Gap Inc. Reports First Quarter Results

Gap Inc. (NYSE: GPS) today reported diluted earnings per share of $0.60 on a reported basis, and $0.24 on an adjusted basis, excluding the gain on sale of a building, costs associated with the company’s planned separation, and costs related to the previously announced specialty fleet restructuring. 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.

“This quarter was extremely challenging, and we are not at all satisfied with our results. We are committed to improving our execution and performance this year,” said Art Peck, president and chief executive officer, Gap Inc. “We remain confident in our plan to separate into two independently traded public companies in 2020, and we are focused on setting up both companies for long term value creation and profitable growth.”

First Quarter 2019 Comparable Sales Results
The company’s first quarter fiscal year 2019 comparable sales were down 4% compared with a 1% increase last year. Comparable sales by global brand for the first quarter were as follows:
•Old Navy Global: negative 1% versus positive 3% last year •Gap Global: negative 10% versus negative 4% last year •Banana Republic Global: negative 3% versus positive 3% last year

For the first quarter ended May 4, 2019:
•Net sales were $3.7 billion, a decrease of 2% compared with last year. ◦The translation of foreign currencies into U.S. dollars negatively impacted the company’s net sales for the first quarter of fiscal year 2019 by about $34 million.1 First quarter net sales details appear in the tables at the end of this press release.
•Gross profit was $1.34 billion, a decrease of 6% compared with last year.
•Gross margin was 36.3%, a decrease of 140 basis points compared with last year.
•Operating margin was 8.5%, an increase of 240 basis points compared with last year. Adjusted operating margin was 3.5%, a decrease of 260 basis points compared with last year. Please see the reconciliation of adjusted operating margin, a non-GAAP financial measure, from the GAAP financial measure in the tables at the end of this press release.
•The effective tax rate was 24.8% for the first quarter of fiscal year 2019.
•Diluted earnings per share were $0.60 compared to $0.42 last year. Adjusted diluted earnings per share were $0.24 for the first quarter of fiscal year 2019. 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 foreign currency fluctuations positively impacted earnings per share for the first quarter of fiscal year 2019 by an estimated $0.01.2
•The company ended the first quarter of fiscal year 2019 with $2.24 billion in merchandise inventory, up about 10% year over year. The company noted that the increase in merchandise inventory was impacted by the acquisition of Janie and Jack, increases in in-transit times, and net store growth year over year.
•The company repurchased 1.9 million shares for $50 million and ended the first quarter of fiscal year 2019 with 378 million shares outstanding.
•The company paid a dividend of $0.2425 per share during the first quarter of fiscal year 2019. In addition, on May 22, 2019, the company announced that its Board of Directors authorized a second quarter dividend of $0.2425 per share.

The company ended the first quarter of fiscal year 2019 with $1.2 billion in cash, cash equivalents, and short-term investments. Year-to-date free cash flow, defined as net cash from operating activities less purchases of property and equipment, was negative $136 million compared with negative $204 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 fiscal year 2019 capital expenditures were $165 million.

The company ended the first quarter of fiscal year 2019 with 3,849 store locations in 44 countries, of which 3,335 were company-operated.
more detail at: https://investors.gapinc.com/news-releases/news-release-details/gap-inc-reports-first-quarter-results-4

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