Cost-per-wear Informs Clothing Choices
NEW YORK -- For Jake Welch, getting dressed is one big math problem.
The 36-year-old brand director for an advertising firm calculates the cost-per-wear of his wardrobe by highlighting 200 items in a spreadsheet -- excluding underwear and socks -- and meticulously listing the price he paid for each of them as well as how many times he has worn it. He updates the spreadsheet every night on his computer to determine whether his purchases were worth it -- or not.
Lots of people thought Welch was weird when he started doing this 12 years ago, opting to ditch the cheapest items on the sales rack in favor of maximizing the value of his purchases over the span of their life cycles. But with inflation still a nagging problem, more shoppers are coming around to his way of thinking.
"I was actually onto something versus being a little looney," said Welch of Erda, Utah, who presented his findings last month at a company meeting.
Retailers are taking note of this mindset and shifting their marketing strategy in some cases. Gap's Old Navy is offering shoppers a full refund for uniforms bought during the back-to-school season if the clothes don't hold up for a year.
Retailers like Kohl's and online shirt retailer Untuckit have recently revamped their marketing campaigns -- particularly for the fall -- to focus on durability and versatility. American Eagle is touting the "longevity of your most-loved jeans" made of recycled cotton and polyester in an email campaigns to customers.
That means a $200 classic sweater could end up being a better deal if you plan to wear it every week in comparison to a hot pink dress picked up for $40 that might be worn only once a month.
"Cost-per-wear is another way that they think about how to combat some of the inflation," said Christie Raymond, Kohl's chief marketing officer. "Is this item going to last? Is it going to really be versatile? For back to school, for example, can my child wear it in a number of different ways?"
Some shoppers are also looking to be more eco-friendly by buying clothes that don't end up in a landfill after being worn a few times.
Still, the cost-per-wear calculation would only make sense for those consumers who can afford to prioritize quality and versatility over price. Neil Saunders, managing director of GlobalData Retail, notes that shoppers with tighter budgets will look at price and may not care whether something will last just as long as it looks good for now.
STILL FARING WELL
Indeed, fast-fashion purveyors are still faring well in the face of inflation. Chinese e-commerce retailer Temu, known for deep discounts and coupons, has continued its meteoric rise in the United States, adding nearly 10 million new daily users since the beginning of the year, according to market intelligence firm GWS. Meanwhile, Shein, the ultra-low-price, fast-fashion juggernaut founded in China, has been increasing its daily users from 3.1 million to 4.9 million daily users over the past year, according to GWS.
But there's a growing backlash to the cheap stuff.
Rohan Deuskar, founder and CEO of Stylitics, a retail technology firm that powers personalized styling, outfitting and bundling suggestions for 150 retailers online, said he started seeing the trend during the Christmas shopping season. He noted the average order was going up, particularly for holiday dresses, while shoppers were buying fewer items. And shoppers were also spending more time engaging with the virtual models that showed different ways to wear the item.
"Shoppers are being more considerate about every purchase and being willing to spend only if they get value -- and that no longer just means cheap," Deuskar said. "We're reaching a little bit of an oversaturation of buying a bunch of stuff."
According to market research firm Circana's Retail Tracking Service, higher prices are outpacing lower prices over the past 12-month period that ended in June. Women's dresses priced $200 and above grew about twice as fast as those priced under $50. Sales of men's jeans that were less than $30 declined, while higher price brands drove growth. Sales of women's jeans priced $150 and above increased by 7%. And while the market for women's active pants declined 20%, women's active pants priced between $125 to $150 increased 19%, according to Circana.
'PRICE AND QUALITY'
Saunders notes that "price and quality aren't always linked." In fact, some retailers could be using any excuse to sell higher priced goods. There's also the timeliness of the fashion item to consider. Shoppers may think about longevity when they look for a coat but not for a skirt or a top.
"People like to refresh or their tastes change," he said.
And cost-per-wear calculations don't factor in weight loss or gain, Saunders added.
Welch said his wardrobe consists of mostly blacks, grays and blues and items that can carry through multiple seasons. Higher inflation has helped him separate his needs and wants better.
