Gap Inc 10-Q, filed Aug 25, 2023

Gap Inc (GAP)

10-Q 2023-08-25 For: 2023-07-29

Added on April 10, 2026

About this 10-Q

Gap Inc filed this 10-Q on August 25, 2023, covering the quarter ended July 29, 2023.

Headline figures

Quarter ended July 29, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $3.55B; down 8.0% from $3.86B a year earlier
Net income: $117M; compared with a net loss of $49M a year earlier
Diluted EPS: $0.32; compared with -$0.13 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


Delaware						94-1697231
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


		Page
	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets as of July 29, 2023, January 28, 2023, and July 30, 2022	1

	Condensed Consolidated Statements of Operations for the 13 Weeks and 26 Weeks Ended July 29, 2023 and July 30, 2022	2

	Condensed Consolidated Statements of Comprehensive Income (Loss ) for the 13 Weeks and 26 Weeks Ended July 29, 2023 and July 30, 2022	3

	Condensed Consolidated Statements of Stockholders' Equity for the 13 Weeks and 26 Weeks Ended Ju ly 29, 2023 and July 30, 2022	4

	Condensed Consolidated Statements of Cash Flows for the 26 Weeks Ended July 29, 2023 and July 30, 2022	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4.	Controls and Procedures	25

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	26

Item 1A.	Risk Factors	26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 5.	Other Information	26

Item 6.	Exhibits	27


($ and shares in millions except par value)	July 29, 2023		January 28, 2023		July 30, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	1,350	$	1,215	$	708

Merchandise inventory	2,226		2,389		3,135
Other current assets	663		1,013		1,106
Total current assets	4,239		4,617		4,949
Property and equipment, net of accumulated depreciation of $4,841, $4,837, and $4,950	2,595		2,688		2,809
Operating lease assets	3,113		3,173		3,532
Other long-term assets	903		908		881
Total assets	$	10,850	$	11,386	$	12,171
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,406	$	1,320	$	1,640
Accrued expenses and other current liabilities	1,007		1,219		1,216
Current portion of operating lease liabilities	578		667		717
Income taxes payable	16		50		41
Total current liabilities	3,007		3,256		3,614
Long-term liabilities:
Revolving credit facility	150		350		350
Long-term debt	1,487		1,486		1,485
Long-term operating lease liabilities	3,433		3,517		3,857
Other long-term liabilities	510		544		560
Total long-term liabilities	5,580		5,897		6,252
Commitments and contingencies (see Note 10)
Stockholders’ equity:
Common stock $0.05 par value
Authorized 2,300 shares for all periods presented; Issued and Outstanding 369, 366, and 364 shares	18		18		18
Additional paid-in capital	73		27		—
Retained earnings	2,128		2,140		2,241
Accumulated other comprehensive income	44		48		46
Total stockholders’ equity	2,263		2,233		2,305
Total liabilities and stockholders’ equity	$	10,850	$	11,386	$	12,171


	13 Weeks Ended				26 Weeks Ended
($ and shares in millions except per share amounts)	July 29, 2023		July 30, 2022		July 29, 2023		July 30, 2022
Net sales	$	3,548	$	3,857	$	6,824	$	7,334
Cost of goods sold and occupancy expenses	2,215		2,527		4,277		4,908
Gross profit	1,333		1,330		2,547		2,426
Operating expenses	1,227		1,358		2,451		2,651
Operating income (loss)	106		(28)		96		(225)

Interest expense	15		21		38		41
Interest income	(17)		(1)		(30)		(2)
Income (loss) before income taxes	108		(48)		88		(264)
Income tax expense (benefit)	(9)		1		(11)		(53)
Net income (loss)	$	117	$	(49)	$	99	$	(211)
Weighted-average number of shares - basic	369		367		368		369
Weighted-average number of shares - diluted	371		367		372		369
Earnings (loss) per share - basic	$	0.32	$	(0.13)	$	0.27	$	(0.57)
Earnings (loss) per share - diluted	$	0.32	$	(0.13)	$	0.27	$	(0.57)


