Gap Inc 10-K for FY2021

Gap Inc (GAP)

10-K 2021-03-16 For: 2021-01-30

Added on April 10, 2026

About this 10-K

Gap Inc filed this 10-K on March 16, 2021, covering the fiscal year ended January 30, 2021 (FY2021).

Headline figures

Fiscal year ended January 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $13.8B; down 15.8% from $16.38B a year earlier
Net loss: $665M; compared with net income of $351M a year earlier
Diluted EPS: -$1.78; compared with $0.93 a year earlier

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Delaware			94-1697231
(State of Incorporation)			(I.R.S. Employer Identification No.)


		Page
PART I

Item 1.	Business	1

Item 1A.	Risk Factors	9

Item 1B.	Unresolved Staff Comments	22

Item 2.	Properties	22

Item 3.	Legal Proceedings	22

Item 4.	Mine Safety Disclosures	22

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	23

Item 6.	Selected Financial Data	25

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 8.	Financial Statements and Supplementary Data	41

Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	79

Item 9A.	Controls and Procedures	80

Item 9B.	Other Information	80

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	81

Item 11.	Executive Compensation	81

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	81

Item 13.	Certain Relationships and Related Transactions, and Director Independence	81

Item 14.	Principal Accounting Fees and Services	81

PART IV

Item 15.	Exhibits, Financial Statement Schedules	82

Item 16.	Form 10-K Summary	88


	1/30/2016		1/28/2017		2/3/2018		2/2/2019		2/1/2020		1/30/2021
The Gap, Inc.	$	100.00	$	94.99	$	139.77	$	112.65	$	82.57	$	96.04
S&P 500	$	100.00	$	120.04	$	151.74	$	148.23	$	180.37	$	211.48
Dow Jones U.S. Apparel Retailers	$	100.00	$	98.56	$	112.18	$	121.92	$	135.90	$	145.29


	February 1, 2020	Fiscal 2020		January 30, 2021
	Number of Store Locations	Number of Stores Opened	Number of Stores Closed (1)	Number of Store Locations		Square Footage (in millions)
Old Navy North America	1,207	32	19	1,220		19.6
Old Navy Asia	17	—	17	—		—
Gap North America	675	2	121	556		5.8
Gap Asia	358	16	34	340		2.9
Gap Europe	137	4	24	117		1.0
Banana Republic North America	541	3	73	471		4.0
Banana Republic Asia	48	5	6	47		0.2

Athleta North America	190	11	2	199		0.8
Intermix North America	33	—	2	31		0.1
Janie and Jack North America	139	—	20	119		0.2
Company-operated stores total	3,345	73	318	3,100		34.6
Franchise	574	67	26	615		N/A
Total	3,919	140	344	3,715		34.6
Decrease over prior year				(5.2)	%	(6.5)	%

	February 2, 2019	Fiscal 2019		February 1, 2020
	Number of Store Locations	Number of Stores Opened	Number of Stores Closed	Number of Store Locations		Square Footage (in millions)
Old Navy North America	1,139	73	5	1,207		19.5
Old Navy Asia	15	4	2	17		0.2
Gap North America	758	4	87	675		7.1
Gap Asia	332	61	35	358		3.2
Gap Europe	152	4	19	137		1.1
Banana Republic North America	556	9	24	541		4.6
Banana Republic Asia	45	5	2	48		0.2

Athleta North America	161	29	—	190		0.8
Intermix North America	36	—	3	33		0.1
Janie and Jack North America (2)	—	—	—	139		0.2
Company-operated stores total	3,194	189	177	3,345		37.0
Franchise	472	140	38	574		N/A
Total	3,666	329	215	3,919		37.0
Increase over prior year				6.9	%	0.8	%


($ in millions)	Fiscal Year
	2020			2019			2018
Cost of goods sold and occupancy expenses	$	9,095		$	10,250		$	10,258
Gross profit	$	4,705		$	6,133		$	6,322
Cost of goods sold and occupancy expenses as a percentage of net sales	65.9		%	62.6		%	61.9		%
Gross margin	34.1		%	37.4		%	38.1		%


☑			Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
			For the transition period from to


($ in millions)	January 30, 2021		February 1, 2020
Cash and cash equivalents	$	1,988	$	1,364
Short-term investments	410		290
Debt
5.95 percent 2021 Notes	—		1,249
8.375 percent 2023 Notes	500		—
8.625 percent 2025 Notes	750		—
8.875 percent 2027 Notes	1,000		—
Working capital	2,124		1,307
Current ratio	1.55:1		1.41:1


