Gap, Inc. (GPS) Tops Q4 EPS by 17c, Offers Guidance, to Suspend Share Repurchases

Gap, Inc. (NYSE: GPS) reported Q4 EPS of $0.58, $0.17 better than the analyst estimate of $0.41. Revenue for the quarter came in at $4.7 billion versus the consensus estimate of $4.55 billion.

GUIDANCE:

Gap, Inc. sees FY2020 EPS of $1.80-$1.92, versus the consensus of $1.68.

“Due to the evolving coronavirus situation, we are facing a period of uncertainty regarding the potential impact on both our supply chain and customer demand,” said Sonia Syngal. “During our 50-year history, Gap, Inc. has weathered many storms. We will benefit from our strong balance sheet and cash generation as well as our important vendor relationships during this current challenging period. We are focusing on decisive actions that will ensure we emerge well positioned to compete in the years ahead, and I am impressed by how diligently the teams have navigated the events of the past weeks.”

Earnings per Share
For fiscal 2020, the company expects its reported diluted earnings per share for fiscal year 2020 to be in the range of $1.23 to $1.35. Excluding costs related to previously announced plans to restructure the Gap brand specialty fleet, the company expects its adjusted diluted earnings per share to be in the range of $1.80 to $1.92.

The fiscal year 2020 guidance largely does not incorporate any estimated impact from the coronavirus outbreak, with the exception of approximately $100 million in sales or $0.10 in diluted earnings per share for the first quarter impact in Asia and Europe. It is not currently possible to provide a reasonable estimate of further impact from the evolving outbreak, including potential disruption from any supply chain impacts or reduction in demand in these or other geographies, including the United States. These estimates could materially change if there is meaningful deterioration from current trends.

Sales
The company expects both comparable sales and net sales for fiscal year 2020 to be down low-single digits, as we continue the Gap specialty fleet restructuring efforts.

Effective Tax Rate
For fiscal year 2020, the company expects its reported effective tax rate to be about 30%. Excluding certain non-cash tax impacts related to expected restructuring charges, the company expects its adjusted fiscal year 2020 effective tax rate to be about 26%.

Share Repurchases
The company noted that in light of the current economic uncertainty stemming from a number of factors, including the coronavirus outbreak, it currently intends to suspend share repurchases in fiscal year 2020.

Capital Expenditures
The company expects capital spending to be approximately $600 million for fiscal year 2020, which includes about $50 million of expansion costs related to the continued buildout of its Ohio distribution center.

Real Estate
The company expects to close about 90 company-operated stores, net of openings and repositions in fiscal year 2020. This guidance includes about 170 Gap brand store closures globally, the majority of which are expected to close in the fourth quarter of fiscal 2020. The company continues to expect store openings to be focused on Old Navy and Athleta.

For earnings history and earnings-related data on Gap, Inc. (GPS) click here.

You May Also Be Interested In

• IBM tumbles on soft Q1 revenue; announces HashiCorp $6.4bn acquisition
• Berenberg Starts Lloyds TSB Group (LYG) at Hold, 'shares are fairly valued'
• TAL Education (TAL) Tops Q1 EPS by 10c