PaulMcKinnon Investment overview I give a buy rating for The Gap, Inc. (NYSE:GAP), as I expect GAP to sustain its growth momentum, potentially driving it back to low-single-digit growth in FY25. This should be accompanied by an expanding adj earnings margin (in line with historical trend). As these happen, valuation multiples should see an upside reversion. Business description GAP is an apparel retail company that sells its products under the following key brands: Old Navy, Gap, Banana Republic, and Ath ...

Editor's note: Seeking Alpha is proud to welcome Bulldog Research as a new contributing analyst. You can become one too! Share your best investment idea by submitting your article for review to our editors. Get published, earn money, and unlock exclusive SA Premium access. Click here to find out more » PM Images Background The Gap, Inc. (“GAP” or “the Company”) (NYSE:GAP) is a collection of lifestyle brands offering apparel, accessories, and personal care products for women, men, and children under the ...

As the retail sector faces a complex mix of opportunities and challenges, Gap and Lululemon are charting distinct courses in their recent earnings reports. While Gap focuses on revitalizing its core brands during ongoing operational hurdles, Lululemon is capitalizing on international growth and stellar performance in athleisure.Gap’s Brand RefreshUnder CEO Richard Dickson, Gap has shown resilience in its efforts to rejuvenate its brand portfolio. The company reported a 5% increase in second-quarter net sale ...

For the quarterly period ended August 3, 2024 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 or UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-7562 THE GAP, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organiz ...

The Gap, Inc. (NYSE:GAP) Q2 2024 Earnings Conference Call August 29, 2024 5:00 PM ET Company Participants Whitney Notaro - Director, IR Richard Dickson - CEO Katrina O'Connell - CFO Conference Call Participants Robert Drbul - Guggenheim Alex Straton - Morgan Stanley Matthew Boss - JPMorgan Ike Boruchow - Wells Fargo Lorraine Hutchinson - Bank of America Adrienne Yih - Barclays Mark Altschwager - Baird Jonna Kim - TD Cowen Dana Telsey - Telsey Advisory Group Operator Good afternoon, ladies and gentlemen, I w ...

Core Insights - Gap reported second-quarter earnings and revenue that surpassed analysts' expectations, driven by increased sales at its Old Navy and Gap stores [1] - The company raised its outlook for gross margin and operating income, indicating a positive trajectory for financial performance [1] Financial Performance - Gap's second-quarter diluted earnings per share (EPS) were 54 cents, with revenue increasing by 4.8% year-over-year to $3.72 billion, both exceeding estimates [1] - Gross margin improved by 500 basis points to 42.6% [1] - Same-store sales rose by 3% overall, with Old Navy seeing a 5% increase, while Gap's namesake brand also grew by 3%. Banana Republic's same-store sales were flat, and Athleta's fell by 4% [1] Management Commentary - CEO Richard Dickson highlighted the company's stronger position compared to the previous year across key metrics such as net sales, margins, and cash position, emphasizing ongoing progress in brand revitalization [1] Future Outlook - The company now expects full-year gross margin to increase by approximately 200 basis points, up from a previous estimate of at least 150 basis points [1] - Operating income is anticipated to grow in the mid-to-high 50% range, compared to an earlier forecast in the mid 40% range [1] Trading Activity - Following an early release of results that led to a temporary trading halt, Gap's shares closed 1.7% higher at $22.80, marking a 9% increase since the beginning of the year [2]

Gap (GAP) reported $3.72 billion in revenue for the quarter ended July 2024, representing a year-over-year increase of 4.9%. EPS of $0.54 for the same period compares to $0.34 a year ago.The reported revenue represents a surprise of +2.93% over the Zacks Consensus Estimate of $3.61 billion. With the consensus EPS estimate being $0.39, the EPS surprise was +38.46%.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall Street expectatio ...

Company Performance - Gap reported quarterly earnings of $0.54 per share, exceeding the Zacks Consensus Estimate of $0.39 per share, and up from $0.34 per share a year ago, representing an earnings surprise of 38.46% [1] - The company achieved revenues of $3.72 billion for the quarter ended July 2024, surpassing the Zacks Consensus Estimate by 2.93% and increasing from $3.55 billion year-over-year [1] - Over the last four quarters, Gap has consistently surpassed consensus EPS and revenue estimates [1] Stock Performance and Outlook - Gap shares have increased by approximately 7.3% since the beginning of the year, while the S&P 500 has gained 17.2% [2] - The company's future stock performance will largely depend on management's commentary during the earnings call and the earnings outlook [2][3] - Current consensus EPS estimate for the upcoming quarter is $0.58 on revenues of $3.81 billion, and for the current fiscal year, it is $1.76 on revenues of $14.91 billion [4] Industry Context - The Retail - Apparel and Shoes industry, to which Gap belongs, is currently ranked in the bottom 42% of over 250 Zacks industries, indicating potential challenges ahead [5] - Another company in the same industry, J.Jill, is expected to report quarterly earnings of $0.94 per share, reflecting a year-over-year decline of 14.6% [5] - J.Jill's anticipated revenues are $155.13 million, down 0.3% from the previous year [6]

