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What changed in GAP INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of GAP INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+276 added−264 removedSource: 10-K (2025-03-18) vs 10-K (2024-03-19)

Top changes in GAP INC's 2025 10-K

276 paragraphs added · 264 removed · 213 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe invest in our employees through accessible resources and structured training programs that offer opportunities for professional and personal development. Our Retail Academy for our headquarters employees combines classroom, e-learning, and experiential programming to onboard new hires, develop early talent, and provide functional and technical training. Our Rotational Management Program develops leaders across a range of functions.
Biggest changeOur structured training programs include our Retail Academy, which combines classroom, e-learning, and experiential learning for early-in-career talent; our Rotational Management Program, which develops leaders across a range of corporate functions; our IGNITE leadership training in distribution centers and contact centers, which connects leaders in these functions to support a high-performance culture; and specific skills-building programs for field and store leaders.
For additional information on risks related to our franchise and licensing business, see the below sections in Item 1A, Risk Factors, of this Form 10-K. • “Risks Related to Strategic Transactions and Investments—Our efforts to expand internationally may not be successful,” and • “Risks Related to Strategic Transactions and Investments—Our franchise and licensing businesses are subject to certain risks not directly within our control that could impair the value of our brands.” Inventory The nature of the retail business requires us to carry a significant amount of inventory, especially prior to the peak holiday selling season when we, along with other retailers, generally build up inventory levels.
For additional information on risks related to our franchise and licensing business, see the below sections in Item 1A, Risk Factors, of this Form 10-K. • “Risks Related to Strategic Transactions and Investments—Our franchise and licensing businesses are subject to certain risks not directly within our control that could impair the value of our brands,” and • “Risks Related to Strategic Transactions and Investments—Our efforts to expand internationally may not be successful.” Inventory The nature of the retail business requires us to carry a significant amount of inventory, especially prior to the peak holiday selling season when we, along with other retailers, generally build up inventory levels.
For additional information on risks related to our inventory, see the below sections in Item 1A, Risk Factors, of this Form 10-K. • “Risks Related to Competition, Brand Relevance and Brand Execution—We must successfully gauge apparel trends and changing consumer preferences to succeed," • "Risks Related to Our Business Operations—If we are unable to manage our inventory effectively, our results of operations could be adversely affected," • "Risks Related to Our Business Operations—Failure to protect our inventory from loss and theft may adversely affect our results of operations," and • “General Risks—Our business and results of operations could be adversely affected by natural disasters, public health crises, political crises, negative global climate patterns, or other catastrophic events.” Competitors The global apparel retail industry is highly competitive.
For additional information on risks related to our inventory, see the below sections in Item 1A, Risk Factors, of this Form 10-K. • “Risks Related to Competition, Brand Relevance and Brand Execution—We must successfully gauge apparel trends and changing consumer preferences to succeed," • "Risks Related to Our Business Operations—If we are unable to manage our inventory and fulfillment operations effectively, our results of operations could be adversely affected," • "Risks Related to Our Business Operations—Failure to protect our inventory from loss and theft may adversely affect our results of operations," and • “General Risks—Our business and results of operations could be adversely affected by natural disasters, public health crises, political crises, negative global climate patterns, or other catastrophic events.” Competitors The global apparel retail industry is highly competitive.
For additional information on risks related to our merchandise vendors, see the below sections in Item 1A, Risk Factors, of this Form 10-K. • "Risks Related to Our Business Operations—Our business is subject to risks associated with global sourcing and manufacturing," • "Risks Related to Our Business Operations—Risks associated with importing merchandise from foreign countries, including failure of our vendors to adhere to our Code of Vendor Conduct, could harm our business," • “Risks Related to Our Business Operations—Trade matters may disrupt our supply chain,” and • “General Risks—Our business and results of operations could be adversely affected by natural disasters, public health crises, political crises, negative global climate patterns, or other catastrophic events.” Seasonal Business Our business typically follows a seasonal pattern, with sales peaking during the end-of-year holiday period.
For additional information on risks related to our merchandise vendors, see the below sections in Item 1A, Risk Factors, of this Form 10-K. • “Risks Related to Our Business Operations—Trade matters may disrupt our supply chain,” • "Risks Related to Our Business Operations—Our business is subject to risks associated with global sourcing and manufacturing," • "Risks Related to Our Business Operations—Risks associated with importing merchandise from foreign countries, including failure of our vendors to adhere to our Code of Vendor Conduct, could harm our business," and • “General Risks—Our business and results of operations could be adversely affected by natural disasters, public health crises, political crises, negative global climate patterns, or other catastrophic events.” Seasonal Business and other Macroeconomic Conditions Our business typically follows a seasonal pattern, with sales peaking during the end-of-year holiday period.
