Form 8-K GAP INC For: Nov 16
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
__________________________________________
Date of Report
(Date of earliest event reported)
November 16, 2017
THE GAP, INC.
(Exact name of registrant as specified in its charter)
Delaware | 1-7562 | 94-1697231 | ||
(State of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
Two Folsom Street San Francisco, California | 94105 | |
(Address of principal executive offices) | (Zip Code) | |
(415) 427-0100
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 7.01. Regulation FD Disclosure
A table outlining historical comparable sales of The Gap, Inc. (the "Company") and by global brand is attached hereto as Exhibit 99.1. Supplemental slides referenced during the Company's third quarter earnings call on November 16, 2017 are attached hereto as Exhibit 99.2.
The information presented in Item 7.01 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, unless we specifically state that the information is to be considered “filed” under the Exchange Act or specifically incorporate it by reference in any filing under the Securities Act or the Exchange Act.
Item 9.01. Financial Statements and Exhibits
99.1 | Historical comparable sales. |
99.2 | Supplemental slides provided in connection with the Company's third quarter 2017 earnings call. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
THE GAP, INC. | |||
(Registrant) | |||
Date: November 16, 2017 | By: | /s/ Teri List-Stoll | |
Teri List-Stoll | |||
Executive Vice President and | |||
Chief Financial Officer | |||
EXHIBIT INDEX
GAP INC.
Historical Comparable Sales by Global Brand
Fiscal 2012 to Present
Final
Fiscal 2017 1Q17 2Q17 3Q17 4Q17 FY-17
Gap Global -4% -1% 1%
Banana Republic Global -4% -5% -1%
Old Navy Global 8% 5% 4%
Gap Inc. 2% 1% 3%
Fiscal 2016 1Q16 2Q16 3Q16 4Q16 FY-16
Gap Global -3% -3% -8% 0% -3%
Banana Republic Global -11% -9% -8% -3% -7%
Old Navy Global -6% 0% 3% 5% 1%
Gap Inc. -5% -2% -3% 2% -2%
Fiscal 2015 1Q15 2Q15 3Q15 4Q15 FY-15
Gap Global -10% -6% -4% -3% -6%
Banana Republic Global -8% -4% -12% -14% -10%
Old Navy Global 3% 3% 4% -8% 0%
Gap Inc. -4% -2% -2% -7% -4%
Fiscal 2014 1Q14 2Q14 3Q14 4Q14 FY-14
Gap Global -5% -5% -5% -6% -5%
Banana Republic Global -1% 0% 0% 1% 0%
Old Navy Global 1% 4% 1% 11% 5%
Gap Inc. -1% 0% -2% 2% 0%
Fiscal 2013 1Q13 2Q13 3Q13 4Q13 FY-13
Gap Global 3% 6% 1% 1% 3%
Banana Republic Global 0% -1% -1% -3% -1%
Old Navy Global 3% 6% 0% 0% 2%
Gap Inc. 2% 5% 1% 1% 2%
Fiscal 2012 1Q12 2Q12 3Q12 4Q12 FY-12
Gap Global 2% 3% 4% 2% 3%
Banana Republic Global 5% 6% 5% 3% 5%
Old Navy Global 4% 3% 9% 8% 6%
Gap Inc. 4% 4% 6% 5% 5%
Comp sales include the results of Company-operated stores and sales through online channels in those countries where we have
existing Comp store sales. A store is included in the Comp sales calculations when it has been open and operated by under Gap Inc.
for at least one year and the selling square footage has not changed by 15 percent or more within the past year.
The calculation of Gap Inc. Comp sales includes Company-operated stores but excludes the results of the franchise business.
Beginning in February 2013, the Comp sales calculations for Gap Inc. include Athleta store and online sales. Beginning in December
2013, the Comp sales calculations for Gap Inc. include Intermix store and online sales. Between August 2013 and February 2015 the
Comp sales calculations for Gap Inc. included Piperlime store sales but excluded Piperlime online.
Exhibit 99.1
GAP INC.
FISCAL 2017
TERI LIST‐STOLL
E X E C U T I V E V I C E P R E S I D E N T &
C H I E F F I N A N C I A L O F F I C E R
THIRD QUARTER
EARNINGS RESULTS
ART PECK
P R E S I D E N T &
C H I E F E X E C U T I V E O F F I C E R
Exhibit 99.2
This 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. Forward‐looking statements include statements identified as such in our November
16, 2017 press release.
Because these forward‐looking statements involve risks and uncertainties, there are important factors that could
cause our actual results to differ materially from those in the forward‐looking statements. Information regarding
factors that could cause results to differ can be found in our November 16, 2017 earnings press release, our
Annual Report on Form 10‐K for the fiscal year ended January 28, 2017, and our subsequent filings with the U.S.