"I ask myself a little bit harder: 'Is it something that I absolutely need?'" he said. "Consulting my spreadsheet, how many golf shorts do I really have?"
Welch noted that his formal wear and suits along with dress shirts are among the items that rank the highest in cost-per-wear. He chose a charcoal suit -- not a tan version -- for his wedding in 2018 that he bought for $480 at Bonobos.
He has worn it 44 times, resulting in a cost-per-wear of $10.91. Not too bad but ideally he likes to get it down to 50 cents per wear, like the athletic shorts he bought at Outdoor Voices for $20 and has worn 434 times, according to his spreadsheet he shared.
'THE NEXT JOURNEY'
Kohl's said its marketing campaigns are showing different ways that items can be worn. For example, on the department store's Instagram account, it pairs a white T-shirt and denim shirts in different ways, including a beachy take and a more stylish approach with hoop earrings. Untuckit's fall campaign, "Made for the next journey," focuses on the different ways customers can wear the shirt or the jacket -- taking it from the office to night-time events.
As for Welch, he said his wife is now staying away from fast-fashion and focusing on quality, although she's not embracing the spreadsheets. And he's delighted that his two girls, ages 3 and 7 months, fit with the new math.
"With my first daughter, the cost for use on her dresses and stuff like that have decreased with having another girl," he said. "So if we have a boy, great. But if we have another girl, that's just even more savings."
Gap Inc. Reports Second Quarter Fiscal 2023 Results
SAN FRANCISCO, Aug. 24, 2023 /PRNewswire/ -- Gap Inc. (NYSE: GPS), a portfolio of billion-dollar lifestyle brands including Old Navy, Gap, Banana Republic, and Athleta, and the largest specialty apparel company in the U.S., today reported financial results for its second quarter ended July 29, 2023.
"I have long admired Gap Inc. As a customer, a brand builder, and most recently, as a Board member. An even greater draw is the company's storied brands. And I'm excited for the opportunity to lead the incredible people of Gap Inc. To unlock our full potential," said Richard Dickson, President and Chief Executive Officer, Gap Inc. "We're seeing encouraging signs of progress, as our teams streamline the way we work so we can focus on growth-driving initiatives – a virtuous cycle that we'll look to become our norm. This means we have to do things differently, with a clear focus on redefining our brands' meaning to consumers, focusing on creativity, designing for relevance as a pursuit rather than a goal, and leveraging our remarkable legacy to shape an exciting new future."
"We are pleased to deliver meaningful operating margin expansion and strong free cash flow during the second quarter driven by modest market share gains, our significantly improved inventory position, and our actions to transform the company's operating model and structure," said Katrina O'Connell, Executive Vice President and Chief Financial Officer, Gap Inc. "While we are encouraged by our near-term progress, we remain mindful of the mixed economic and consumer environment in which we are operating and continue to plan the business prudently."
Second Quarter Fiscal 2023 - Financial Results
Second Quarter Fiscal 2023 – Balance Sheet and Cash Flow Highlights
Additional information regarding adjusted gross margin, adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted earnings per share, and free cash flow, all of which are non-GAAP financial measures, is provided at the end of this press release along with a reconciliation of these measures from the most directly comparable GAAP financial measures for the applicable period.
Second Quarter Fiscal 2023 – Global Brand Results
Old Navy:
Gap:
Banana Republic:
Athleta:
Fiscal 2023 Outlook
"As we look toward the long-term, we believe our focus on unlocking the value of our important and iconic brands coupled with the transformative actions we are taking to improve our operating structure will position Gap Inc. Back on its path towards delivering sustainable, profitable growth and value for our shareholders," said Katrina O'Connell, Executive Vice President and Chief Financial Officer, Gap Inc.
The company's outlook takes into consideration the continued uncertain consumer and macro environment.
The company is estimating that third quarter net sales could decrease in the low double-digit range compared to last year's net sales of $4.04 billion. As a reminder, the sale of Gap China to Baozun Inc. Closed on January 31, 2023. Third quarter 2022 net sales included approximately $70 million in sales for Gap China.
