Gap Inc. (GPS)
Q4 2008 Earnings Call Transcript
February 26, 2009 5:00 p.m. ET

Executives

Evan Price - Vice President of Investor Relations
Glenn Murphy - Chairman and Chief Executive Officer
Sabrina Simmons - Executive Vice President and Chief Financial Officer

Analysts

Lorraine Maikis - Bank of America/Merrill Lynch
Michelle Tan - Goldman Sachs & Co.
Brian Tunick – JPMorgan Chase & Co.
Paul Lejuez - Credit Suisse
Kimberly Greenberger - Citigroup
Michelle Clark - Morgan Stanley
Jeff Black - Barclays Capital
Stacy Pak - SP Research, Inc.
Janet Kloppenburg - JJK Research
Richard Jaffe - Stifel Nicolaus & Company, Inc.

Presentation

Operator

Good afternoon, ladies and gentlemen. My name is Kara and I will be your conference operator today. At this time, I would like to welcome everyone to the Gap Inc. fourth quarter 2008 conference call. At this time, all participants are in a listen-only mode. For those analysts who have registered to participate in the question-and-answer session after the presentation, you may now press “*1” to enter the Q&A queue. If any one should require assistance during the call, please press the “*” key followed by the “0” key on your touchtone phone.

I would now like to introduce your host, Evan Price, Vice President of Investor Relations.

Evan Price

Good afternoon, everyone. Welcome to Gap Inc.''s fourth quarter 2008 earnings conference call.

For those of you participating in the webcast, please turn to slides 2 and 3. I''d like to remind you that the information made available on this webcast and conference call contains forward-looking statements, including those identified in today''s earnings press release, which is available on GapInc.com as well as other statements that express our expectations, anticipations, beliefs, estimates, intentions, plans and forecasts. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements. Information regarding factors that could cause results to differ can be found in our annual report on Form 10-K for the fiscal year ended February 2, 2008. Investors should also consult our quarterly report on Form 10-Q for the quarter ended November 1, 2008 and today''s press release.

Future economic and indices trends that could potentially impact net sales and profitability are difficult to predict. These forward-looking statements are based on information as of February 26, 2009 and we assume no obligation to publicly update or revise our forward-looking statements, even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

This presentation includes non-generally accepted accounting principle measure free cash flow, which under SEC Regulation G we are required to reconcile with GAAP. The reconciliation of this measure to the GAAP financial measure is included in today''s earnings press release, which is available on GapInc.com.

Joining us on the call today are Chairman and CEO, Glenn Murphy, and Executive Vice President and CFO, Sabrina Simmons.

Now I''d like to turn the call over to Glenn.

Glenn Murphy

Thank you, Evan, and good afternoon, everybody. Before I turn it over to Sabrina to take you through the fourth quarter results and the full-year results, I just thought I''d start off by making a few comments.

First off, we were pleased with our results in 2008. We had a 28% increase in EPS, a 16% increase in net earnings, we had free cash flow of $1 billion, and we strengthened our return on invested capital. And in Q4, which arguably was the toughest quarter in which we operated in, we almost achieved last year''s EPS number by almost $0.01 as we did $0.34 against $0.35 the year before.

So all in all, we were quite pleased with our results and, to be fair, I think as an organization I''m very proud of not just people in the room with me today but the 150-odd thousand employees that make up Gap Inc. who, through their hard work and their dedication, really made a very good year in a very tough economic environment.