Product cost increases or events causing disruption of imports from Vietnam, Indonesia, or other foreign countries, including the imposition of additional import restrictions or taxes, or vendors temporarily closing or potentially failing due to political, financial, or regulatory issues, could have an adverse effect on our operations.
Product cost increases or events causing disruption of imports from Vietnam, Indonesia, or other foreign countries, including the imposition of additional import restrictions, tariffs, or taxes, or vendors temporarily closing or potentially failing due to political, financial, or regulatory issues, could have an adverse effect on our operations.
We maintain a large part of our inventory in distribution centers. We review our inventory levels in order to identify slow-moving merchandise and broken assortments (items no longer in stock in a sufficient range of sizes or colors) and we primarily use promotions and markdowns to clear merchandise.
We maintain a large part of our inventory in distribution centers. We review our inventory levels in order to identify slow-moving merchandise and broken assortments (items no longer in stock in a sufficient range of sizes or colors) and we primarily use markdowns to clear merchandise.
The information contained in, or referred to, on our website is not deemed to be incorporated into this Annual Report unless otherwise expressly noted. 6 Information about our Executive Officers The following are our executive officers: Name, Age, Position, and Principal Occupation: Horacio Barbeito , 53, President and Chief Executive Officer, Old Navy effective August 2022; President and CEO, Walmart Canada from November 2019 to July 2022; President and CEO, Walmart Argentina and Chile from February 2015 to November 2019; and President and CEO, Walmart Argentina from February 2012 to February 2015.
The information contained in, or referred to, on our website is not deemed to be incorporated into this Annual Report unless otherwise expressly noted. 6 Information about our Executive Officers The following are our executive officers: Name, Age, Position, and Principal Occupation: Horacio Barbeito , 54, President and Chief Executive Officer, Old Navy effective August 2022; President and CEO, Walmart Canada from November 2019 to July 2022; President and CEO, Walmart Argentina and Chile from February 2015 to November 2019; and President and CEO, Walmart Argentina from February 2012 to February 2015.
Although each brand expression has a different look and feel, customers can earn and redeem rewards across all of our brands. All of our brands issue and redeem gift cards.
Although each brand expression has a different look and feel, customers can earn and redeem rewards across all of our brands. All of our brands also issue and redeem gift cards.
Mark Breitbard , 56, President and Chief Executive Officer, Gap brand effective September 2020; President and Chief Executive Officer, Specialty Brands from March 2020 to September 2020; President and Chief Executive Officer, Banana Republic from May 2017 to March 2020; Chief Executive Officer, The Gymboree Corporation from January 2013 to April 2017; President, Gap North America from 2012 to January 2013; Executive Vice President, Gap North America Merchandising from 2011 to 2012; and Executive Vice President, GapKids and babyGap from 2010 to 2011.
Mark Breitbard , 57, President and Chief Executive Officer, Gap brand effective September 2020; President and Chief Executive Officer, Specialty Brands from March 2020 to September 2020; President and Chief Executive Officer, Banana Republic from May 2017 to March 2020; Chief Executive Officer, The Gymboree Corporation from January 2013 to April 2017; President, Gap North America from 2012 to January 2013; Executive Vice President, Gap North America Merchandising from 2011 to 2012; and Executive Vice President, GapKids and babyGap from 2010 to 2011.
Richard Dickson , 55, President and Chief Executive Officer, Gap Inc. effective August 2023; President and Chief Operating Officer, Mattel, Inc. from 2015 to 2023; Chief Brands Officer, Mattel, Inc. from 2014 to 2015; and President and Chief Executive Officer, Branded Businesses of The Jones Group (now Premier Brands Group Holdings), which owned a portfolio of premier apparel, footwear, and accessories brands, from 2010 to 2014.
Richard Dickson , 56, President and Chief Executive Officer, Gap Inc. effective August 2023; President and Chief Operating Officer, Mattel, Inc. from 2015 to 2023; Chief Brands Officer, Mattel, Inc. from 2014 to 2015; and President and Chief Executive Officer, Branded Businesses of The Jones Group (now Premier Brands Group Holdings), which owned a portfolio of premier apparel, footwear, and accessories brands, from 2010 to 2014.
The Compensation and Management Development Committee has formal oversight over the Company's policies and strategies relating to its human capital management function, including policies, processes and strategies relating to employee recruitment, retention, appraisal, and development; talent management; workplace culture and employee engagement; workforce diversity, equity, and inclusion, and any risks or goals related thereto; and the Company's general approach to broad-based compensation, benefits, workplace, and employment practices, as outlined in its charter.