The company anticipates that fiscal 2023 net sales could decrease in the mid-single digit range compared to last year's net sales of $15.6 billion. As a reminder, fiscal 2022 net sales included approximately $300 million in sales for Gap China. Fiscal 2023 will include a 53rd week estimated to positively impact net sales by $150 million.
The company continues to expect gross margin expansion for fiscal 2023. At the estimated level of sales described above, the company is planning adjusted operating expenses of approximately $1.3 billion in the third quarter and approximately $5.15 billion for fiscal 2023.
The company continues to expect fiscal 2023 capital expenditures in the range of $500 million to $525 million.
Webcast and Conference Call Information
Emily Gacka, Director of Investor Relations at Gap Inc., will host a conference call to review the company's second quarter fiscal 2023 results beginning at approximately 2:00 p.M. Pacific Time today. Ms. Gacka will be joined by Executive Chair Bob Martin, Chief Executive Officer Richard Dickson and Chief Financial Officer Katrina O'Connell.
A live webcast of the conference call will be available online at investors.Gapinc.Com. A replay of the webcast will be available at the same location.
Non-GAAP DisclosureThis press release and related conference call include financial measures that have not been calculated in accordance with U.S. generally accepted accounting principles (GAAP) and are therefore referred to as non-GAAP financial measures. The non-GAAP measures described below are intended to provide investors with additional useful information about the company's financial performance, to enhance the overall understanding of its past performance and future prospects and to allow for greater transparency with respect to important metrics used by management for financial and operating decision-making. The company presents these non-GAAP financial measures to assist investors in seeing its financial performance from management's view and because it believes they provide an additional tool for investors to use in computing the company's core financial performance over multiple periods with other companies in its industry. Additional information regarding the intended use of each non-GAAP measure included in this press release and related conference call is provided in the tables to this press release.
The non-GAAP measures included in this press release and related conference call are adjusted gross margin, adjusted operating expenses/adjusted SG&A, adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted earnings per share, and free cash flow, as well as expected adjusted operating expenses/adjusted SG&A. These non-GAAP measures exclude the impact of certain items that are set forth in the tables to this press release. A reconciliation of expected adjusted operating expenses/adjusted SG&A is not provided, in reliance on the exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, because a comparable GAAP measure is not reasonably accessible or reliable due to the inherent difficulty in forecasting and quantifying measures that would be necessary for such reconciliation. Namely, we are not able to reliably predict the impact of many of the costs and expenses that may be incurred in the future that could impact operating expenses/SG&A. In addition, we believe such a reconciliation would imply a degree of precision and certainty that could be confusing to investors. The variability of those costs and expenses may be material and have a significant and unpredictable impact on our future GAAP results.
The non-GAAP measures used by the company should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP and may not be the same as similarly titled measures used by other companies due to possible differences in method and in items or events being adjusted. The company urges investors to review the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures included in the tables to this press release below, and not to rely on any single financial measure to evaluate its business. The non-GAAP financial measures used by the company have limitations in their usefulness to investors because they have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles.
