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Gap's franchise sales up; ready for Holiday

25
Nov '11
Gap Inc. reported that net sales for the third quarter of fiscal year 2011, which ended October 29, 2011, decreased 2 percent to $3.59 billion compared with $3.65 billion for the third quarter last year. Net income was $193 million compared with $303 million for the third quarter last year. Third quarter diluted earnings per share was $0.38, down 21 percent from last year.

During the third quarter, the company continued to invest in long-term growth opportunities, while also maintaining strong expense discipline and returning cash to shareholders.

“Across our brands, we're intensely focused on improving our current sales trend, including making necessary product and marketing adjustments, with a view toward building momentum as we head into 2012,” said Glenn Murphy, chairman and chief executive officer of Gap Inc. “We're ready to compete aggressively this holiday.”

“Across our brands, we're intensely focused on improving our current sales trend, including making necessary product and marketing adjustments, with a view toward building momentum as we head into 2012,” said Glenn Murphy, chairman and chief executive officer of Gap Inc. “We're ready to compete aggressively this holiday.”

Third Quarter Financial and Business Highlights
• Returned $700 million to shareholders, with $645 million in share repurchases and $55 million in dividends, underscoring the company's continued commitment to return cash to shareholders.
• Tightly managed operating expenses, which totaled $968 million and leveraged by 40 basis points as a percentage of net sales.
• Improved net sales at the Gap Inc. Direct division – which includes the online sales channel – by 21 percent, growing to $414 million compared with $342 million last year. Online sales for its Gap, Old Navy, and Banana Republic brands each improved year-over-year.
• Opened three new Athleta stores – two in New York and one in Newport Beach. Since quarter-end, the brand also opened stores in Los Angeles, Washington D.C. and Philadelphia to support the company's plan to open over 50 stores in North America by the end of 2013.
• Continued to invest in its global expansion plan by announcing plans to open its first Banana Republic flagship in Paris and Gap flagship in Hong Kong later this year. The company continues to expand in China, with additional openings scheduled this year in the cities of Tianjin and Hangzhou.
• Increased franchise sales by 47 percent in the third quarter compared with last year. Opened franchise stores in four new countries: Chile, Poland, Serbia, and Vietnam. The company also officially opened its doors for the first time in South America, with the franchise store in Santiago, during the third quarter.

Third Quarter Comparable Sales Results
The company's third quarter comparable sales, which include the associated comparable online sales, were down 5 percent compared with a 1 percent increase in thethird quarter last year. For the third quarter of fiscal year 2011, online sales positively impacted comparable sales for Gap Inc. by 2 percentage points.

Comparable sales for the third quarter of fiscal year 2011, including the associated comparable online sales, were as follows:
• Gap North America: negative 6 percent versus positive 2 percent last year
• Banana Republic North America: negative 1 percent versus positive 2 percent last year
• Old Navy North America: negative 4 percent versus flat last year
• International: negative 10 percent versus positive 4 percent last year

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Gap Inc


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