Gap(US:GPS)2023-03-09 23:21Financial Data and Key Metrics Changes - Fourth quarter net sales decreased 6% to $4.24 billion, or 5% on a constant currency basis, in line with expectations of mid-single-digit declines [25][24] - Fiscal 2022 net sales were $15.6 billion, down 6% compared to last year, including a 1 point foreign exchange headwind [32] - Fourth quarter net income was a loss of $273 million, with EPS at a loss of $0.75 [31] Business Line Data and Key Metrics Changes - Old Navy sales in the fourth quarter were $2.2 billion, down 6% versus last year, with comparable sales down 7% [26] - Gap brand total sales were $1.1 billion, down 9% versus last year, with comparable sales down 4% [27] - Banana Republic sales were down 6% to $578 million in the fourth quarter, with comparable sales down 3% [28] - Athleta sales were $436 million, down 1%, but up 51% compared to 2019 pre-pandemic levels [29] Market Data and Key Metrics Changes - Store sales decreased 3% from the prior year, while online sales were down 10% and represented 41% of total sales in the quarter [26] - Old Navy maintained market share in the second half of the year, driven by gains in women's [27] - Gap brand experienced continued weakness in the kids and baby categories, offset by strength in women's [28] Company Strategy and Development Direction - The company is undergoing transformative change to build a healthier organization, focusing on cost reduction and improving operational efficiency [21][22] - A simplified leadership and operating structure was announced, aiming for $300 million in annualized savings, with half expected to be realized in fiscal 2023 [8][24] - The company is rationalizing technology investments and optimizing marketing to better align brand messaging [8] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about entering fiscal 2023 in a stronger position, despite ongoing consumer and macroeconomic uncertainties [24][22] - The company is planning for sales to be down in the mid-single-digit range year-over-year for the first quarter, influenced by external factors like the sale of Gap China [39][38] - Management acknowledged challenges in product acceptance, particularly at Athleta, and emphasized the need for improved product offerings [53][29] Other Important Information - The company ended fiscal 2022 with $1.2 billion in cash, an increase of almost 40% from last year [35] - The company plans to close 50 to 55 Gap and Banana Republic stores while opening 30 to 35 Old Navy and Athleta stores [42] - The company is committed to maintaining a quarterly dividend of $0.15 per share [35] Q&A Session Summary Question: Timeline for Old Navy's return to positive comparable sales growth - Management noted improvements in women's strength and inventory cleanup, indicating a positive direction but did not specify a timeline [45][47] Question: Competitive positioning and pricing environment for Old Navy - Management expressed confidence in Old Navy's value proposition and noted a focus on cleaner inventories to reduce promotional aggressiveness [51][52] Question: Inventory planning and responsive capabilities - Management highlighted the importance of responsive capabilities and the opportunity to bring in newness, with a focus on improving stock-to-sales ratios [56][58] Question: Breakdown of $550 million in annualized savings - Management provided details on the savings, including $250 million from previous actions and an additional $300 million from new organizational changes [61][63] Question: Health of the consumer and its impact on sales - Management observed that lower-income consumers are still impacted, but overall consumer health remains stable, with cautious monitoring of trends [70][69]