Forward-Looking StatementsThis press release and related conference call contain forward-looking statements within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements other than those that are purely historical are forward-looking statements. Words such as "expect," "anticipate," "believe," "estimate," "intend," "plan," "project," and similar expressions also identify forward-looking statements. Forward-looking statements include statements regarding the following: our new Chief Executive Officer, his qualifications to lead the company, and defining a bright future for the company; making what we do, what we stand for, and what we sell relevant; our brands balancing the need for clothes and want for fashion; sparking defining trends; making consumers into fans and growing fandom; growing our customers and the value of our brands; continuing to strengthen our financial footing; accelerating efforts to drive profitable growth by unlocking the value in our brands; revitalizing our brands; redefining our brands' meaning to consumers; focusing on creativity; designing for relevant as a pursuit rather than a goal; building to quality; leveraging our company's legacy; reigniting a creative culture and attracting great talent; committing our brands to a distinctive purpose; reorienting our brands around design and the customer; reengaging in the cultural conversation and making products that inspire cultural dialogue; providing experiences in stores and online that excite and delight our customers; mattering to our people, investors, communities, and the world; expected costs savings from organizational changes and the impact on our teams being consumer-centric; our positioning into the second half of the year; focusing on the levers and opportunities in our control to deliver for our customers, employees, and shareholders; Old Navy's positioning in the marketplace; Old Navy's marketing, product, and value in the back-to-school season; maximizing fine fabrics at Banana Republic in the second half of the year; Banana Republic's broader home offering; our new President and CEO of Athleta and bringing Athleta to its full potential over the long term; moderating buys and using our responsive levers; expected ending inventory in fiscal 2023; our plans to pay down our asset-backed line of credit in fiscal 2023; our dividend strategy and paying a third quarter fiscal 2023 dividend; expected third quarter and fiscal 2023 net sales; the impact of an additional week in fiscal 2023 on fiscal 2023 net sales; expected third quarter and fiscal 2023 gross margin; expected air expense in third quarter and fiscal 2023; expected inventory position and promotional activity in the third quarter and fiscal 2023; inflationary costs, including commodity costs and ocean freight rates, in the third quarter and fiscal 2023; expected ROD in the third quarter and fiscal 2023; expected third quarter and fiscal 2023 adjusted operating expenses/adjusted SG&A; expected capital expenditures in fiscal 2023; delivering our fiscal 2023 outlook; unlocking the value of our bands; actions to put the company on a path towards sustainable, profitable growth and delivering long-term shareholder value; and streamlining the way we work in order to focus on growth-driving initiatives.
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. These factors include, without limitation, the following risks, any of which could have an adverse effect on our financial condition, results of operations, and reputation: the overall global economic and geopolitical environment and the impact on consumer spending patterns; the risk that we or our franchisees may be unsuccessful in gauging apparel trends and changing consumer preferences or responding with sufficient lead time; the risk that we fail to maintain, enhance, and protect our brand image and reputation; the highly competitive nature of our business in the United States and internationally; the risk that restructuring our business may not generate the intended benefits and projected cost savings to the extent or on the timeline as expected; the risk that we fail to manage key executive succession and retention and to continue to attract and retain qualified personnel; the risk that we may be unable to manage or protect our inventory effectively and the resulting impact on our gross margins, sales and results of operations; the risk that inflationary pressures continue to negatively impact gross margins or that we are unable to pass along price increases; the risk that our investments in customer, digital, and omni-channel shopping initiatives may not deliver the results we anticipate; the risks to our business, including our costs and supply chain, associated with global sourcing and manufacturing; the risks to our reputation or operations associated with importing merchandise from foreign countries, including failure of our vendors to adhere to our Code of Vendor Conduct; the risk of data or other security breaches or vulnerabilities that may result in increased costs, violations of law, significant legal and financial exposure, and a loss of confidence in our security measures; the risk that failures of, or updates or changes to, our IT systems may disrupt our operations; the risk that our franchisees and licensees could impair the value of our brands or fail to make payments for which we are liable; natural disasters, public health crises, political crises, negative global climate patterns, or other catastrophic events; the ongoing conflict between Russia and Ukraine and the impact on global market stability; engaging in or seeking to engage in strategic transactions that are subject to various risks and uncertainties; the risk that our efforts to expand internationally may not be successful; the risk that trade matters could increase the cost or reduce the supply of apparel available to us; the risk of foreign currency exchange rate fluctuations; the risk that our comparable sales and margins may experience fluctuations, that the seasonality of our business may experience changes, or that we may fail to meet financial market expectations; reductions in income and cash flow from our credit card arrangement related to our private label and co-branded credit cards; the risk that we or our franchisees may be unsuccessful in identifying, negotiating, and securing new store locations and renewing, modifying, or terminating leases for existing store locations effectively; the risk that changes in our credit profile or deterioration in market conditions may limit our access to the capital markets; the adverse effects of climate change on our operations and those of our franchisees, vendors and other business partners; the risk that we will not be successful in defending various proceedings, lawsuits, disputes, and claims; our failure to comply with applicable laws and regulations and changes in the regulatory or administrative landscape; our failure to satisfy regulations and market expectations related to our ESG initiatives; the risk that worsening global economic and geopolitical conditions could result in changes to the assumptions and estimates used when preparing our financial statements; the risk that changes in our business structure, our performance or our industry could result in reductions in our pre-tax income or utilization of existing tax carryforwards in future periods, and require additional deferred tax valuation allowances; the risk that changes in the geographic mix and level of income or losses, the expected or actual outcome of audits, changes in deferred tax valuation allowances, and new legislation could impact our effective tax rate; the risk that our level of indebtedness may impact our ability to operate and expand our business; the risk that we and our subsidiaries may be unable to meet our obligations under our indebtedness agreements; the risk that the adoption of new accounting pronouncements will impact future results; and the risk that additional information may arise during our close process or as a result of subsequent events that would require us to make adjustments to our financial information.
