Gross profit was $1.43 billion in the first quarter of 2018, an increase of 10 per cent compared with last year. Excluding the impact from the adoption of the new revenue recognition standard, gross profit increased about 3 per cent compared with last year.
The company's gross margin was 37.7 per cent, a decrease of 20 basis points compared with last year. Excluding the impact from the adoption of the new revenue recognition standard, gross margin was 36.7 per cent, a decrease of 120 basis points compared with last year, largely due to the Gap brand. The operating margin was 6.1 per cent, a decrease of 130 basis points compared with last year. Excluding the impact from the adoption of the new revenue recognition standard, operating margin was 6.3 per cent, a decrease of 110 basis points compared with last year.
The company ended the first quarter of fiscal year 2018 with $1.4 billion in cash, cash equivalents, and short-term investments. Year-to-date free cash flow, defined as net cash from operating activities less purchases of property and equipment, was negative $204 million, which reflects a higher bonus payout in the first quarter of fiscal year 2018.
"We are pleased to have delivered our sixth consecutive quarter of positive comp growth, despite the expected challenges at Gap brand," said Art Peck, president and chief executive officer, Gap Inc. "Our balanced growth strategy provides the right foundation to differentiate our portfolio of brands in this retail environment, with strategic investments in value, active and digital fueled by productivity opportunities unique to our scaled operating platform."
The company ended the first quarter of fiscal year 2018 with 3,617 store locations in 45 countries, of which 3,171 were company-operated.
"Despite the pressures we faced in the first quarter, we are affirming our full-year guidance, reflecting our confidence in the underlying fundamentals of the business as well as the benefits of executing against our balanced growth strategy," said Teri List-Stoll, executive vice president and chief financial officer, Gap Inc.
For 2018, the company continues to expect comparable sales for fiscal year 2018 to be flat to up slightly. The company expects capital spending to be approximately $800 million for fiscal year 2018, with a continued focus on transformative infrastructure investments to support its omni-channel and digital strategies, such as information technology and supply chain. (RR)
Fibre2Fashion News Desk – India
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