Gaps (GPS) earnings call was very interesting..
CEO Glenn murphy: “We here at Gap Inc., continue to be committed to our three financial tenants for the remainder of this fiscal year. Number one, driving a healthier margin business through a combination of tactics such as our commitment to solid inventory management, reducing and containing costs; it is obviously a critical tenant for us in 2008, and taking a more disciplined approach to capital spending in order to improve our ROIC.
We believe that our unwavering focus to these financial priorities will service well going forward, as we see no signs of improvement in the psyche of the American consumer. Having said that, we recognize and acknowledge that a company like Gap, with a leading market share, that we need to internally advance the dialogue of how we will at the right time begin the stem and then recapture our lost market share.”
* Gross margin increased 150 basis points to 39.7% versus 38.2% last year.
* Operating expenses decreased by $92 million
* Repurchased 11 million shares for $216 million.
* Online sales grew 21% versus last year to $236 million for the quarter
* Merchandise margin improved 310 basis points in the first quarter,
* Ended the Q1 with $1.6 billion in inventory, down 14% versus the prior year.
* Inventory per square foot was $37, down 17% versus down 8% in 2007
* Ended the first quarter with about $1.8 billion in cash and short-term investments.
The Q&A session was a bit of a disappointment because they questions were not very insightful. Murphy and the rest of management were very forthcoming it is just that they were not asked anything that would give more light into the future.
It is almost like the analysts cannot recognize this type of retailing. They seem to think everyone must be a Wal-Mart (WMT) or Target (TGT) and cannot escape that paradigm. Too bad, Murphy seems like the kind of guy tht would answer almost anything…if he was actually asked.
That being said he is doing a tremendous job in a very difficult operating environment.
Disclosure (“none” means no position):Long WMT, none