	13 Weeks Ended				26 Weeks Ended
($ in millions)	July 29, 2023		July 30, 2022		July 29, 2023		July 30, 2022
Net income (loss)	$	117	$	(49)	$	99	$	(211)
Other comprehensive income (loss), net of tax
Foreign currency translation	(3)		4		(4)		7
Change in fair value of derivative financial instruments, net of tax expense of $—, $—, $2, $2	(2)		2		6		9
Reclassification adjustment for gains on derivative financial instruments, net of (tax expense) tax benefit of $(1), $1, $(1), $—	(4)		(6)		(6)		(8)
Other comprehensive income (loss), net of tax	(9)		—		(4)		8
Comprehensive income (loss)	$	108	$	(49)	$	95	$	(203)


☑			QUARTERLY 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


	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 April 29, 2023	368	$	18	$	47	$	2,067	$	53	$	2,185
Net income for the 13 weeks ended July 29, 2023						117				117
Other comprehensive loss, net of tax
Foreign currency translation								(3)		(3)
Change in fair value of derivative financial instruments								(2)		(2)
Amounts reclassified from accumulated other comprehensive income								(4)		(4)

Issuance of common stock related to stock options and employee stock purchase plans	1	—		6						6
Issuance of common stock and withholding tax payments related to vesting of stock units	—	—		(1)						(1)
Share-based compensation, net of forfeitures				21						21
Common stock dividends declared and paid ($0.15 per share)						(56)				(56)
Balance as of July 29, 2023	369	$	18	$	73	$	2,128	$	44	$	2,263

Balance as of April 30, 2022	369	$	19	$	—	$	2,389	$	46	$	2,454

Net loss for the 13 weeks ended July 30, 2022						(49)				(49)
Other comprehensive income (loss), net of tax
Foreign currency translation								4		4
Change in fair value of derivative financial instruments								2		2
Amounts reclassified from accumulated other comprehensive income								(6)		(6)
Repurchases and retirement of common stock	(5)	(1)		(12)		(44)				(57)
Issuance of common stock related to stock options and employee stock purchase plans	—	—		8						8
Issuance of common stock and withholding tax payments related to vesting of stock units	—	—		(1)						(1)
Share-based compensation, net of forfeitures				5						5
Common stock dividends declared and paid ($0.15 per share)						(55)				(55)
Balance as of July 30, 2022	364	$	18	$	—	$	2,241	$	46	$	2,305


($ in millions)	Old Navy Global		Gap Global		Banana Republic Global		Athleta Global		Other (2)		Total
13 Weeks Ended July 29, 2023
U.S. (1)	$	1,777	$	542	$	415	$	327	$	11	$	3,072
Canada	165		76		44		13		—		298
Europe	1		29		—		—		—		30
Asia	—		77		14		—		—		91
Other regions	18		31		7		1		—		57
Total	$	1,961	$	755	$	480	$	341	$	11	$	3,548


	13 Weeks Ended July 29, 2023						26 Weeks Ended July 29, 2023
($ in millions)	Cost of Goods Sold and Occupancy Expenses		Operating Expenses		Total Costs		Cost of Goods Sold and Occupancy Expenses		Operating Expenses		Total Costs
Employee-related costs	$	—	$	3	$	3	$	4	$	61	$	65
Consulting and other associated costs	—		10		10		—		23		23
Total restructuring costs	$	—	$	13	$	13	$	4	$	84	$	88


Scheduled Maturity ($ in millions)	Principal		Interest Rate		Interest Payments

October 1, 2029 (1)	$	750	3.625	%	Semi-Annual
October 1, 2031 (2)	750		3.875	%	Semi-Annual
Total issuance	$	1,500


			Fair Value Measurements at Reporting Date Using
($ in millions)	July 29, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	1	$	—	$	1	$	—