Scheduled Maturity ($ in millions)	Principal		Interest Rate		Interest Payments
Senior Secured Notes (1)
May 15, 2023	$	500	8.375	%	Semi-Annual
May 15, 2025	750		8.625	%	Semi-Annual
May 15, 2027	1,000		8.875	%	Semi-Annual
Total issuance	$	2,250



			Page

Report of Independent Registered Public Accounting Firm			42

Consolidated Balance Sheets as of January 30, 2021 and February 1, 2020			46

Consolidated Statements of Operations for the fiscal years ended January 30, 2021, February 1, 2020, and February 2, 2019			47

Consolidated Statements of Comprehensive Income (Loss) for the fiscal years ended January 30, 2021, February 1, 2020, and February 2, 2019			48

Consolidated Statements of Stockholders' Equity for the fiscal years ended January 30, 2021, February 1, 2020, and February 2, 2019			49

Consolidated Statements of Cash Flows for the fiscal years ended January 30, 2021, February 1, 2020, and February 2, 2019			50

Notes to Consolidated Financial Statements			51


($ and shares in millions except par value)	January 30, 2021		February 1, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	1,988	$	1,364
Short-term investments	410		290
Merchandise inventory	2,451		2,156
Other current assets	1,159		706
Total current assets	6,008		4,516
Property and equipment, net of accumulated depreciation	2,841		3,122
Operating lease assets	4,217		5,402
Other long-term assets	703		639
Total assets	$	13,769	$	13,679
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:

Accounts payable	$	1,743	$	1,174
Accrued expenses and other current liabilities	1,276		1,067
Current portion of operating lease liabilities	831		920
Income taxes payable	34		48
Total current liabilities	3,884		3,209
Long-term liabilities:
Long-term debt	2,216		1,249
Long-term operating lease liabilities	4,617		5,508
Other long-term liabilities	438		397
Total long-term liabilities	7,271		7,154
Commitments and contingencies (see Note 14)
Stockholders' equity:
Common stock $0.05 par value
Authorized 2,300 shares for all periods presented; Issued and Outstanding 374 and 371 shares	19		19
Additional paid-in capital	85		—
Retained earnings	2,501		3,257
Accumulated other comprehensive income	9		40
Total stockholders' equity	2,614		3,316
Total liabilities and stockholders' equity	$	13,769	$	13,679


	Fiscal Year
($ and shares in millions except per share amounts)	2020		2019		2018
Net sales	$	13,800	$	16,383	$	16,580
Cost of goods sold and occupancy expenses	9,095		10,250		10,258
Gross profit	4,705		6,133		6,322
Operating expenses	5,567		5,559		4,960
Operating income (loss)	(862)		574		1,362
Loss on extinguishment of debt	58		—		—
Interest expense	192		76		73
Interest income	(10)		(30)		(33)
Income (loss) before income taxes	(1,102)		528		1,322
Income taxes	(437)		177		319
Net income (loss)	$	(665)	$	351	$	1,003
Weighted-average number of shares—basic	374		376		385
Weighted-average number of shares—diluted	374		378		388
Earnings (loss) per share—basic	$	(1.78)	$	0.93	$	2.61
Earnings (loss) per share—diluted	$	(1.78)	$	0.93	$	2.59


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income
($ and shares in millions except per share amounts)	Shares	Amount								Total
Balance as of February 3, 2018	389	$	19	$	8	$	3,081	$	36	$	3,144
Cumulative effect of a change in accounting principle related to revenue recognition						36				36
Net income						1,003				1,003
Other comprehensive loss, net of tax
Foreign currency translation								(17)		(17)
Change in fair value of derivative instruments								54		54
Amounts reclassified from accumulated other comprehensive income								(20)		(20)
Repurchases and retirement of common stock	(14)	—		(132)		(266)				(398)
Issuance of common stock related to stock options and employee stock purchase plans	2	—		46						46
Issuance of common stock and withholding tax payments related to vesting of stock units	1	—		(23)						(23)
Share-based compensation, net of forfeitures				101						101
Common stock dividends declared and paid ($0.97 per share)						(373)				(373)
Balance as of February 2, 2019	378	19		—		3,481		53		3,553
Cumulative effect of a change in accounting principle related to leases						(86)				(86)
Net income						351				351
Other comprehensive income, net of tax
Foreign currency translation								(2)		(2)
Change in fair value of derivative instruments								13		13
Amounts reclassified from accumulated other comprehensive income								(24)		(24)
Repurchases and retirement of common stock	(10)	—		(75)		(125)				(200)
Issuance of common stock related to stock options and employee stock purchase plans	1	—		25						25
Issuance of common stock and withholding tax payments related to vesting of stock units	2	—		(21)						(21)
Share-based compensation, net of forfeitures				71						71
Common stock dividends declared and paid ($0.97 per share)						(364)				(364)
Balance as of February 1, 2020	371	19		—		3,257		40		3,316