[Second Quarter Fiscal 2024 Financial Highlights](index=1&type=section&id=Second%20Quarter%20Fiscal%202024%20%E2%80%93%20Financial%20Results) Gap Inc. reported strong second-quarter results, exceeding expectations with a **5% increase** in net sales to **$3.7 billion** and a **3% rise** in comparable sales. The company achieved significant margin expansion, with operating margin improving by **490 basis points** to **7.9%**. This performance was driven by market share gains for the **sixth consecutive quarter**, strength in online sales, and improved merchandise margins - The company gained market share for the **6th consecutive quarter**, reflecting the successful execution of its brand reinvigoration strategy[1](index=1&type=chunk)[2](index=2&type=chunk) Q2 Fiscal 2024 Key Financial Metrics | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $3.7 billion | $3.55 billion | +5% YoY | | Comparable Sales | +3% | -6% | N/A | | Gross Margin | 42.6% | 37.6% | +500 bps YoY | | Operating Margin | 7.9% | 3.0% | +490 bps YoY | | Net Income | $206 million | $117 million | +76% YoY | | Diluted EPS | $0.54 | $0.32 | +$0.22 YoY | - Sales growth was supported by a **4% increase** in store sales and a **7% increase** in online sales, which now represent **33%** of total net sales[3](index=3&type=chunk) - Gross margin improvement was primarily driven by a **410 basis point increase** in merchandise margin, benefiting from lower commodity costs and improved promotional activity[3](index=3&type=chunk) [Global Brand Performance](index=2&type=section&id=Second%20Quarter%20Fiscal%202024%20%E2%80%93%20Global%20Brand%20Results) Brand performance was led by strong results at Old Navy and Gap, which both saw positive comparable sales growth for the fourth and third consecutive quarters, respectively. Old Navy's net sales grew **8%**, and Gap's grew **1%**. Banana Republic's sales were flat, showing stabilization, while Athleta's sales declined slightly, though it is expected to return to growth in the second half of the year Comparable Sales Growth by Brand (Q2 2024 vs. Q2 2023) | Brand | Q2 2024 Comp Sales | Q2 2023 Comp Sales | | :--- | :--- | :--- | | Old Navy | 5% | (6)% | | Gap | 3% | (1)% | | Banana Republic | 0% | (8)% | | Athleta | (4)% | (7)% | | **Gap Inc. Total** | **3%** | **(6)%** | - **Old Navy:** Net sales reached **$2.1 billion**, up **8% YoY**, with comparable sales up **5%**. This marks the **fourth consecutive quarter** of positive comparable sales[7](index=7&type=chunk) - **Gap:** Net sales were **$766 million**, up **1% YoY**, with comparable sales up **3%**. This is the **third consecutive quarter** of positive comparable sales, with market share gains for **five straight quarters**[7](index=7&type=chunk) - **Banana Republic:** Net sales of **$479 million** were flat YoY, as were comparable sales, as the brand focuses on improving pricing and assortment[8](index=8&type=chunk) - **Athleta:** Net sales of **$338 million** were down **1% YoY**, with comparable sales down **4%**. The company expects Athleta to return to positive comparable sales growth for the rest of the year[9](index=9&type=chunk) [Balance Sheet and Cash Flow](index=2&type=section&id=Balance%20Sheet%20and%20Cash%20Flow%20Highlights) The company significantly strengthened its financial position, ending the quarter with **$2.1 billion** in cash and equivalents, a **59% increase** from the prior year. Free cash flow was robust at **$397 million**, and inventory levels were reduced by **5%** to **$2.11 billion**, reflecting disciplined management. The company also maintained its dividend, paying **$0.15 per share** Key Balance Sheet and Cash Flow Metrics (as of August 3, 2024) | Metric | Q2 2024 | YoY Change | | :--- | :--- | :--- | | Cash, Cash Equivalents & Short-term Investments | $2.1 billion | +59% | | Ending Inventory | $2.11 billion | -5% | | Net Cash from Operating Activities (26 Weeks) | $579 million | +10% | | Free Cash Flow (26 Weeks) | $397 million | +21% | - The company paid a second-quarter dividend of **$0.15 per share**, totaling **$56 million**, and the Board approved a third-quarter dividend of the same amount[5](index=5&type=chunk) [Fiscal 2024 Outlook](index=3&type=section&id=Fiscal%202024%20Outlook) Following strong Q2 performance, Gap Inc. raised its full-year guidance for gross margin and operating income growth. The company now expects gross margin to expand by approximately **200 basis points** and operating income to grow in the **mid to high 50% range**. The outlook for net sales remains 'up slightly' on a 52-week basis [Full Year Fiscal 2024 Outlook](index=3&type=section&id=Full%20Year%20Fiscal%202024) Full Year Fiscal 2024 Guidance Update | Metric | Current FY 2024 Outlook | Prior FY 2024 Outlook | FY 2023 Results | | :--- | :--- | :--- | :--- | | Net Sales | Up slightly (52-week basis) | Up slightly (52-week basis) | $14.9 billion | | Gross Margin | Approx. 