Derivative financial instruments	11		—		11		—
Deferred compensation plan assets	36		36		—		—
Other assets	4		—		—		4
Total	$	52	$	36	$	12	$	4
Liabilities:
Derivative financial instruments	$	9	$	—	$	9	$	—
			Fair Value Measurements at Reporting Date Using
($ in millions)	January 28, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	15	$	—	$	15	$	—

Derivative financial instruments	11		—		11		—
Deferred compensation plan assets	34		34		—		—
Other assets	4		—		—		4
Total	$	64	$	34	$	26	$	4
Liabilities:
Derivative financial instruments	$	20	$	—	$	20	$	—
			Fair Value Measurements at Reporting Date Using
($ in millions)	July 30, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	28	$	—	$	28	$	—

Derivative financial instruments	27		—		27		—
Deferred compensation plan assets	41		41		—		—
Other assets	4		—		—		4
Total	$	100	$	41	$	55	$	4
Liabilities:
Derivative financial instruments	$	6	$	—	$	6	$	—


	Location and Amount of (Gain) Loss Recognized in Income (Loss)
	13 Weeks Ended July 29, 2023				13 Weeks Ended July 30, 2022
($ in millions)	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 in the Condensed Consolidated Statements of Operations in which the effects of derivatives are recorded	$	2,215	$	1,227	$	2,527	$	1,358

(Gain) loss recognized in net income (loss)
Derivatives designated as cash flow hedges	(5)		—		(5)		—

Derivatives not designated as hedging instruments	—		10		—		(7)
Total (gain) loss recognized in net income (loss)	$	(5)	$	10	$	(5)	$	(7)


	Location and Amount of (Gain) Loss Recognized in Income (Loss)
	26 Weeks Ended July 29, 2023				26 Weeks Ended July 30, 2022
($ in millions)	Cost of goods sold and occupancy expense		Operating expenses		Cost of goods sold and occupancy expense		Operating expenses
Total amount of expense line items presented in the Condensed Consolidated Statements of Operations in which the effects of derivatives are recorded	$	4,277	$	2,451	$	4,908	$	2,651

(Gain) loss recognized in net income (loss)
Derivatives designated as cash flow hedges	(7)		—		(8)		—
Derivatives not designated as hedging instruments	—		2		—		(29)
Total (gain) loss recognized in net income (loss)	$	(7)	$	2	$	(8)	$	(29)


	13 Weeks Ended				26 Weeks Ended
($ and shares in millions except average per share cost)	July 29, 2023		July 30, 2022		July 29, 2023		July 30, 2022
Number of shares repurchased (1)	—		5.7		—		9.4
Total cost	$	—	$	57	$	—	$	111
Average per share cost including commissions	$	—	$	9.99	$	—	$	11.77


	January 28, 2023	26 Weeks Ended July 29, 2023		July 29, 2023
	Number of Store Locations	Number of Stores Opened	Number of Stores Closed		Number of Store Locations		Square Footage (in millions)
Old Navy North America	1,238	17	8		1,247		19.9
Gap North America	493	—	12		481		5.1
Gap Asia (1)	232	1	4		140		1.2

Banana Republic North America	419	—	11		408		3.4
Banana Republic Asia	46	3	2		47		0.2
Athleta North America	257	15	3		269		1.1
Company-operated stores total	2,685	36	40		2,592		30.9
Franchise (1)	667	101	38		864		N/A
Total	3,352	137	78		3,456		30.9
Increase (decrease) over prior year					1.9	%	(6.4)	%

	January 29, 2022	26 Weeks Ended July 30, 2022		July 30, 2022
	Number of Store Locations	Number of Stores Opened	Number of Stores Closed		Number of Store Locations		Square Footage (in millions)
Old Navy North America	1,252	16	5		1,263		20.2
Gap North America	520	2	12		510		5.4
Gap Asia	329	4	31		302		2.5
Gap Europe (2)	11	—	—		—		—
Banana Republic North America	446	2	11		437		3.7
Banana Republic Asia	50	1	—		51		0.2

Athleta North America	227	13	4		236		1.0
Company-operated stores total	2,835	38	63		2,799		33.0
Franchise (2)	564	30	14		591		N/A
Total	3,399	68	77		3,390		33.0
Decrease over prior year					(3.0)	%	(3.8)	%


	26 Weeks Ended
($ in millions)	July 29, 2023		July 30, 2022
Net cash provided by (used for) operating activities	$	528	$	(207)
Less: Purchases of property and equipment	(199)		(406)

Free cash flow	$	329	$	(613)


		THE GAP, INC.