Net income (loss)						(665)				(665)
Other comprehensive loss, net of tax
Foreign currency translation								(17)		(17)
Change in fair value of derivative instruments								(3)		(3)
Amounts reclassified from accumulated other comprehensive income								(11)		(11)

Issuance of common stock related to stock options and employee stock purchase plans	2	—		22						22
Issuance of common stock and withholding tax payments related to vesting of stock units	1	—		(9)						(9)
Share-based compensation, net of forfeitures				72						72
Common stock dividends declared ($0.2425 per share) (1)						(91)				(91)
Balance as of January 30, 2021	374	$	19	$	85	$	2,501	$	9	$	2,614


Category						Term
Leasehold improvements						Shorter of remaining lease term or economic life, up to 15 years
Furniture and equipment						Up to 10 years
Software						3 to 7 years
Buildings and building improvements						Up to 39 years


			Fair Value Measurements at Reporting Date Using
($ in millions)	January 30, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	375	$	25	$	350	$	—
Short-term investments	410		342		68		—
Derivative financial instruments	5		—		5		—
Deferred compensation plan assets	43		43		—		—
Other assets	2		—		—		2
Total	$	835	$	410	$	423	$	2
Liabilities:
Derivative financial instruments	$	21	$	—	$	21	$	—


	Fiscal Year
($ in millions)	2020		2019		2018
Net cash provided by operating activities	$	237	$	1,411	$	1,381
Less: Purchases of property and equipment (1)	(392)		(702)		(705)
Free cash flow	$	(155)	$	709	$	676


	Location and Amount of (Gain) Loss Recognized in Income (loss)
	Fiscal Year 2020				Fiscal Year 2019				Fiscal Year 2018
($ in millions)	Cost of goods sold and occupancy expenses		Operating expenses		Cost of goods sold and occupancy expenses		Operating expenses		Cost of goods sold and occupancy expenses		Operating expenses
Total amount of expense line items presented on the Consolidated Statements of Operations in which the effects of derivatives are recorded	$	9,095	$	5,567	$	10,250	$	5,559	$	10,258	$	4,960

(Gain) loss recognized in income (loss):
Derivatives designated as cash flow hedges	$	(13)	$	—	$	(29)	$	—	$	(13)	$	(1)
Derivatives not designated as hedging instruments	—		15		—		(4)		—		(33)
Total (gain) loss recognized in income (loss)	$	(13)	$	15	$	(29)	$	(4)	$	(13)	$	(34)


	Fiscal Year
($ and shares in millions except average per share cost)	2020		2019		2018
Number of shares repurchased (1)	—		10		14
Total cost	$	—	$	200	$	398
Average per share cost including commissions	$	—	$	19.18	$	28.93


	Shares	Weighted-Average Grant-Date Fair Value Per Share
Balance as of February 1, 2020	6,962,409	$	24.33
Granted	8,827,881	$	11.22

Vested	(2,699,411)	$	24.26
Forfeited	(1,601,983)	$	16.80
Balance as of January 30, 2021	11,488,896	$	15.33


	Fiscal Year
($ in millions except per share amounts)	2020		2019		2018
Weighted-average fair value per share of Stock Units granted	$	11.22	$	21.93	$	29.33
Fair value of Stock Units vested	$	65	$	66	$	58


	Shares	Weighted- Average Exercise Price Per Share
Balance as of February 1, 2020	11,436,022	$	28.26
Granted	5,446,299	$	9.22
Exercised	(99,300)	$	22.67
Forfeited/Expired	(4,391,089)	$	27.33
Balance as of January 30, 2021	12,391,932	$	20.27


	Intrinsic Value as of January 30, 2021 (in millions)		Number of Shares as of January 30, 2021	Weighted- Average Remaining Contractual Life (in years)	Weighted- Average Exercise Price Per Share
Options Outstanding	$	58	12,391,932	7.6	$	20.27
Options Exercisable	$	—	4,392,298	5.6	$	29.31


($ in millions)
Fiscal Year
2021	$	1,071
2022	958
2023	836
2024	738
2025	626
Thereafter	2,575
Total minimum lease payments	6,804
Less: Interest	(1,356)
Present value of operating lease liabilities	5,448
Less: Current portion of operating lease liabilities (1)	(831)