The Compensation and Management Development Committee has formal oversight over the Company's policies and strategies relating to its human capital management function, including policies, processes, and strategies relating to employee recruitment, retention, appraisal, and development; talent management; workplace culture and employee engagement; workforce inclusion and belonging, and any risks or goals related thereto; and the Company's general approach to broad-based compensation, benefits, workplace, and employment practices, as outlined in its charter.
Eric Chan , 47, Executive Vice President, Chief Business and Strategy Officer effective January 2024; Chief Financial Officer, LA Clippers from August 2018 to December 2023; Chief Operating Officer, Bouqs Company from February 2017 to August 2018; and Chief Financial Officer, Loot Crate from October 2015 to February 2017.
Eric Chan , 48, Executive Vice President, Chief Business and Strategy Officer effective January 2024; Chief Financial Officer, LA Clippers from August 2018 to December 2023; Chief Operating Officer, Bouqs Company from February 2017 to August 2018; and Chief Financial Officer, Loot Crate from October 2015 to February 2017.
Sally Gilligan , 51, Executive Vice President, Chief Supply Chain and Transformation Officer effective January 2024; Chief Supply Chain, Strategy and Transformation Officer from March 2023 to January 2024; Chief Growth Transformation Officer from April 2021 to March 2023; Chief Information Officer & Head of Strategy from April 2018 to March 2021; and Senior Vice President, Product Operations and Supply Chain from 2015 to April 2018.
Sally Gilligan , 52, Executive Vice President, Chief Supply Chain and Transformation Officer effective January 2024; Chief Supply Chain, Strategy and Transformation Officer from March 2023 to January 2024; Chief Growth Transformation Officer from April 2021 to March 2023; Chief Information Officer & Head of Strategy from April 2018 to March 2021; and Senior Vice President, Product Operations and Supply Chain from 2015 to April 2018.
Chris Blakeslee , 46, President and Chief Executive Officer, Athleta effective August 2023; President, BELLA+CANVAS and Alo Yoga from January 2020 to July 2023; and Executive Vice President, Color Image Apparel from October 2017 to December 2019.
Chris Blakeslee , 47, President and Chief Executive Officer, Athleta effective August 2023; President, BELLA+CANVAS and Alo Yoga from January 2020 to July 2023; and Executive Vice President, Color Image Apparel from October 2017 to December 2019.
Julie Gruber , 58, Executive Vice President, Chief Legal and Compliance Officer, and Corporate Secretary effective May 2021; Executive Vice President, Chief Legal, Compliance and Sustainability Officer, and Corporate Secretary from March 2020 to May 2021; and Executive Vice President, Global General Counsel, Corporate Secretary, and Chief Compliance Officer from February 2016 to March 2020. Ms.
Julie Gruber , 59, Executive Vice President, Chief Legal and Compliance Officer, and Corporate Secretary effective May 2021; Executive Vice President, Chief Legal, Compliance and Sustainability Officer, and Corporate Secretary from March 2020 to May 2021; and Executive Vice President, Global General Counsel, Corporate Secretary, and Chief Compliance Officer from February 2016 to March 2020. Ms.
Katrina O'Connell , 54, Executive Vice President, Chief Financial Officer effective March 2020; Chief Financial Officer and Senior Vice President of Strategy & Innovation, Old Navy from January 2017 to March 2020; and Chief Financial Officer and Senior Vice President of Strategy, Banana Republic from March 2015 to January 2017. Ms.
Katrina O'Connell , 55, Executive Vice President, Chief Financial Officer effective March 2020; Chief Financial Officer and Senior Vice President of Strategy & Innovation, Old Navy from January 2017 to March 2020; and Chief Financial Officer and Senior Vice President of Strategy, Banana Republic from March 2015 to January 2017. Ms.
We are committed to pursuing technology and product innovation that supports our sustainability efforts while also delivering great quality products to our customers.
We are committed to pursuing technology and product innovation that support our sustainability efforts while also delivering great quality products to our customers.
Gap Inc. is an omni-channel retailer, with sales to customers both in stores and online, through Company-operated and franchise stores, Company-owned websites, and third-party arrangements. As of February 3, 2024, we had Company-operated stores in the United States, Canada, Japan, and Taiwan. In fiscal 2022, we signed agreements with a third party, Baozun Inc.
Gap Inc. is an omni-channel retailer, with sales to customers both in stores and online, through Company-operated and franchise stores, websites, and third-party arrangements. As of February 1, 2025, we had Company-operated stores in the United States, Canada, Japan, and Taiwan. In fiscal 2022, we signed agreements with a third party, Baozun Inc.