Additional information regarding factors that could cause results to differ can be found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2023, as well as our subsequent filings with the Securities and Exchange Commission.
These forward-looking statements are based on information as of August 24, 2023. 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.
About Gap Inc.
Gap Inc., a collection of purpose-led lifestyle brands, is the largest American specialty apparel company offering clothing, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, and Athleta brands. The company uses omni-channel capabilities to bridge the digital world and physical stores to further enhance its shopping experience. Gap Inc. Is guided by its purpose, Inclusive, by Design, and takes pride in creating products and experiences its customers love while doing right by its employees, communities, and planet. Gap Inc. Products are available for purchase worldwide through company-operated stores, franchise stores, and e-commerce sites. Fiscal year 2022 net sales were $15.6 billion. For more information, please visit www.Gapinc.Com.
Investor Relations Contact:Nina [email protected]
Media Relations Contact:Megan [email protected]
The Gap, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS UNAUDITED ($ in millions) July 29, 2023 July 30, 2022 ASSETS Current assets: Cash and cash equivalents $ 1,350 $ 708 Merchandise inventory 2,226 3,135 Other current assets 663 1,106 Total current assets 4,239 4,949 Property and equipment, net 2,595 2,809 Operating lease assets 3,113 3,532 Other long-term assets 903 881 Total assets $ 10,850 $ 12,171 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,406 $ 1,640 Accrued expenses and other current liabilities 1,007 1,216 Current portion of operating lease liabilities 578 717 Income taxes payable 16 41 Total current liabilities 3,007 3,614 Long-term liabilities: Revolving credit facility 150 350 Long-term debt 1,487 1,485 Long-term operating lease liabilities 3,433 3,857 Other long-term liabilities 510 560 Total long-term liabilities 5,580 6,252 Total stockholders' equity 2,263 2,305 Total liabilities and stockholders' equity $ 10,850 $ 12,171 The Gap, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED 13 Weeks Ended 26 Weeks Ended ($ and shares in millions except per share amounts) July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022 Net sales $ 3,548 $ 3,857 $ 6,824 $ 7,334 Cost of goods sold and occupancy expenses 2,215 2,527 4,277 4,908 Gross profit 1,333 1,330 2,547 2,426 Operating expenses 1,227 1,358 2,451 2,651 Operating income (loss) 106 (28) 96 (225) Interest, net (2) 20 8 39 Income (loss) before income taxes 108 (48) 88 (264) Income tax expense (benefit) (9) 1 (11) (53) Net income (loss) $ 117 $ (49) $ 99 $ (211) Weighted-average number of shares - basic 369 367 368 369 Weighted-average number of shares - diluted 371 367 372 369 Net earnings (loss) per share - basic $ 0.32 $ (0.13) $ 0.27 $ (0.57) Net earnings (loss) per share - diluted $ 0.32 $ (0.13) $ 0.27 $ (0.57) The Gap, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED 26 Weeks Ended ($ in millions) July 29,2023 (a) July 30,2022 (a) Cash flows from operating activities: Net income (loss) $ 99 $ (211) Depreciation and amortization 267 262 Loss on divestiture activity - 35 Gain on sale of building (47) - Change in merchandise inventory 160 (140) Change in accounts payable 104 (292) Change in accrued expenses and other current liabilities (76) (191) Change in income taxes payable, net of receivables and other tax-related items 5 372 Other, net 16 (42) Net cash provided by (used for) operating activities 528 (207) Cash flows from investing activities: Purchases of property and equipment (199) (406) Net proceeds from sale of building 76 333 Proceeds from divestiture activity 11 - Net cash used for investing activities (112) (73) Cash flows from financing activities: Proceeds from revolving credit facility - 350 Repayments of revolving credit facility (200) - Payments for debt issuance costs - (6) Proceeds from issuances under share-based compensation plans 13 15 Withholding tax payments related to vesting of stock units (11) (15) Repurchases of common stock - (111) Cash dividends paid (111) (111) Net cash (used for) provided by financing activities (309) 122 Effect of foreign exchange rate fluctuations on cash, cash equivalents, and restricted cash (2) (9) Net increase (decrease) in cash, cash equivalents, and restricted cash 105 (167) Cash, cash equivalents, and restricted cash at beginning of period 1,273 902 Cash, cash equivalents, and restricted cash at end of period $ 1,378 $ 735 ____________________ (a) For the twenty-six weeks ended July 29, 2023 and July 30, 2022, total cash, cash equivalents, and restricted cash includes $28 million and $27 million, respectively, of restricted cash recorded within other long-term assets on the Condensed Consolidated Balance Sheets. The Gap, Inc. NON-GAAP FINANCIAL MEASURES UNAUDITED FREE CASH FLOW Free cash flow is a non-GAAP financial measure. We believe free cash flow is an important metric because it represents a measure of how much cash a company has available for discretionary and non-discretionary items after the deduction of capital expenditures. We require regular capital expenditures including technology improvements as well as building and maintaining our stores and distribution centers. We use this metric internally, as we believe our sustained ability to generate free cash flow is an important driver of value creation. However, this non-GAAP financial measure is not intended to supersede or replace our GAAP results. 26 Weeks Ended ($ in millions) July 29, 2023 July 30, 2022 Net cash provided by (used for) operating activities $ 528 $ (207) Less: Purchases of property and equipment (199) (406) Free cash flow $ 329 $ (613) The Gap, Inc. NON-GAAP FINANCIAL MEASURES UNAUDITED ADJUSTED STATEMENT OF OPERATIONS METRICS FOR THE SECOND QUARTER OF FISCAL YEAR 2023 The following adjusted statement of operations metrics are non-GAAP financial measures. These measures are provided to enhance visibility into the Company's underlying results for the period excluding the impact of restructuring costs. Management believes the adjusted metrics are useful for the assessment of ongoing operations as we believe the adjusted items are not indicative of our ongoing operations, and provide additional information to investors to facilitate the comparison of results against past and future years. However, these non-GAAP financial measures are not intended to supersede or replace the GAAP measures. ($ in millions)13 Weeks Ended July 29, 2023 Operating Expenses Operating Expenses as a % of Net Sales Operating Income Operating Margin Income Tax Expense (Benefit) Net Income Earnings per Share - Diluted (b) GAAP metrics, as reported $ 1,227 34.6 % $ 106 3.0 % $ (9) $ 117 $ 0.32 Adjustments for: Restructuring costs (a) (13) (0.4) % 13 0.4 % 3 10 0.03 Non-GAAP metrics $ 1,214 34.2 % $ 119 3.4 % $ (6) $ 127 $ 0.34 ____________________ (a) Includes $3 million of employee-related costs and $10 million of consulting and other associated costs related to our previously announced actions to further simplify and optimize our operating model and structure. (b) Earnings per share was computed individually for each line item; therefore, the sum of the individual lines may not equal the total. The Gap, Inc. NON-GAAP FINANCIAL MEASURES UNAUDITED