SAN FRANCISCO -February 25, 2016 - (BUSINESS WIRE) - Gap Inc. (NYSE:GPS) today reported fourth quarter and fiscal year 2015 results and provided guidance for fiscal year 2016.
The company’s adjusted diluted earnings per share were $0.57 for the fourth quarter of fiscal year 2015 and $2.43 for fiscal year 2015, excluding the $25 million and $132 million pre-tax impacts ofpreviously announced strategic actions, respectively. Please see the reconciliations of adjusted diluted earnings per share, a non-GAAP financial measure, from the GAAP financial measures in the tables at the end of this press release.
On a reported basis, the company’s diluted earnings per share were $0.53 for the fourth quarter of fiscal year 2015 and $2.23 for fiscal year 2015.
The company noted that the translation of foreign currencies into U.S. dollars negatively impacted the company’s reported net sales for fiscal year 2015 by about $363 million. In calculating net sales on a constant currency basis, current year foreign exchange rates are applied to both current year and prior year net sales. The company also noted that foreign currency fluctuations negatively impacted earnings per share for fiscal year 2015 by an estimated $0.14, or about 5 percentage points of earnings per share growth.1
“With a year of transition behind us, I’m confident that we have the right strategies in place to fuel our long-term growth,” said Art Peck, chief executive officer, Gap Inc. “We made significant progress in 2015 transforming our product operating model, enabling us to be more responsive to trends and market conditions, and consistently deliver on-brand product collections.”
Peck continued, "Our brands are strengthening their connections with customers through digital, and especially mobile, enhancements that create richer experiences whether shopping online or in stores, or any combination of channels."
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.
The company’s fourth quarter fiscal year 2015 comparable sales were down 7 percent versus positive 2 percent last year. For fiscal year 2015, the company’s comparable sales were down 4 percent versus flat last year. Comparable sales by global brand for fiscal year 2015 were as follows:
On a constant currency basis, net sales were $16.2 billion for fiscal year 2015. Please see the reconciliation of adjusted net sales, a non-GAAP financial measure, from the GAAP financial measure in the table at the end of this press release.
On a reported basis, fourth quarter fiscal year 2015 net sales were $4.4 billion and fiscal year 2015 net sales were $15.8 billion. The translation of foreign currencies into U.S. dollars negatively impacted the company’s reported net sales for fiscal year 2015 by about $363 million.
The following table details the company’s fourth quarter and fiscal year 2015 net sales (unaudited):
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(1) U.S. includes the United States, Puerto Rico, and Guam.
(2) Includes Athleta and Intermix.
(3) Includes Piperlime, Athleta, and Intermix.
Total online sales were $803 million for the fourth quarter of fiscal year 2015 and $2.53 billion for fiscal year 2015
The company expects diluted earnings per share to be in the range of $2.20 to $2.25 for fiscal year 2016, which includes the estimated negative impact of approximately $0.19, or over $120 million pre-tax, due to foreign currency fluctuations at current exchange rates. This impact equates to approximately 8 percentage points of earnings per share growth, when compared with the company’s adjusted diluted earnings per share of $2.43 for fiscal year 2015.
The company’s operating margin for fiscal year 2015 was 9.6 percent. In fiscal year 2016, the company expects operating margin to be about 9.5 percent.
Fourth quarter fiscal year 2015 operating expenses were $1.09 billion compared with $1.14 billion last year. Fiscal year 2015 operating expenses were $4.2 billion, about flat to last year.
Marketing expenses for the fourth quarter of fiscal year 2015 were $169 million, down $9 million compared with last year. For fiscal year 2015, marketing expenses were $578 million compared with $639 million last year.
For the fourth quarter of fiscal year 2015, the effective tax rate was 37.1 percent and for fiscal year 2015 the effective tax rate was 37.5 percent. For fiscal year 2016, the company expects the effective tax rate to be about 38 percent.
At the end of the fourth quarter of fiscal year 2015, inventory dollars per store were about flat, in line with the company’s previous guidance. The company noted that in fiscal year 2016 total inventory guidance will replace the inventory per store metric. The company expects total inventory to be down in the low single digits at the end of the first quarter of fiscal year 2016.
The company ended fiscal year 2015 with $1.4 billion in cash and cash equivalents. For fiscal year 2015, free cash flow, defined as net cash provided by operating activities less purchases of property and equipment, was an inflow of about $870 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.
During the fourth quarter of fiscal year 2015, the company paid a dividend of $0.23 per share and repurchased 7.6 million shares for $193 million, ending the fourth quarter of fiscal year 2015 with 397 million shares outstanding.
During fiscal year 2015, the company distributed about $1.4 billion to shareholders through share repurchases and dividends.
Underscoring Gap Inc.’s continued commitment to distributing cash to shareholders, the company announced in a separate press release today that its Board of Directors approved a $1 billion share repurchase authorization for Gap Inc.’s stock, superseding the company’s existing authorization dated February 26, 2015. The company also announced today its intent to pay an annual dividend per share of $0.92 in fiscal year 2016 and that the Board of Directors authorized a first quarter fiscal year 2016 dividend of $0.23 per share.
The company noted that it intends to allocate a portion of fiscal year 2016 cash flow towards debt repayment. As a result, the company’s fiscal year 2016 share repurchases will likely be lower than the company’s historic average.
Fiscal year 2015 capital expenditures were $726 million, below the company’s prior guidance. For fiscal year 2016, the company expects capital spending to be approximately $650 million, with a continued focus on mobile and supply chain capabilities.
Fiscal year 2015 depreciation and amortization expense, net of amortization of lease incentives, was $527 million. For fiscal year 2016, the company expects depreciation and amortization expense, net of amortization of lease incentives, to be about $560 million.
The company ended fiscal year 2015 with 3,721 store locations in 51 countries, of which 3,275 were company-operated. Square footage of company-operated stores was about flat compared with the end of fiscal year 2014.
In fiscal year 2016, the company expects to open about 40 company-operated stores, net of closures and repositions. In line with its strategy, the company expects store openings to be focused on greater China, global outlet stores and Athleta.
The company expects square footage to be about flat in fiscal year 2016 compared with fiscal year 2015.
Store count, openings, closings, and square footage for our stores are as follows:
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Jack Calandra, senior vice president of Corporate Finance and Investor Relations at Gap Inc., will host a summary of the company’s fourth quarter and fiscal year 2015 results during a conference call and webcast from approximately 2:00 p.m. to 3:00 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: 2809688). International callers may dial 913-643-0954. The webcast can be accessed at www.gapinc.com.
The company will report February sales on March 3, 2016.
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 February 25, 2016. 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, Athleta, and Intermix brands. Fiscal year 2015 net sales were $15.8 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.