The Gap 2013 Annual Report Download - page 41

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17
Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
We are a global retailer offering apparel, accessories, and personal care products for men, women, and children
under the Gap, Banana Republic, Old Navy, Piperlime, Athleta, and Intermix brands. We have Company-operated
stores in the United States, Canada, the United Kingdom, France, Ireland, Japan, Italy, China, Hong Kong, and
beginning in March 2014, Taiwan. We also have franchise agreements with unaffiliated franchisees to operate
Gap, Banana Republic, and Old Navy stores in many other countries around the world. Under these agreements,
third parties operate, or will operate, stores that sell apparel and related products under our brand names. In
addition, our products are available to customers online through Company-owned websites and through the use
of third parties that provide logistics and fulfillment services. Most of the products sold under our brand names are
designed by us and manufactured by independent sources. We also sell products that are designed and
manufactured by branded third parties, especially at our Piperlime and Intermix brands.
We identify our operating segments according to how our business activities are managed and evaluated. Prior to
fiscal 2013, we had two reportable segments: Stores and Direct. The Stores reportable segment included the
results of the retail stores for Gap, Old Navy, and Banana Republic. The Direct reportable segment included the
results of our online brands, as well as Piperlime, Athleta, and Intermix.
Beginning in fiscal 2013, we combined all channels and geographies under one global leader for each of the Gap,
Old Navy, and Banana Republic brands. Each global brand president oversees their brand's specialty, outlet,
online, and franchise operations. Our newer brands, Piperlime, Athleta, and Intermix, are managed by the
president of our Growth, Innovation, and Digital ("GID") division, who oversees those brands' store and online
operations. Each of our brands serves customers through its store and online channels. We have determined that
each of our operating segments (Gap Global, Old Navy Global, Banana Republic Global, and GID) share similar
economic and other qualitative characteristics and, effective February 3, 2013, we have aggregated the results of
our operating segments into one reportable segment.
We are pleased with our fiscal 2013 results. We continued to deliver against our priorities to grow sales with
healthy merchandise margins, manage expenses in a disciplined manner, deliver operating margin expansion and
earnings per share growth, and return excess cash to shareholders. We used a balanced approach to drive
shareholder value even in the face of headwinds from foreign exchange and a shorter fiscal year calendar. We
delivered positive comparable sales in each of the four quarters of fiscal 2013. We remained committed to our
principle of returning excess cash to shareholders and distributed $1.3 billion through dividends and share
repurchases.
As we transitioned to a global brand structure to drive long-term global growth, we opened 190 Company-
operated stores, primarily through expansion in Asia, growth of our global outlets, and Athleta stores in the United
States. Specifically, we expanded our Gap store base in China, opening 34 stores for a total of 81 specialty and
outlet stores, and opened an additional 17 Old Navy stores in Japan for a total of 18 stores. We opened 58 global
outlets for a total of 532 outlet stores. We also opened 30 Athleta stores, ending fiscal 2013 with 65 Athleta stores.
Our franchisees added 72 new stores and five new markets.
Fiscal 2013 consisted of 52 weeks versus 53 weeks in fiscal 2012. Net sales and operating results for fiscal 2013
reflect the impact of one less selling week as well as the calendar shift, which positively impacted the results of
the first quarter of fiscal 2013 and negatively impacted the results of the fourth quarter of 2013. In addition, due to
the 53rd week in fiscal 2012, comparable ("Comp") sales for the fiscal year ended February 1, 2014 are
compared to the 52-week period ended February 2, 2013.
Financial results for fiscal 2013 are as follows:
• Net sales for fiscal 2013 increased 3 percent to $16.1 billion compared with $15.7 billion for fiscal 2012.
Excluding the impact of foreign exchange, our net sales increased 5 percent for fiscal 2013 compared with fiscal
2012. See Net Sales discussion for impact of foreign exchange.