Amy Thompson , 48, Executive Vice President, Chief People Officer effective January 2024; Chief People Officer, Mattel, Inc. from 2017 to 2023; and Chief People Officer, TOMS Shoes from 2012 to 2017. Ms. Thompson previously held several executive and leadership roles at Starbucks Coffee Company from 2006 to 2012. 8
Amy Thompson , 49, Executive Vice President, Chief People Officer effective January 2024; Chief People Officer, Mattel, Inc. from 2017 to 2023; and Chief People Officer, TOMS Shoes from 2012 to 2017. Ms. Thompson previously held several executive and leadership roles at Starbucks Coffee Company from 2006 to 2012. 7
Item 1. Business. General The Gap, Inc. (Gap Inc., the "Company," "we," and "our") is a collection of lifestyle brands offering apparel, accessories, and personal care products for women, men, and children under the Old Navy, Gap, Banana Republic, and Athleta brands.
Item 1. Business. General The Gap, Inc. (Gap Inc., the "Company," "we," and "our") is a house of iconic brands offering apparel, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, and Athleta brands.
We compete with local, national, and global apparel retailers. For additional information on risks related to competition, see the section entitled “Risk Factors—“Risks Related to Competition, Brand Relevance and Brand Execution—Our business is highly competitive” in Item 1A, Risk Factors, of this Form 10-K. Human Capital As of February 3, 2024, we had a workforce of approximately 85,000 employees.
We compete with local, national, and global apparel retailers. For additional information on risks related to competition, see the section entitled “Risk Factors—“Risks Related to Competition, Brand Relevance and Brand Execution—Our business is highly competitive” in Item 1A, Risk Factors, of this Form 10-K. 4 Human Capital As of February 1, 2025, we had a workforce of approximately 82,000 employees.
Our Board of Directors Committee Charters (Audit and Finance, Compensation and Management Development, and Governance and Sustainability Committees) and Corporate Governance Guidelines are also available on our website under “Investors, Governance.” Our Code of Business Conduct is available on our website under “Investors, Corporate Compliance.” Any waivers to the Code of Business Conduct will be publicly disclosed.
Committee charters for each standing committee of our Board (the Audit and Finance, Compensation and Management Development, and Governance and Sustainability Committees) and Corporate Governance Guidelines are available on our website under “Investors, Governance.” Our Code of Business Conduct is available on our website under “Investors, Corporate Compliance.” Any waivers to the Code of Business Conduct will be publicly disclosed on the website.
Environmental, Social, Governance ("ESG") Information about our ESG efforts is available on our website (www.gapinc.com) under "Values, Sustainability" which provides information on our public commitments, policies, social and environmental programs, sustainability strategy, and ESG data.
Environmental, Social, and Governance ("ESG") Information about our ESG efforts is available on our website (www.gapinc.com) under "Impact, ESG Resources" which provides information on our public commitments, policies, social and environmental programs, ESG strategy, and ESG data.
Our internal Safety and Claims teams analyze risks and collaborate with operational leaders to understand and adjust business practices to align with emerging trends, and our Internal Audit team gauges procedural compliance at distribution centers and stores. Human Capital Management Oversight. The Board of Directors (the "Board") and its Compensation and Management Development Committee oversee human capital management issues.
Dedicated teams analyze risks and collaborate with operational leaders to understand and adjust business practices to align with emerging trends, and our Internal Audit team gauges procedural compliance at distribution centers and stores. 5 Human Capital Management Oversight. Our Board of Directors (the "Board") through its Compensation and Management Development Committee oversees human capital management issues.
We know that in order to remain competitive in the retail apparel industry, we must attract, develop, and retain skilled employees in our design, merchandising, supply chain, marketing, information technology, and other functions, as well as in our stores and distribution centers. Competition for such personnel is intense.
We know that in order to remain competitive in the retail apparel industry, we must attract, develop, and retain skilled employees in our design, merchandising, supply chain, marketing, information technology, and other functions, as well as in our stores and distribution centers.
The Compensation and Management Development Committee regularly receives reports on talent management, succession planning, and diversity, equity, and inclusion, and engages periodically on compensation program design for all employees at all levels.
The Compensation and Management Development Committee receives reports on talent management, succession planning, and inclusion and belonging, and engages on compensation program design for employees at all levels.
We also hire seasonal employees, primarily during the peak holiday selling season. As of February 3, 2024, approximately 83 percent of employees worked in retail locations, approximately 9 percent of employees worked in distribution centers, and approximately 8 percent of employees worked in headquarters locations.
