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Gap
reported its third quarter earnings on Friday. Shares of the company are down five percent.
Below are some key highlights from its conference call:
Financial Metrics:
• Net income for the third quarter was $351 million, and we delivered earnings per share of $0.80, up 11% to last year.
• As a reminder, our Q3 earnings per share of $0.80, includes the non-recurring benefit of about $0.06 from a lower effective tax rate of 34.5% in the quarter.
• Regarding sales for the third quarter; total net sales were flat at $4 billion, and comp sales were down 2%.
• For the quarter, the translation of foreign revenues into dollars negatively impacted our reported sales by $31 million.
• Primarily due to the weakening yen and Canadian dollar. On a constant currency basis, therefore, our revenues were up 1%.
• Moving to gross margins; third quarter gross margins were up 20 basis points to 40.2%.
• We're pleased that inventory ended down 2% per store, below our previous guidance.
• We ended the quarter with about $1 billion in cash. Given our opportunistic approach to share buybacks.
• We're pleased we repurchased 11.4 million shares in the quarter, with the vast majority of those shares bought at a price of about $36.50.
• Year-to-date, we've used over $1 billion to repurchase 26 million shares.
• We've also distributed nearly $300 million in dividends, resulting in total cash distributions through October of more than $1.3 billion.
• We ended the quarter with 424 million shares outstanding.
Performance Metrics:
• The team continues to commit to making our business stronger and stronger every single season.
• We have over 1,000 stores with Wifi.
• We will have a lot more of those done in the first quarter of next year. We have 1,000 stores in the new Order in Store.
• We now expect CapEx to be about $700 million, down from our previous guidance of about $750 million.
• And we now expect depreciation and amortization to be about $500 million.
• Our net square footage guidance is unchanged at up about 2.5%.
• As a reminder, we delivered a full point of leverage in the first half of the year.
• However, similar the third quarter, we expect expenses to deleverage in the fourth quarter.
• At the end of the fourth quarter, we expect year-over-year inventory dollars per store to be down slightly.
• It's important to note that this guidance on inventory excludes any impact from the West Coast port issues.
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