarter were $162 million, down $16 million compared with the third quarter of last year.
The company’s operating margin was 14.5 percent in the third quarter versus 13.5 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 39.4 percent for the third 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 4 percent at the end of the third quarter of fiscal year 2013.
The company expects the increase in year-over-year inventory dollars per store at the end of the fourth quarter of fiscal year 2013 to be somewhat higher than the increase at the end of the third quarter, but still in the single digits.
The company ended the third quarter of fiscal year 2013 with $996 million 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 $466 million compared with an inflow of $776 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.
Third quarter share repurchases were $790 million and the company ended the third quarter of fiscal year 2013 with 449 million shares outstanding.
The company paid a dividend of $0.20 per share during the third quarter of fiscal year 2013. In addition, on November 13, 2013, the company announced that its Board of Directors authorized a fourth quarter dividend of $0.20 per share.
Fiscal year-to-date, capital expenditures were $487 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 third quarter of fiscal year 2013 with a total of 3,515 store locations, 3,160 of which were company-operated.
During the third quarter of fiscal year 2013, the company opened 65 and closed 11 company-operated stores. Square footage of company-operated stores was up 1 percent compared with the third quarter of fiscal year 2012.
In fiscal year 2013, the company expects to open about 160 company-operated stores, focused on Gap China, Old Navy Japan, Athleta 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 third 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: 9886415). International callers may dial 913-643-0954. The webcast can be accessed at www.gapinc.com.
The company will report November sales on December 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 November 21, 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 350 franchise stores, and e-commerce sites. For more information, please visit www.gapinc.com.
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(a) 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, 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.
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.