We also hire seasonal employees, primarily during the peak holiday selling season. As of February 1, 2025, approximately 84 percent of employees worked in retail locations, approximately 8 percent of employees worked in distribution centers, and approximately 8 percent of employees worked in headquarters locations.
In addition to operating in the specialty, outlet, online, and franchise channels, we use our omni-channel capabilities to bridge the digital world and physical stores to further enhance the shopping experience for our customers.
In addition to operating in the specialty, outlet, online, and franchise channels, we use our omni-channel capabilities to bridge the digital world and physical stores.
Old Navy opened its first store in 1994 in the United States and since then has expanded to more than 1,200 Company-operated stores in the U.S. and Canada, as well as franchise stores around the world. Gap.
Old Navy opened its first store in 1994 in the United States and since then has expanded to more than 1,200 Company-operated stores in the U.S. and Canada, as well as franchise stores around the world. Gap. Gap is a globally recognized icon of casual American style.
We leverage our customer database and respond to shopping behaviors and needs with personalized content across email, site, and digital media to drive relevance and urgency. Our diversified media mix spans traditional to digital to social media.
Marketing and Advertising We use a variety of marketing and advertising mediums to drive brand health, customer acquisition, and engagement. We leverage our customer database and respond to shopping behaviors and needs with personalized content across email, site, and digital media to drive relevance and urgency. Our diversified media mix spans traditional to digital to social media.
For more information on the number of stores by brand and region, see the table included in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of this Form 10-K.
We ended fiscal 2024 with 2,506 Company-operated stores and 1,063 franchise store locations. For more information on the number of stores by brand and region, see the table included in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of this Form 10-K.
Under these agreements, third parties operate, or will operate, stores and websites that sell apparel and related products under our brand names. We also have licensing agreements with licensees to sell products using our brand names.
Franchise and Licensing We have franchise agreements to operate Old Navy, Gap, Banana Republic, and Athleta in about 40 countries around the world. Under these agreements, third parties operate, or will operate, stores and websites that sell apparel and related products under our brand names. We also have licensing agreements with licensees to sell products using our brand names.
We leverage feedback and purchasing data from our customer database, along with market trend insights, to guide our product and merchandising decision-making. Marketing and Advertising We use a variety of marketing and advertising mediums to drive brand health, customer acquisition, and engagement.
We leverage feedback and purchasing data from our customer database, along with market trend insights, to guide our product and merchandising decision-making.
For additional information on risks related to building our brands, see the section entitled “Risk Factors—Risks Related to Strategic Transactions and Investments—Our investments in customer, digital, and omni-channel shopping initiatives may not deliver the results we anticipate” in Item 1A, Risk Factors, of this Form 10-K.
For additional information on risks related to building our brands, see the section entitled “Risk Factors—Risks Related to Strategic Transactions and Investments—Our investments in customer, digital, omni-channel, and other strategic initiatives may not deliver the results we anticipate” in Item 1A, Risk Factors, of this Form 10-K. 3 Trademarks and Service Marks We own the material trademarks used in connection with the marketing, distribution, and sale of our products, domestically and internationally, where our products are currently sold or manufactured.
Our store and distribution center employees are trained on safe work practices and learn procedural knowledge through on-the-job training programs that are aligned to industry and Occupational Safety & Health standards.
We provide an array of financial incentives and health, well-being, and leave benefits to help our employees optimize their professional and personal lives. Our store and distribution center employees are trained on safe work practices and learn procedural knowledge through on-the-job training programs that are aligned to industry and occupational health and safety standards.
We have obtained and continue to maintain registrations for the aforementioned marks in the United States, Canada, Mexico, the United Kingdom, the European Union, Japan, China, and numerous other countries throughout the world. In addition, we own domain names for our primary trademarks and numerous copyright registrations.
Our major trademarks include the Old Navy, Gap, Banana Republic, and Athleta trademarks and service marks, and certain other trademarks and service marks. We have obtained and continue to maintain registrations for these marks in the United States, Canada, Mexico, the United Kingdom, the European Union, Japan, China, and numerous other countries throughout the world.
We intend to continue to strategically register, both domestically and internationally, trademarks, domain names, and copyrights that we utilize today and those we develop in the future. We will continue to aggressively police our intellectual property and pursue those who infringe, both domestically and internationally.
In addition, we own domain names for our primary trademarks and numerous copyright registrations. We intend to continue to strategically register, both domestically and internationally, trademarks, domain names, and copyrights that we utilize today and those we may develop in the future.