Securities and Exchange Commission, all of which are available on gapinc.com.
These forward‐looking statements are based on information as of November 16, 2017. We assume no obligation
to publicly update or revise our forward‐looking statements even if experience or future changes make it clear
that any projected results expressed or implied therein will not be realized.
This presentation includes the non‐GAAP measures adjusted net income, adjusted earnings per share, adjusted
earnings per share growth excluding the year‐over‐year impacts of foreign exchange, adjusted gross profit,
adjusted gross margin, adjusted operating expenses, adjusted operating expenses as a percent of net sales,
adjusted operating income, adjusted operating income as a percent of net sales (operating margin), adjusted
capital expenditures, and free cash flow. The description and reconciliation of these measures from GAAP is
included in our November 16, 2017 earnings press release, which is available on gapinc.com.
F O R W A R D L O O K I N G S T A T E M E N T S
DISCLOSURE STATEMENT
S E C R E GU L A T I O N G
THE GAP INC. ADVANTAGE
• Portfolio of iconic, profitable
brands
• Ability to meet our customers
where they are: online, mobile,
in‐store
• Leveraging responsive and
innovative product creation
capabilities to gain market share
in loyalty‐driving categories
• Scale that drives profitability
and growth
(1) 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.
COMP AND NET SALES
Q3 Net Sales (in billions) $3.84 $3.80
Q3 Net Sales Growth vs. Prior Year 1% (2%)
Q3 Net Sales Growth vs. Prior 1% (2%)
Year in Constant Currency (1)
2% 2%
1%
3%
Q4 2016 Q1 2017 Q2 2017 Q3 2017
Gap Inc. Comparable Sales
2017 2016
Q3 GROSS MARGIN
Gross Profit (in billions) $1.53 $1.49 $1.53 $1.49
Merchandise Margin B/(W) LY 0bps 220bps 0bps 200bps
ROD % of Sales B/(W) LY 40bps (20bps) 60bps (40bps)
39.7% 39.3%
2017 2016
Reported
39.7% 39.1%
2017 2016
Adjusted(1)
(1) Excludes $7 million of credit, net, related to pre‐tax restructuring charges in 2016.
Q3 OPERATING EXPENSES
Operating Expenses
(in millions) $1,147 $1,104 $1,147 $1,068
29.9% 29.1%
2017 2016
Reported
29.9%
28.1%
2017 2016
Adjusted(1)
(1) Excludes $36 million of pre‐tax restructuring charges in 2016.
AS A % OF SALES
Q3 OPERATING MARGIN
9.8% 10.2%
2017 2016
Reported
9.8%
11.0%
2017 2016
Operating Income
(in millions) $378 $389 $378 $418
Adjusted(1)
(1) Excludes $29 million of pre‐tax restructuring charges in 2016.
Q3 NET INCOME
IN MILLIONS
$229
$204
2017 2016
Reported
$229 $238
2017 2016
EPS $0.58 $0.51 $0.58 $0.60
EPS Growth YoY 14% (16%) (3%) (5%)
Adjusted EPS Growth Excluding Estimated YoY Impact of FX vs. Prior Year (2) 0% 0%
Adjusted(1)
(1) Adjusted figures exclude impact of restructuring charges of $29 million, related tax benefit of $12 million, and incremental tax expense of $17 million related to restructuring.
(2) 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.
OTHER THIRD QUARTER 2017 METRICS
• Year‐to‐date capital expenditures
totaled $463 million
• Ended the quarter with $1.35 billion
in cash and cash equivalents
• Year‐to‐date distributions of
approximately $572 million to
shareholders through share
repurchases and dividends
FISCAL 2017 OUTLOOK
Full Fiscal Year 2017
Reported Diluted Earnings per Share $2.18 ‐ $2.22
Up from previous guidance of: $2.12 ‐ $2.20
Adjusted Diluted Earnings per Share $2.08 ‐ $2.12 (1)
Up from previous guidance of: $2.02 – $2.10 (1)
Comp Sales Up low‐single‐digits
Up from previous guidance of: Flat to up slightly
Company‐Operated Stores:
Net Store Closures About 30
Previous ending store count guidance: About flat vs. LY
New Athleta Stores About 15
Capital Expenditures About $625 million(2)
Effective Tax Rate About 38%
Down from previous guidance of: About 39%
Fourth Quarter of Fiscal Year 2017
Share Repurchase About $100 million
AS OF NOVEMBER 16, 2017
(1) Excludes earnings per share impact of gain related to insurance proceeds in 2017.
(2) Excludes an estimated $175 million associated with rebuilding of our Fishkill D.C. and related supply chain spend, the majority of which is expected to be covered by
insurance proceeds.
