SAN FRANCISCO - May 22, 2014 - (BUSINESS WIRE) - Gap Inc. (NYSE: GPS) today reported first quarter fiscal year 2014 earnings per share of $0.58 on a diluted basis. Net sales for the first quarter increased 1 percent to $3.77 billion compared with $3.73 billion last year.
"After a disappointing start, I'm pleased with how the business performed toward the end of the quarter, especially at Old Navy,” said Glenn Murphy, chairman and chief executive officer of Gap Inc. "We are confident in our strategies to drive long-term value, as evidenced by the reaffirmation of our full-year guidance."
As reinforced at its annual investor meeting last month, during the quarter the company continued to focus on its strategic initiatives – global growth, omni-channel strategies, a seamless inventory model and a responsive supply chain – designed to achieve long-term, profitable growth across its portfolio of brands.
Additional Financial and Business Highlights
Net sales for the first quarter increased 1 percent to $3.77 billion compared with $3.73 billion last year. The company noted that the translation of foreign revenues into dollars negatively impacted reported net sales by approximately $20 million in the first quarter of fiscal year 2014.
Net sales increased 2 percent on a constant currency basis for the first quarter of fiscal year 2014. 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.
The company’s first quarter comparable sales decreased 1 percent compared with a 2 percent increase in the first quarter of last year.
Comparable sales by global brand for the first quarter of fiscal year 2014 were as follows:
View Original for Full Data Table
(1) U.S. includes the United States, Puerto Rico, and Guam.
(2) Includes Piperlime, Athleta, and Intermix.
Total online sales increased 13 percent to $575 million for the first quarter of fiscal year 2014 compared with $509 million in the first quarter last year.
First quarter fiscal year 2014 diluted earnings per share were $0.58. This compares with diluted earnings per share of $0.71 in the first quarter of fiscal year 2013, which included a four cent benefit from the favorable resolution of tax matters in the quarter. Additionally, the company noted that the impact from foreign currency fluctuations reduced the first quarter fiscal year 2014 earnings per share growth rate by approximately 5 percentage points.
The company reaffirmed its guidance for full year 2014 diluted earnings per share to be in the range of $2.90 to $2.95.
The company continues to expect depreciation and amortization expense, net of amortization of lease incentives, to be about $520 million for fiscal year 2014.
First quarter operating expenses were $1.02 billion, compared with $1.01 billion in the first quarter of last year. The company tightly managed operating expenses and achieved 10 basis points of leverage as a percentage of net sales.
Marketing expenses for the first quarter were $143 million, flat compared with last year.
The company’s operating margin was 11.7 percent in the first quarter versus 14.2 percent last year. The company expects operating margin to be about flat for fiscal year 2014.
The effective tax rate was 39.0 percent for the first quarter of fiscal year 2014. The company continues to expect its full year tax rate to be about 38.5 percent in fiscal year 2014.
On a year-over-year basis, inventory dollars per store were up 7 percent at the end of the first quarter of fiscal year 2014.
At the end of the second quarter of fiscal year 2014, the company expects year-over-year inventory dollars per store to improve by a few points versus the first quarter of fiscal year 2014 increase.
The company ended the first quarter of fiscal year 2014 with $1.54 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 $351 million compared with an inflow of $205 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.
First quarter share repurchases were $219 million and the company ended the first quarter of fiscal year 2014 with 443 million shares outstanding.
The company paid a dividend of $0.22 per share during the first quarter of fiscal year 2014. In addition, on May 20, 2014, the company announced that its Board of Directors authorized a second quarter dividend of $0.22 per share.
Fiscal year-to-date capital expenditures were $162 million.
For fiscal year 2014, the company continues to expect capital spending to be approximately $750 million in support of its outlined strategies.
The company ended the first quarter of fiscal year 2014 with 3,565 store locations in 48 countries, of which 3,179 were company-operated.
During the first quarter of fiscal year 2014, the company opened 31 and closed 16 company-operated stores. Square footage of company-operated stores was up 0.5 percent compared with the first quarter of fiscal year 2013.
In fiscal year 2014, the company expects to open about 185 company-operated stores, focused on China, Old Navy in Japan, Athleta and global outlet stores. The company expects to close about 70 company-operated stores. The closures are weighted towards Gap North America and 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 2.5 percent in fiscal year 2014.
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 first quarter 2014 results during a conference call and webcast from approximately 2:00 p.m. to 2:45 p.m. Pacific Daylight 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: 5007532). International callers may dial 913-643-0954. The webcast can be accessed at www.gapinc.com.
The company will report May sales on June 5, 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 1, 2014, 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 22, 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, and children 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 more than 3,100 company-operated stores, over 350 franchise stores, and e-commerce sites. For more information, please visit www.gapinc.com.
David Davick
Gap Inc.
Investor Relations
415-427-2164
Investor_relations@gap.com
Kari Shellhorn
Gap Inc.
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.