Additionally, other macroeconomic conditions such as the uncertainty surrounding global inflationary pressures, acts of terrorism or war, global credit and banking markets, and new legislation have had and may continue to have an impact on customer behavior that could result in temporary changes in the seasonality of our business.
Additionally, other macroeconomic conditions such as uncertainty surrounding inflationary pressures, global geopolitical instability, and changes related to government fiscal, monetary, and tax policies including changes in interest rates, tax rates, duties, tariffs, and other restrictions, have had and may continue to have an impact on customer behavior that could result in temporary changes in the seasonality of our business.
Since 2018, Athleta has been certified as a benefit corporation ("B Corp"), furthering its commitment to using the business as a force for good to drive social and environmental impact. The Company continues to meet rigorous standards across social and environmental performance, with accountability and transparency.
Since 2018, Athleta has been certified as a benefit corporation ("B Corp"), furthering its commitment to using the business as a force for good to drive social and environmental impact. Athleta apparel is available at Company-operated stores across the U.S. and Canada, franchise retail locations globally, and online.
Compliance with these laws, rules, reporting obligations, and regulations, which can change, could result in significant costs but has not had, and is not expected to have, a material effect on our capital expenditures, results of operations, or competitive position as compared to prior periods. 5 Available Information We make available on our website (www.gapinc.com) under “Investors, Financial Information, SEC Filings” our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file or furnish them to the SEC.
Compliance with these laws, rules, reporting obligations, and regulations, which can change, could result in significant costs but has not had, and is not expected to have, a material effect on our capital expenditures, results of operations, or competitive position as compared to prior periods.
Our omni-channel services, including buy online pick-up in store, order-in-store, find-in-store, and ship-from-store, as well as enhanced mobile-enabled experiences, are tailored uniquely across our collection of brands. Old Navy. Old Navy is a North American value apparel brand that makes on-trend fashion accessible to everyone. The brand democratizes style through its combination of on-trend product, consistent quality, and affordable pricing.
Old Navy. Old Navy is a North American value apparel brand that makes on-trend fashion accessible to everyone. The brand democratizes style through its combination of on-trend product, consistent quality, and affordable pricing. Old Navy is committed to creating a frictionless and delightful shopping experience across stores, online, and convenient omni-channel capabilities.
Of our merchandise purchased during fiscal 2023, substantially all purchases, by dollar value, were from factories outside the United States. Approximately 29 percent of our fiscal 2023 purchases, by dollar value, were from factories in Vietnam. Approximately 18 percent of our fiscal 2023 purchases, by dollar value, were from factories in Indonesia.
Approximately 27 percent of our fiscal 2024 purchases, by dollar value, were from factories in Vietnam. Approximately 19 percent of our fiscal 2024 purchases, by dollar value, were from factories in Indonesia.
Full-time U.S.-based employees who have completed one year of employment receive a tuition reimbursement benefit. We also offer functional and technical training to our employees in our stores and distribution centers. Equality and Belonging.
We have ongoing initiatives to transition seasonal employees to full-time roles in our distribution centers, and to promote store and distribution center employees into corporate functions. All full-time U.S. employees who have completed one year of employment also qualify for an annual tuition reimbursement benefit. Inclusion and Belonging.
We value our employees' feedback and use opinion surveys as a critical component of our ongoing listening strategy. We use these insights to understand what is important to our employees, to determine where we should focus our efforts, and to inform ongoing programs and strategies, all to help us create a thriving, productive work environment.
We value our employees' feedback and use opinion surveys to understand what is important to our employees, and to inform ongoing programs and strategies – all to help us foster a thriving, productive work environment, while identifying opportunities for year-over-year enhancements to the employee experience. Health, Well-being, and Safety. Our employees' health, well-being, and safety are top priorities.
Our success is dependent to a significant degree on the continued contributions of our employees. We understand the importance of human capital and prioritize building talent; creating a culture of equality and belonging; ensuring pay equity; gathering and actioning on employee feedback; and supporting the health, wellness, and safety of our employees, customers, and communities. 4 Building Talent.
We value the importance of our human capital and prioritize developing our talent; creating an inclusive workplace and fostering a strong sense of belonging for our employees; pay equity; gathering and actioning on employee feedback; and supporting our employees' health, well-being, and safety. Talent Development.
We focus on productivity of demand generation investments to drive increased effectiveness. 2 Merchandise Vendors We purchase private label and non-private label merchandise from over 250 vendors. Our vendors have factories in about 30 countries. Our two largest vendors accounted for approximately 9 percent and 7 percent of the dollar amount of our total fiscal 2023 purchases.