Date:	August 25, 2023	By	/s/ Richard Dickson
			Richard Dickson
			President and Chief Executive Officer
			(Principal Executive Officer)

Date:	August 25, 2023	By	/s/ Katrina O'Connell
			Katrina O'Connell
			Executive Vice President and Chief Financial Officer
			(Principal Financial and Accounting Officer)


	13 Weeks Ended		26 Weeks Ended
(shares in millions)	July 29, 2023	July 30, 2022	July 29, 2023	July 30, 2022
Weighted-average number of shares - basic	369	367	368	369
Common stock equivalents (1)	2	—	4	—
Weighted-average number of shares - diluted	371	367	372	369


Provision			Relocation Package
Relocation Management			A Relocation Manager from Gap Inc.’s Global Relocation Services Provider will assist you with the logistics of your relocation.
Relocation (Miscellaneous) Allowance			2 weeks’ gross salary, not to exceed US$6,000, to be paid within 30 days of transfer through payroll. Applicable taxes will be withheld from the payment.
House hunting Trip			Maximum of 7 days. Round trip airfare, lodging for 6 nights and meals (in accordance with Gap Inc. Global Travel Policy) for you and your spouse/partner.
Home Sale Assistance*			Reimbursement of closing costs (up to 8%) & offer to purchase transferee’s home at appraised value (Guaranteed Buyout) per Gap Inc. VP & Above Homeowner policy.
Quick Sale Bonus			Bonus payment for selling home to an outside buyer within 60 days of listing (1% of sale price up to US$10,000).
Shipment of Household Goods			Standard shipment in accordance with Gap Inc. VP & Above Homeowner policy.
Pet Shipment			The Company will reimburse the cost of transporting up to two pets (dog, cat or bird).
Home Purchase Assistance**			Direct bill or reimbursement of closing cost up to 2% of loan amount; includes purchase point up to 1% to buy down interest rate through Gap Inc. preferred lenders.
Duplicate Mortgage			The Company will reimburse overlapping mortgage/rent in the event that transferee has housing liability in old and new locations (lesser of the two amounts) for up to one month.
Temporary Living in New Location; Commute			Coverage of temporary housing, either lease reimbursement or company sourced furnished housing, up to $15k per month (prior to tax gross-up) for one year in San Francisco Bay Area. Airfare and airport transfers for employee to commute to/from home in Los Angeles to San Francisco hub for one year (up to $150k prior to gross-up).
Final Move			Reimbursement for final move airfare or mileage, lodging (if required) and meals for transferee, spouse/partner and dependents in accordance with Gap Inc. Global Travel Policy.
Relocation Time-off			If you are an existing employee transferring to a new location, you are eligible to take up to 4 days off from work to look for housing and move into your new location. This time will be considered “relocation hours” and should not be charged against your paid time off (PTO). Your relocation hours should be approved in advance by your old and new hiring managers.
Tax Gross-up			Tax gross-up on all taxable relocation expenses.
Employment Requirement			Must be employed by Gap, Inc. at the time the applicable expense is incurred or the event triggering payment, in-kind benefit or reimbursement occurs.
Signed Payback Agreement			Required.
Internal Revenue Code Section 409A			To the extent a payment, in-kind benefit or reimbursement is deferred compensation subject to, and not exempt from, Section 409A of the Internal Revenue Code of 1986, as amended, the following rules shall apply: (i) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (ii) the reimbursement of an eligible expense must be made no later than the last day of the calendar year following the calendar year in which the expense was incurred, and (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.