ADJUSTED STATEMENT OF OPERATIONS METRICS FOR THE SECOND QUARTER OF FISCAL YEAR 2022 The following adjusted statement of operations metrics are non-GAAP financial measures. These measures are provided to enhance visibility into the Company's underlying results for the period excluding the impact of impairment of certain inventory and a loss on divestiture activity. Management believes the adjusted metrics are useful for the assessment of ongoing operations as we believe the adjusted items are not indicative of our ongoing operations, and provide additional information to investors to facilitate the comparison of results against past and future years. However, these non-GAAP financial measures are not intended to supersede or replace the GAAP measures. ($ in millions)13 Weeks Ended July 30, 2022 Gross Profit Gross Margin Operating Expenses Operating Expenses as a % of Net Sales Operating Income (loss) Operating Margin Income Taxes Net Income (loss) Earnings (loss) per Share - Diluted GAAP metrics, as reported $ 1,330 34.5 % $ 1,358 35.2 % $ (28) (0.7) % $ 1 $ (49) $ (0.13) Adjustments for: Inventory impairment charges (a) 58 1.5 % - - % 58 1.5 % 9 49 0.13 Loss on divestiture activity (b) - - % (35) (0.9) % 35 0.9 % 5 30 0.08 Non-GAAP metrics $ 1,388 36.0 % $ 1,323 34.3 % $ 65 1.7 % $ 15 $ 30 $ 0.08 ____________________ (a) Represents the inventory impairment charges as a result of delayed seasonal product due to global supply chain disruption and extended size product discontinued at stores. (b) Represents the impact of the loss on divestiture activity related to the transition of the Old Navy Mexico business. The Gap, Inc. NET SALES RESULTS UNAUDITED The following table details the Company's second quarter fiscal year 2023 and 2022 net sales (unaudited): ($ in millions) Old Navy Global Gap Global BananaRepublic Global Athleta Global Other (2) Total 13 Weeks Ended July 29, 2023 U.S. (1) $ 1,777 $ 542 $ 415 $ 327 $ 11 $ 3,072 Canada 165 76 44 13 - 298 Europe 1 29 - - - 30 Asia - 77 14 - - 91 Other regions 18 31 7 1 - 57 Total $ 1,961 $ 755 $ 480 $ 341 $ 11 $ 3,548 ($ in millions) Old Navy Global Gap Global BananaRepublic Global Athleta Global Other (2) Total 13 Weeks Ended July 30, 2022 U.S. (1) $ 1,880 $ 565 $ 460 $ 335 $ 3 $ 3,243 Canada 183 82 53 7 - 325 Europe - 51 2 - - 53 Asia 1 141 18 - - 160 Other regions 26 42 6 2 - 76 Total $ 2,090 $ 881 $ 539 $ 344 $ 3 $ 3,857 ____________________ (1) U.S. Includes the United States and Puerto Rico. (2) Primarily consists of net sales from revenue-generating strategic initiatives. The Gap, Inc. REAL ESTATE Store count, openings, closings, and square footage for our stores are as follows: January 28, 2023 26 Weeks Ended July 29, 2023 July 29, 2023 Number ofStore Locations Number of StoresOpened Number of StoresClosed Number ofStore Locations Square Footage(in millions) Old Navy North America 1,238 17 8 1,247 19.9 Gap North America 493 - 12 481 5.1 Gap Asia (1) 232 1 4 140 1.2 Banana Republic North America 419 - 11 408 3.4 Banana Republic Asia 46 3 2 47 0.2 Athleta North America 257 15 3 269 1.1 Company-operated stores total 2,685 36 40 2,592 30.9 Franchise (1) 667 101 38 864 N/A Total 3,352 137 78 3,456 30.9 ____________________ (1) The 89 Gap China stores that were transitioned to Baozun during the period are not included as store closures or openings for Company-operated and Franchise store activity. The ending balance for Gap Asia excludes Gap China stores and the ending balance for Franchise includes Gap China locations transitioned during the period.View original content to download multimedia:https://www.Prnewswire.Com/news-releases/gap-inc-reports-second-quarter-fiscal-2023-results-301909520.Html
SOURCE Gap Inc.
SHOULD YOU BUY IT?