Our vendors have factories in about 30 countries. Our two largest vendors accounted for approximately 9 percent and 8 percent of the dollar amount of our total fiscal 2024 purchases. Of our merchandise purchased during fiscal 2024, substantially all purchases, by dollar value, were from factories outside North America.
We believe the distinctive trademarks we use in connection with our products are important in building our brand image and distinguishing our products from those of others. 3 Franchise and Licensing We have franchise agreements to operate Old Navy, Gap, Banana Republic, and Athleta in about 40 countries around the world.
We will continue to aggressively police our intellectual property and pursue those who infringe our intellectual property rights, both domestically and internationally. We believe the distinctive trademarks we use in connection with our products are important in building our brand image and distinguishing our products from those of others.
Established in 1998 and acquired by Gap Inc. in 2008, Athleta integrates technical features and innovative design across its women's and girls' collection to carry her through a life in motion, from yoga, training, and sports to everyday activities and travel.
Founded in 1998 and acquired by Gap Inc. in 2008, Athleta integrates technical features and innovative design to support all the ways she moves – from yoga and training to travel and recovery. Athleta's versatile performance apparel is designed for women by women, with inclusivity at its core.
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Old Navy is committed to creating an accessible, frictionless, and delightful shopping experience including a fun store environment, a dynamic online channel, and convenient omni-channel capabilities.
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The shopping experience is further enhanced by our omni-channel services, including buy online pick-up in store, order-in-store, and ship-from-store, as well as enhanced mobile-enabled experiences, which allow our customers to shop seamlessly across our brands and channels. Our brands have shared investments in supply chain and inventory management, which allows us to optimize efficiency and responsiveness in our operations.
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Founded in San Francisco in 1969, Gap is an authority on modern American style and continues to build on its heritage of championing originality. The brand includes adult apparel and accessories, GapKids, babyGap, Gap Maternity, GapBody, and GapFit collections. Gap connects with customers online, in Company-operated and franchise retail locations globally, and through licensing partnerships.
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Founded in San Francisco in 1969, Gap champions originality by creating loved essentials and delivering culturally-relevant experiences that celebrate individuality. Gap is an adult apparel and accessories brand that also offers GapKids, babyGap, Gap Maternity, GapBody and GapFit collections. The brand also serves value-conscious customers with exclusively designed collections for Gap Outlet and Gap Factory Stores.
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Gap also serves value-conscious customers with exclusively designed collections for Gap Outlet and Gap Factory Stores. Banana Republic. Acquired in 1983 as a travel and adventure outfitter, Banana Republic is a premium lifestyle retailer celebrating exploration and self-expression through timeless quality, versatile fabrics, and exceptionally made womenswear, menswear, and home designs.
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Gap is our namesake brand and connects with customers in Company-operated and franchise retail locations globally, online, and through licensing partnerships. Banana Republic. Banana Republic is a storyteller's brand, outfitting the modern explorer with high-quality, expertly crafted collections and experiences to inspire and enrich their journeys.
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Customers can purchase Banana Republic products globally in the brand's specialty stores, factory stores, online, and franchise stores. Athleta. Athleta is a premium fitness and lifestyle brand whose mission is to foster empowerment, confidence, strength, and well-being through movement.
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Founded in 1978 and acquired by Gap Inc. in 1983, Banana Republic connects with customers in Company-operated and franchise retail locations globally, and online. 1 Athleta. Athleta is a premium performance lifestyle brand that empowers women and girls to build confidence, strength, and belonging through movement – igniting the Power of She.
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With this accreditation, Gap Inc. is one of the largest publicly-traded retail companies with a B Corp certified subsidiary apparel brand. 1 We ended fiscal 2023 with 2,562 Company-operated stores and 998 franchise store locations.
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For additional information on risks related to product development, see the section entitled “Risk Factors—Risks Related to Competition, Brand Relevance, and Brand Execution—We must successfully gauge apparel trends and changing consumer preferences to succeed” in Item 1A, Risk Factors, of this Form 10-K.
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Trademarks and Service Marks We own the material trademarks used in connection with the marketing, distribution and sale of our products, domestically and internationally, where our products are currently sold or manufactured.
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We focus on productivity of demand generation investments to drive increased effectiveness.
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Our major trademarks include the Old Navy, Gap, Gap Kids, babyGap, Gap Body, GapFit, Banana Republic, and Athleta trademarks and service marks, and certain other trademarks and service marks.
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For additional information on risks related to our marketing efforts, see the section entitled “Risk Factors—Risks Related to Competition, Brand Relevance, and Brand Execution—We must successfully implement our marketing efforts” in Item 1A, Risk Factors, of this Form 10-K. 2 Merchandise Vendors We purchase private label and non-private label merchandise from over 200 vendors.