200 bps expansion | At least 150 bps expansion | 38.8% | | Operating Income | Mid to High 50% growth | Mid 40% growth | $606 million (adj.) | | Operating Expense | Approx. $5.1 billion | Approx. $5.1 billion | $5.17 billion (adj.) | | Capital Expenditures | Approx. $500 million | Approx. $500 million | $420 million | [Third Quarter (Q3) 2024 Outlook](index=3&type=section&id=Q3%202024%20Outlook) Q3 2024 Guidance | Metric | Q3 2024 Outlook | Q3 2023 Results | | :--- | :--- | :--- | | Net Sales | Up slightly | $3.77 billion | | Gross Margin | 50 to 75 bps expansion | 41.3% | | Operating Expense | Approx. $1.3 billion | $1.3 billion | [Supplementary Information](index=8&type=section&id=Supplementary%20Information) This section provides the detailed unaudited financial statements, including the Condensed Consolidated Balance Sheets, Statements of Operations, and Statements of Cash Flows. It also includes reconciliations for non-GAAP measures, a detailed breakdown of net sales by brand and region, and an overview of the company's real estate portfolio [Consolidated Financial Statements](index=8&type=section&id=Consolidated%20Financial%20Statements) - The report includes unaudited condensed consolidated financial statements for the period ended August 3, 2024[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) Financial Statement Summary (as of August 3, 2024) | Metric | Amount | | :--- | :--- | | Total Assets | $11.51 billion | | Total Liabilities | $8.61 billion | | Total Stockholders' Equity | $2.90 billion | | Net Income (26 Weeks) | $364 million | [Non-GAAP Financial Measures](index=4&type=section&id=Non-GAAP%20Financial%20Measures) - The company uses non-GAAP measures such as free cash flow and adjusted operating income to provide additional insight into its core financial performance, excluding items like restructuring costs[14](index=14&type=chunk)[15](index=15&type=chunk) Free Cash Flow Reconciliation (26 Weeks Ended) | ($ in millions) | August 3, 2024 | July 29, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $579 | $528 | | Less: Purchases of property and equipment | ($182) | ($199) | | **Free cash flow** | **$397** | **$329** | [Net Sales and Real Estate Details](index=13&type=section&id=Net%20Sales%20and%20Real%20Estate) - In Q2 2024, the U.S. region accounted for **$3.29 billion** of the total **$3.72 billion** in net sales[31](index=31&type=chunk) - As of August 3, 2024, the company operated a total of **3,568 stores**, including **2,541 company-operated** and **1,027 franchise locations**. The total number of company-operated stores decreased by a net of **21** in the first half of the year[34](index=34&type=chunk) [Disclosures](index=4&type=section&id=Disclosures) This section contains important legal information, including the 'safe harbor' statement regarding forward-looking statements. It outlines numerous risks and uncertainties that could cause actual results to differ from projections, such as the global economic environment, competitive pressures, and supply chain disruptions - The report contains forward-looking statements concerning strategic priorities, brand reinvigoration, financial outlook, and other projections[17](index=17&type=chunk)[18](index=18&type=chunk) - Key risk factors cited include the global economic and geopolitical environment, the highly competitive nature of the apparel business, failure to manage inventory effectively, and risks associated with global sourcing and manufacturing[18](index=18&type=chunk)[19](index=19&type=chunk)

Net sales increased 5% versus last year with market share gains for the 6th consecutive quarterComparable sales were up 3% driven by strength at Old Navy and GapOperating margin of 7.9% improved 490 basis points versus last yearIncreases outlook for fiscal 2024 gross margin and operating income growth SAN FRANCISCO, Aug. 29, 2024 /PRNewswire/ -- Gap Inc. (NYSE: GAP), the largest specialty apparel company in the U.S. and a house of iconic brands including Old Navy, Gap, Banana Republic, and Athleta, today re ...