Gap Inc : Earnings Highlights and Review: Gap's Q1 Results Outperformed Estimates
Research Desk Line-up: DSW Inc. Post Earnings Coverage
LONDON, UK / ACCESSWIRE / June 7, 2017 / Pro-Trader Daily publishes post-earnings coverage on The Gap, Inc. (NYSE: GPS) following the Company's announcement of its financial results for the first quarter fiscal 2017 (Q1 FY17) on May 18, 2017. The San Francisco, California-based Company posted a flat revenue growth, while diluted EPS grew on a y-o-y basis, outperforming market expectations. Our daily stock reports are accessible for free, and with those to look forward today you also will be signing up for a complimentary member's account at:
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Gap reported net sales of $3.44 billion in Q1 FY17 which came in flat with respect to net sales reported in the prior year's comparable quarter. Net sales numbers beat market forecasts of $3.41 billion. The Company recorded comparable sales growth of 2% during Q1 FY17 against a 5% decline in Q1 FY16.
The global retailer of clothing, accessories, and personal care product reported net income of $143 million, or $0.36 per diluted share, in Q1 FY17 compared to $127 million, or $0.32 per diluted share, in Q1 FY16. Moreover, Wall Street had expected the Company to report net income of $0.29 per diluted share.
At the end of Q1 FY17, Gap had 3,652 store locations in 50 countries of which 3,186 were Company-operated.
In Q1 FY17, the Company's gross profit grew to $1.30 billion from $1.21 billion in the previous year's comparable period. Gross margin also improved during the reported quarter to 37.9% from 35.2% in Q1 FY16. The Company incurred operating expenses of $1.05 billion in Q1 FY17 compared to $987 million in Q1 FY16. Operating income increased during the reported quarter to $254 million from $222 million in Q1 FY16. Additionally, the Company's operating margin also improved from to 6.5% in Q1 FY16 to 7.4% in Q1 FY17.
During Q1 FY17, Gap Global segment reported sales of $1.16 billion, up from $1.22 billion in Q1 FY16. The Company's Old Navy Global segment's sales also improved to $1.56 billion in Q1 FY17 from $1.49 billion in Q1 FY16. However, Banana Republic Global segment's sales fell to $517 million in Q1 FY17 from $550 million in the prior year's comparable quarter.
US region contributed 79% of the Company's total sales in Q1 FY17, up from 77% in Q1 FY16. The Company's sales during Q1 FY17 in US market were $2.73 billion, up from $2.66 billion in Q1 FY16. Sales in Canada also grew to $234 million in Q1 FY17 from $216 million in Q1 FY6. However, sales in Europe, Asia, and Other region fell during Q1 FY17 to $137 million, $283 million, and $53 million, respectively.
Cash Flow and Balance Sheet
In the 13 weeks ended April 29, 2017, net cash provided by operating activities was $91 million, compared to $168 million in the first three months of FY16. The company reported a negative free cash flow of $5 million in Q1 FY17 versus a positive free cash flow of $29 million in Q1 FY16.
As on April 29, 2017, the Company had $1.58 billion in cash and cash equivalents compared to a balance of $1.31 billion as on April 30, 2016. The Company reported long-term debt of $1.25 billion in its books of accounts as on April 29, 2017, versus $1.32 billion as on April 30, 2016.
Total merchandise inventories as of April 29, 2017, stood at $1.96 billion, which came in flat on a year-over-year basis.
Dividends and Share Repurchases
In a separate press release on May 18, 2017, Gap's Board of Directors announced a quarterly dividend of $0.23 per share. The dividend is payable on or after July 26, 2017, to shareholders of record at the close of business on July 05, 2017.
During Q1 FY17, the Company repurchased 4.2 million shares for about $100 million and ended the Q1 FY17 with 396 million shares outstanding. Moreover, the Company intends to spend about $100 million on share repurchases in Q2 FY17.
In its guidance for Q4 FY17, Gap's management reaffirmed its full-year earnings per share guidance range of $1.95 to $2.05. The Company continues to anticipate comparable sales for FY17 to be flat to up slightly. Furthermore, the Company forecasts store count to be about flat at the end of FY17, down from previous guidance of 40 net store openings.
At the closing bell, on Tuesday, June 06, 2017, Gap's stock slipped 1.56%, ending the trading session at $22.09. A total volume of 8.87 million shares were traded at the end of the day, which was higher than the 3-month average volume of 5.69 million shares. In the last twelve months, shares of the Company have surged 15.96%. The Company's shares are trading at a PE ratio of 12.76 and have a dividend yield of 4.16%. The stock currently has a market cap of $8.93 billion.
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