ANNE D'INNOCENZIOAssociated Press
PERSONAL FINANCESHOPPING
For Jake Welch, getting dressed is one big math problem.
The 36-year-old brand director for an advertising firm calculates the cost-per-wear of his wardrobe by highlighting 200 items in a spreadsheet — excluding underwear and socks — and meticulously listing the price he paid for each of them as well as how many times he's worn it. He updates the spreadsheet every night on his computer to determine whether his purchases were worth it — or not.
Lots of people thought Welch was weird when he started doing this 12 years ago, opting to ditch the cheapest items on the sales rack in favor of maximizing the value of his purchases over the span of their lifecycles. But with inflation still a nagging problem, more shoppers are coming around to his way of thinking.
"I was actually onto something versus being a little looney," said Welch of Erda, Utah, who presented his findings at a recent company meeting.
People are also reading…
Retailers are taking note of this mindset and shifting their marketing strategy in some cases. Gap's Old Navy is offering shoppers a full refund for uniforms purchased during the upcoming back-to-school season if the clothes don't hold up for a year. Retailers like Kohl's and online shirt retailer Untuckit have recently revamped their marketing campaigns — particularly for the fall — to focus on durability and versatility. American Eagle is touting the "longevity of your most-loved jeans" made of recycled cotton and polyester in an email campaign to customers.
That means a $200 classic sweater may end up being a better deal if you plan to wear it every week in comparison to a hot pink dress picked up for $40 that might be worn only once a month.
"Cost-per-wear is another way that they think about how to combat some of the inflation," said Christie Raymond, Kohl's chief marketing officer. "Is this item going to last? Is it going to really be versatile? For back to school, for example, can my child wear it in a number of different ways?"
Some shoppers are also looking to be more eco-friendly by buying clothes that don't end up in a landfill after being worn a few times.
Fast fashion still booming
Still, the cost-per-wear calculation may make sense only for those consumers who can afford to prioritize quality and versatility over price.
Neil Saunders, managing director of GlobalData Retail, notes that shoppers with tighter budgets will look at price and may not care whether something will last just as long as it looks good for now.
Indeed, fast-fashion purveyors are still faring well in the face of inflation. Chinese e-commerce retailer Temu, known for deep discounts and coupons, has continued its meteoric rise in the U.S., adding nearly 10 million new daily users since the turn of the year, according to market intelligence firm GWS. Meanwhile, Shein, the ultra-low-price, fast-fashion juggernaut founded in China, over the past year increased from 3.1 million daily users to 4.9 million, according to GWS.
But there's a growing backlash to the cheap stuff .
Rohan Deuskar, founder and CEO of Stylitics, a retail technology firm that powers personalized styling, outfitting and bundling suggestions for 150 retailers online, said he started seeing the trend this past holiday shopping season. He noted the average order was going up, particularly for holiday dresses, while shoppers were buying fewer items. And shoppers were also spending more time engaging with the virtual models that showed different ways to wear the item.
"Shoppers are being more considerate about every purchase and being willing to spend only if they get value — and that no longer just means cheap," Deuskar said. "We're reaching a little bit of an oversaturation of buying a bunch of stuff ."
According to market research firm Circana's Retail Tracking Service, higher prices are outpacing lower prices over the past 12-month period ending in June. Women's dresses priced
$200 and above grew about twice as fast as those priced under $50. Sales of men's jeans that were less than $30 declined, while higher-price brands drove growth. Sales of women's jeans priced $150 and above increased by 7%. And while the market for women's active pants declined 20%, women's active pants priced between $125 and $150 increased 19%, according to Circana.
Saunders notes that "price and quality aren't always linked." In fact, some retailers may be using any excuse to sell higher-price goods.
And cost-per-wear calculations don't factor in weight loss or gain, Saunders added.
Welch said his wardrobe consists of mostly blacks, grays and blues and items that can carry through multiple seasons. Higher inflation has helped him better separate his needs and wants.
"I ask myself a little bit harder: 'Is it something that I absolutely need?'" he said. "Consulting my spreadsheet, how many golf shorts do I really have?"