Long-term operating lease liabilities (1)	$	4,617


	Fiscal Year
(shares in millions)	2020	2019	2018
Weighted-average number of shares—basic	374	376	385
Common stock equivalents (1)	—	2	3
Weighted-average number of shares—diluted	374	378	388


($ in millions)	Old Navy Global		Gap Global		Banana Republic Global		Other (2)		Total
Fiscal 2020
U.S. (1)	$	6,898	$	2,099	$	1,242	$	1,411	$	11,650
Canada	578		261		130		3		972
Europe	—		319		10		—		329
Asia	4		642		64		—		710
Other regions	56		67		16		—		139
Total	$	7,536	$	3,388	$	1,462	$	1,414	$	13,800

($ in millions)	Old Navy Global		Gap Global		Banana Republic Global (3)		Other (4)		Total
Fiscal 2019
U.S. (1)	$	7,259	$	2,723	$	2,191	$	1,225	$	13,398
Canada	587		349		215		2		1,153
Europe	—		525		14		—		539
Asia	45		943		96		—		1,084
Other regions	92		94		23		—		209
Total	$	7,983	$	4,634	$	2,539	$	1,227	$	16,383

($ in millions)	Old Navy Global		Gap Global		Banana Republic Global		Other (4)		Total
Fiscal 2018
U.S. (1)	$	7,134	$	2,990	$	2,095	$	1,121	$	13,340
Canada	584		379		227		3		1,193
Europe	—		589		14		—		603
Asia	50		1,089		94		—		1,233
Other regions	72		113		26		—		211
Total	$	7,840	$	5,160	$	2,456	$	1,124	$	16,580


1.			Financial Statements: See “Index to Consolidated Financial Statements” in Part II, Item 8 of this Form 10-K.


2.			Financial Statement Schedules: Schedules are included in the Consolidated Financial Statements or notes of this Form 10-K or are not required.


3.			Exhibits: The exhibits listed in the below Exhibit Index are filed or incorporated by reference as part of this Form 10-K.


		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed/ Furnished Herewith
3.1	Amended and Restated Certificate of Incorporation. (P)	10-K	1-7562	3.1	April 26, 1993

3.2	Certificate of Amendment of Amended and Restated Certificate of Incorporation.	10-K	1-7562	3.2	April 4, 2000

3.3	Amended and Restated Bylaws (effective March 23, 2020).	8-K	1-7562	3.1	March 5, 2020

4.1	Indenture, dated as of May 7, 2020, by and among the Registrant, the Guarantors party thereto and U.S. Bank National Association as trustee and as collateral agent.	8-K	1-7562	4.1	May 8, 2020

4.2	Form of 8.375% Senior Secured Notes due 2023, included as Exhibit A-1 to the Indenture.	8-K	1-7562	4.2	May 8, 2020

4.3	Form of 8.625% Senior Secured Notes due 2025, included as Exhibit A-2 to the Indenture.	8-K	1-7562	4.3	May 8, 2020

4.4	Form of 8.875% Senior Secured Notes due 2027, included as Exhibit A-3 to the Indenture.	8-K	1-7562	4.4	May 8, 2020

4.5	Description of Registrant's securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.	10-K	1-7562	4.4	March 17, 2020

10.1	Third Amended and Restated Revolving Credit Agreement dated as of May 7, 2020.	8-K	1-7562	10.1	May 8, 2020

10.2*	Amended and Restated Consumer Credit Card Program Agreement by and among Registrant, Gap (Puerto Rico), Inc., GPS Consumer Direct, Inc., Gap (Apparel), LLC, Gap (ITM) Inc., GE Capital Retail Bank and GE Capital Retail Finance Corporation, dated as of February 28, 2014.	10-Q/A	1-7562	10.1	October 10, 2014

10.3	First Amendment to Amended and Restated Consumer Credit Card Program Agreement by and among Registrant, Gap (Puerto Rico), Inc., GPS Consumer Direct, Inc., Gap (Apparel), LLC, Gap (ITM) Inc., Synchrony Bank (f/k/a GE Capital Retail Bank) and Synchrony Financial, dated as of January 31, 2015.	10-K	1-7562	10.12	March 23, 2015

10.4*	Second Amendment to Amended and Restated Consumer Credit Card Program Agreement by and among Registrant, Gap (Puerto Rico), Inc., GPS Consumer Direct, Inc., Gap (Apparel), LLC, Gap (ITM) Inc., Synchrony Bank (f/k/a GE Capital Retail Bank) and Synchrony Financial, dated as of May 8, 2015.	10-Q	1-7562	10.1	September 8, 2015