SAN FRANCISCO - November 19, 2015 - (BUSINESS WIRE) - Gap Inc. (NYSE:GPS) today reported results for the third quarter of fiscal year 2015 and updated its full-year fiscal 2015 outlook.
“With a challenging third quarter behind us, we are sharply focused on holiday execution across all channels,” said Art Peck, chief executive officer, Gap Inc. “We are driving forward on our key strategies designed to fuel future growth.”
“Old Navy delivered another consecutive quarter of growth,” Peck continued. “Gap has made clear progress on its transformation agenda and we look forward to introducing customers to the brand’s spring collection, which embodies elevated American style.”
On a reported basis, Gap Inc.’s third quarter fiscal year 2015 diluted earnings per share were $0.61. On an adjusted basis, the company’s diluted earnings per share were $0.63, excluding a $0.02 impact from strategic actions previously announced on June 15, 2015. Please see the reconciliation of adjusted diluted earnings per share, a non-GAAP financial measure, from the GAAP financial measure in the table at the end of this press release.
Business Highlights
Third Quarter 2015 Comparable Sales Results
Gap Inc.’s comparable sales for the third quarter of fiscal year 2015 were down 2 percent versus a 2 percent decrease last year. Comparable sales by global brand for the third quarter were as follows:
Third Quarter 2015 Net Sales Results
For the third quarter of fiscal year 2015, Gap Inc.’s net sales decreased 3 percent to $3.86 billion compared with $3.97 billion for the third quarter last year.
On a constant currency basis, net sales for the third quarter of fiscal year 2015 were flat compared with last year. In calculating the net sales change 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 sales trends, excluding the impact of foreign currency exchange rate fluctuations.
The company noted that the translation of foreign currencies into U.S. dollars negatively impacted the company’s reported net sales for the third quarter of fiscal year 2015 by about $100 million, primarily due to the weakening Japanese yen and Canadian dollar.
The following table details the company’s third quarter 2015 net sales:
View Original for Full Data Table
Total online sales increased to $635 million for the third quarter of fiscal year 2015 compared with $621 million in the third quarter last year.
On a reported basis, third quarter of fiscal year 2015 diluted earnings per share were $0.61. The company’s adjusted diluted earnings per share, excluding the negative impact of about $0.02 from the strategic actions, were $0.63 for the third quarter of fiscal year 2015. Please see the reconciliation of adjusted diluted earnings per share, a non-GAAP financial measure, from the GAAP financial measure in the table at the end of this press release.
The company noted that the estimated impact from foreign currency fluctuations reduced the company’s diluted earnings per share growth rate in the third quarter of fiscal year 2015 by about $0.05 or about 6 percentage points1 The company also noted that diluted earnings per share for the third quarter of fiscal year 2014 benefitted from a discrete tax item that resulted in a lower effective tax rate of 34.5 percent compared with 37.4 percent for the third quarter this year.
The company updated its adjusted diluted earnings per share guidance for the full fiscal year 2015 to be in the range of $2.38 to $2.42 and now expects its adjusted operating margin to be about 10.5 percent in fiscal year 2015.
The company also noted that its adjusted earnings per share guidance range and adjusted operating margin for fiscal year 2015 exclude charges associated with the strategic actions, which continue to be estimated at approximately $130 million to $140 million. Additionally, its full-year guidance and operating margin for fiscal year 2015 are negatively impacted by West Coast port delays in the first half of fiscal year 2015 and foreign currency fluctuations.
1 In calculating earnings per share excluding the impact of foreign exchange, the company estimates current gross margins using the appropriate prior year rates (including the impact of merchandise-related hedges), translates current period foreign earnings at prior year rates, and excludes the year-over-year earnings impact of balance sheet remeasurement and gains or losses from non-merchandise-related foreign currency hedges. This is done in order to enhance the visibility of business results excluding the direct impact of foreign currency exchange rate fluctuations.
Third quarter operating expenses were $1.03 billion compared with $1.04 billion in the third quarter of last year. Marketing expenses for the third quarter were $142 million, down $34 million from last year driven primarily by decreased spending at Gap brand.
The effective tax rate was 37.4 percent for the third quarter of fiscal year 2015. The company continues to expect its full-year fiscal 2015 effective tax rate to be about 38 percent.
At the end of the third quarter of fiscal year 2015, inventory dollars per store were down 4 percent on a year-over-year basis.
At the end of the fourth quarter of fiscal year 2015, the company expects year-over-year inventory dollars per store to be about flat versus a decline of 6 percent last year.
The company ended the third quarter of fiscal year 2015 with $1.04 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 $229 million. 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.
Year-to-date for fiscal year 2015, Gap Inc. repurchased 22 million shares for about $800 million. For the third quarter of fiscal year 2015, Gap Inc. repurchased 6.2 million shares for about $200 million and ended the quarter with 404 million shares outstanding.
Including the company’s dividend, year-to-date shareholder distributions totaled about $1.1 billion for fiscal year 2015, underscoring the company’s commitment to returning cash to shareholders.
The company paid a dividend of $0.23 per share during the third quarter of fiscal year 2015. In addition, on November 13, 2015, the company announced that its Board of Directors authorized a fourth quarter dividend of $0.23 per share.
Fiscal year-to-date capital expenditures were $505 million. For fiscal year 2015, the company continues to expect capital spending to be approximately $800 million.
The company continues to expect depreciation and amortization expense, net of amortization of lease incentives, to be about $525 million for fiscal year 2015.
The company ended the third quarter of fiscal year 2015 with 3,794 store locations in 51 countries, of which 3,346 were company-operated.
While the company continues to pursue its previously stated growth initiatives with a focus on Asia, global outlets and Athleta in the U.S., it continues to expect its overall store count and square footage to remain flat in fiscal year 2015, as compared to last year due to Gap brand store closures.
Store count, openings, closings, and square footage for our stores are as follows:
View Original for Full Data Table
Jack Calandra, senior vice president of Corporate Finance and Investor Relations at Gap Inc., will host a summary of the company’s third quarter fiscal year 2015 results during a conference call and webcast from approximately 2:00 p.m. to 2:45 p.m. Pacific Time today. Mr. Calandra will be joined by Art Peck, Gap Inc. 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: 2687902). International callers may dial 913-643-0954. The webcast can be accessed at www.gapinc.com.
The company will report November sales on December 3, 2015.
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 January 31, 2015, 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 19, 2015. 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.
About Gap Inc.
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. Fiscal year 2014 net sales were $16.4 billion. Gap Inc. products are available for purchase in more than 90 countries worldwide through about 3,300 company-operated stores, over 400 franchise stores, and e-commerce sites. For more information, please visit www.gapinc.com.
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SOURCE Gap Inc.
Jack Calandra
Gap Inc.
Investor Relations
415-427-1726
Investor_relations@gap.com
Jennifer Poppers
Gap Inc.
Media Relations
415-427-1729
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.