This is a summary of the fourth quarter fiscal 2008 earnings call as presented by Gap Inc (GPS) on February 26, 2009
Management
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Chairman and CEO: Glenn Murphy
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EVP and CFO: Sabrina Simmons
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VP of IR: Evan Price
Key Investors Issues
- Net earnings were $243 million, or 34 cents per share on a diluted basis from ******* in the prior year
- Net sales were $4.1 billion, compared with $4.7 billion for 2007
- Comparable store sales decreased 14 %.
Full Year Highlights
- EPS grew by 28% to $1.34 and the firm generated free cash flow of $981 million.
- It returned about $1 billion to shareholders through dividends and share repurchases
- Total sales were down 8% to $14.5 billion, and comp store sales decreased 12%.
Fourth Quarter Highlights
The firm had a 28% increase in EPS, a 16% increase in net earnings, free cash flow of $1 billion, and strengthened the return on invested capital.
- The firm almost achieved last year''s EPS number by almost 1 cent as it achieved 34 cents against 35 cents the year before.
- The Body sub brand has been completely re-done in the last six months.
- That business was taken over by Patrick and his team, and now if you go into the stores you see the beginning of what the Body business could look like going forward.
The Banana Republic business operates in a higher end market, which has been more negatively affected by the other segments of retail.
-The firm generates strong cash flow, with almost no debt on its balance sheet, it has almost $2 billion of cash on hand.
- Gap Inc has taken out more than $400 million of SG&A in 2008, there is still opportunity in SG&A.
- Early indications are they will continue to make progress in 2009, and rent and occupancy, which through the real estate strategy will bring us some benefits through downsizes, through consolidations.
The cost part of the business will continue to be a focus continuing the good work done in 2008..
- Traffic or lack thereof has been the Achilles'' heel of the company for a number of years.
- Every one of the firm''s brands will have a brand new store model in the ground, tested, by the end of the third quarter.
- The order of that is going to be Gap is going to be further ahead, followed by Old Navy, followed by the outlet business and then Banana Republic.
Gap Inc intends to continue to open franchise stores in 2009.
- As well as continue to make investments in the online business.
- The acquisition of Athleta has proven to be quite a positive decision with the integration going well.
- The international business has performed better than the domestic business in 2008 and is also an area that the company will be making targeted strategic investments in the coming year.
Earnings were $243 million, diluted earnings per share were 34 cents and fourth quarter weighted average shares were 706 million.
- Total sales were $4.08 billion, down 13% versus last year while total company comp store sales were down 14% in the quarter.
- Merchandise margins improved 80 basis points, offset by 160 basis points of occupancy deleveraging.
- Gross margin was 34%resulting in gross profits of $1.4 billion.
