SAN FRANCISCO - February 27, 2014 - (BUSINESS WIRE) - Gap Inc. (NYSE: GPS) today reported fourth quarter and fiscal year 2013 results and provided guidance for fiscal year 2014. Delivering another consecutive year of double-digit earnings per share growth, the company increased earnings per share 18 percent to $2.74 on a diluted basis for the 52 weeks ended February 1, 2014 compared with $2.33 for the 53 weeks ended February 2, 2013.
"We are pleased to deliver another year of profitable growth for our shareholders," said Glenn Murphy, chairman and chief executive officer of Gap Inc. "Engaging customers across our multi-channel portfolio of brands positions us well on our path to winning in the global marketplace."
Net sales for the 13 weeks ended February 1, 2014 were $4.58 billion, compared with $4.73 billion for the 14 weeks ended February 2, 2013. The company's fourth quarter comparable sales were up 1 percent compared with a 5 percent increase in the fourth quarter last year.
Net income for the 13 weeks ended February 1, 2014 was $307 million, or $0.68 per share on a diluted basis. This compares with net income of $351 million, or $0.73 per share on a diluted basis, for the 14 weeks ended February 2, 2013.
The company noted that fiscal year 2013 had 52 weeks compared with 53 weeks in fiscal year 2012. As a result, net sales for the fourth quarter and fiscal year 2013 were negatively impacted by the loss of the 53rd week. In addition, comparable sales for the fourth quarter and fiscal year 2013, respectively, are compared to the 13-week and 52-week periods ended February 2, 2013.
Net sales increased 5 percent on a constant currency basis for fiscal year 2013. 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.
Reported net sales increased $497 million to $16.15 billion for the 2013 fiscal year compared with net sales of $15.65 billion for the 2012 fiscal year. The company's comparable sales for fiscal year 2013 increased 2 percent compared with a 5 percent increase last year.
Net income for the 52 weeks ended February 1, 2014 was $1.28 billion, or $2.74 per share on a diluted basis. This compares with net income of $1.14 billion, or $2.33 per share on a diluted basis, for the 53 weeks ended February 2, 2013.
Comparable sales by global brand for the 2013 fiscal year were as follows:
The following tables detail the company's fourth quarter and fiscal year net sales:
View Original for Full Data Table
Total online sales were $698 million for the 13 weeks ended February 1, 2014 compared with $602 million for the 14 weeks ended February 2, 2013. For the 52 weeks ended February 1, 2014, total online sales were $2.26 billion compared with $1.86 billion for the 53 weeks ended February 2, 2013.
The company expects earnings per share to be in the range of $2.90 to $2.95 for fiscal year 2014.
The company's 2014 fiscal year guidance contemplates some of the expected impact from weakening foreign currencies. As a result, the company estimates its reported fiscal year 2014 earnings per share growth rate to be negatively impacted by about 5 percentage points at current exchange rates. At its midpoint, the company's fiscal year 2014 guidance represents earnings per share growth of 7 percent on a reported basis; without this negative 5 percentage point impact, the company expects that the earnings per share growth would be in the double-digits.
Fiscal year 2013 depreciation and amortization expense, net of amortization of lease incentives, was $470 million.
For fiscal year 2014, the company expects depreciation and amortization expense, net of amortization of lease incentives, to be about $520 million.
Fourth quarter operating expenses were $1.07 billion, down $103 million compared with the fourth quarter of last year. The company tightly managed operating expenses and achieved 140 basis points of leverage as a percentage of net sales.
Full year operating expenses were $4.14 billion, down $85 million from the prior year, with the majority of the benefit driven by translation of foreign currency expenses.
Marketing expenses for the full year were $637 million, down $16 million compared with last year.
The company's operating margin in fiscal year 2013 expanded 90 basis points to 13.3 percent.
Excluding the estimated impact of foreign currency, the company would expect operating margin expansion for fiscal year 2014, however, on a reported basis the company expects operating margin to be about flat for fiscal year 2014.
For the fourth quarter of fiscal year 2013, the effective tax rate was 39.1 percent and for fiscal year 2013 the effective tax rate was 38.8 percent.
For fiscal year 2014, the company expects the effective tax rate to be about 38.5 percent.
On a year-over-year basis, inventory dollars per store were up 7 percent at the end of the fourth quarter of fiscal year 2013.
The company expects the increase in year-over-year inventory dollars per store at the end of the first quarter of fiscal year 2014 to be similar to the fourth quarter increase of about 7 percent.
The company ended fiscal year 2013 with $1.51 billion in cash and cash equivalents. For fiscal year 2013, free cash flow, defined as net cash provided by operating activities less purchases of property and equipment, was an inflow of $1.04 billion compared with an inflow of $1.28 billion in fiscal year 2012. 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.
Fourth quarter share repurchases were $134 million and the company ended the fourth quarter of fiscal year 2013 with 446 million shares outstanding.
As announced in November 2013, the company approved a $1 billion share repurchase authorization, of which $966 million was still available as of the end of fiscal year 2013, underscoring the company's continued commitment to distributing excess cash to shareholders.
The company paid a dividend of $0.20 per share during the fourth quarter of fiscal year 2013.
In a separate press release today, the company announced that its Board of Directors approved a plan to increase the company's annual dividend per share by 10 percent to $0.88 per share for fiscal year 2014. This represents more than a 75 percent increase in the company's annual dividend per share in the last two years.
The company also announced that its Board of Directors has authorized the first quarter fiscal year 2014 dividend of $0.22 per share, payable on or after April 30, 2014 to shareholders of record at the close of business on April 9, 2014.
Fiscal year 2013 capital expenditures were $670 million.
For fiscal year 2014, the company expects capital spending to be approximately $750 million, reflecting the company's continued investment in its outlined strategic goals.
The company ended fiscal year 2013 with 3,539 store locations, in 48 countries, 3,164 of which were company-operated. Square footage of company-operated stores was up 1 percent compared with the end of fiscal year 2012.
In fiscal year 2014, the company expects to open about 185 company-operated stores, net of repositions, focused on China, Old Navy Japan, Athleta and global outlet stores. The company expects that it will close about 70 company-operated stores, net of repositions.
Given its focus on growing through new channels and geographies, the company expects square footage to increase about 2.5 percent in fiscal year 2014, representing the largest increase since 2007.
Store count, openings, closings, and square footage for our stores are as follows:
View Original for Full Data Table
Katrina O'Connell, vice president of Corporate Finance and Investor Relations at Gap Inc., will host a summary of the company's fourth quarter and 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: 1733048). International callers may dial 913-643-0954. The webcast can be accessed at www.gapinc.com.
The company will report February sales on March 6, 2014.
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 February 27, 2014. 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 2013 net sales were $16.1 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.
David Davick
Investor Relations
415-427-2164
Investor_relations@gap.com
Kari Shellhorn
Media Relations
415-427-1805
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.