Gap Inc.reported that net earnings for the third quarter, which ended November 1, 2008, increased to $246 million, or $0.35 per share on a diluted basis, compared with $238 million, or $0.30 per share on a diluted basis, for the third quarter last year.
Third quarter net sales were $3.6 billion, compared with $3.9 billion for the third quarter of last year. The company's third quarter comparable store sales decreased 12 percent, compared with a decrease of 5 percent in the third quarter of last year. The company's online sales for the third quarter increased 15 percent to $284 million, compared with $247 million for the third quarter of last year. “We're pleased with our ability to improve our earnings results during the third quarter,” said Glenn Murphy, chairman and chief executive officer of Gap Inc.
“While we expect the challenging economic environment to continue, we'll focus on offering our customers an engaging store experience and products at the right value proposition to stand out this holiday season.”
The company continued to generate strong cash flow & maintains a healthy balance sheet, as demonstrated by the $1.6 billion in cash and investments on hand at the end of the third quarter.
Year-todate free cash flow, defined as net cash provided by operating activities less purchases of property and equipment, was an inflow of $519 million.
Gap Inc. also reaffirmed that it expects full year diluted earnings per share on a GAAP basis to be $1.30 to $1.35, compared with fiscal year 2007 diluted earnings per share of $1.05.
Sales Results By Division The detail table represents the company's third quarter comparable store sales and net sales by division:
Additional Results and 2008 Outlook Effective Tax Rate The effective tax rate was 38.2 percent for the third quarter of fiscal year 2008. The company continues to expect that the effective tax rate will be about 39 percent for fiscal year 2008.
Cash and Investments The company continues to expect to generate about $1 billion in free cash flow for the full year.
Share Repurchases During the third quarter, the company repurchased 5.7 million shares for a total of $100 million. Approximately 0.9 million of these 5.7 million shares were repurchased from individual members of the Fisher family as part of the company's previously announced purchase agreements with them.
Year-to-date, the company has repurchased 33.4 million shares for a total of $600 million.
Dividends The company paid a dividend of $0.085 per share during the third quarter.
Margins Gross margin of 38.7 percent increased 120 basis points in the third quarter compared with the prior year.
Operating margin for the third quarter was 11.1 percent compared with 9.5 percent for the third quarter of fiscal year 2007. The company continues to expect operating margin to be about 10 percent for fiscal year 2008.