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Our Equality and Belonging Strategy leverages our people, brands, and voice to unlock opportunities and enable a culture of belonging for our teams, customers, and future generations. Within Gap Inc., we offer year-round programming, including heritage month celebrations, and opportunities for employees to participate in our Equality & Belonging Groups.
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For additional information on risks related to macroeconomic conditions, see the section entitled “Risk Factors—Risks Related to Macroeconomic Conditions—Global economic conditions have and could continue to adversely affect our business, financial condition, and results of operations” in Item 1A, Risk Factors, of this Form 10-K.
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We also continue to annually disclose our people data on our website (www.gapinc.com). Pay Equity. In 2014, we were the first Fortune 500 company to announce that we pay women and men equally for equal work, and since then we have conducted internal pay equity reviews using a third-party firm. Employee Feedback.
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We are powered by passionate people who strive to inspire authentic self-expression and keep our brands at the forefront of culture.
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We have modernized our approach to soliciting employee feedback through the use of pulse surveys on topical issues to capture data so we can understand and respond faster to employees' needs. We also collect feedback about our employees' work experience during performance reviews. Health, Wellness and Safety.
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We provide our employees with resources, experiences, and support to help expand our employees’ skills and shape their careers.
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The health and safety of our employees, customers and communities is a top priority. For our employees, we provide an array of financial incentives and health, well-being and leave benefits to help them make the most of their professional and personal lives.
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As a global company, we believe it is important to promote a culture of inclusion and belonging for our employees, customers, and communities. We strive to foster a workplace where our employees feel valued, respected, and equipped to reach their full potential.
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Gurmeet Singh , 54, Chief Digital and Technology Officer effective July 2022; Chief Technology and Chief Information Officer, Big Lots Inc. from July 2021 to July 2022; Group Chief Digital Officer, Al Futtaim Group from February 2020 to July 2021; Chief Digital, Information and Marketing Officer, 7-Eleven from January 2019 to September 2019, and Chief Digital Officer and Chief Information Officer, 7-Eleven from November 2017 to January 2019. 7 Sandra Stangl , 56, President and Chief Executive Officer, Banana Republic effective December 2020; Co-Founder and Chief Merchant, MINE (Pearl Design Co.) from February 2019 to November 2020; Co-President, Chief Merchandising and Business Development Officer, Restoration Hardware, Inc. from December 2017 to August 2018; Co-President, New Business Development, Restoration Hardware, Inc. from May 2017 to December 2017; and President, Pottery Barn Kids and Pottery Barn Teen, Williams-Sonoma, Inc. from 2013 to January 2017.
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We also strive to support our employees so that they feel a strong sense of belonging and connection to our company, and are able to bring their authentic selves to work. We aim to develop leaders who model and promote inclusive behaviors, which we believe creates stronger teams.
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We also offer opportunities for our employees to celebrate culture throughout the year through heritage month programming and our employee resource groups. Pay Equity. We continue to conduct internal pay equity reviews to help ensure that our pay practices are fair and competitive. Employee Feedback.
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For additional information on risks related to regulation, see the section entitled “Risk Factors—General Risks—Failure to comply with applicable laws and regulations, and changes in the regulatory or administrative landscape, could adversely affect our business, financial condition, and results of operations” in Item 1A, Risk Factors, of this Form 10-K.
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Available Information We make available on our website (www.gapinc.com) under “Investors, Financial Information, SEC Filings” our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file or furnish them to the SEC.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSome of the factors that may influence consumer spending patterns include higher unemployment levels, pandemics (such as the COVID-19 pandemic, or the resurgence of the pandemic or the emergence of new strains or variants), extreme weather conditions and natural disasters, higher consumer debt levels, inflationary pressures, recession or fear of recession, global geopolitical instability (including the ongoing Russia-Ukraine and Israel-Hamas conflicts), reductions in net worth based on market declines and uncertainty, home foreclosures and reductions in home values, fluctuating interest and foreign currency rates and credit availability, government austerity measures, fluctuating fuel and other energy costs, fluctuating commodity prices, and general uncertainty regarding the overall future economic environment.
Biggest changeSome of the factors that may influence consumer spending patterns include higher unemployment levels; pandemics and other health crises; extreme weather conditions and natural disasters; higher consumer debt levels; inflationary pressures; recession or fear of recession; global geopolitical instability (including in Europe and the Middle East); reductions in net worth based on market declines and uncertainty; home foreclosures and reductions in home values; fluctuating interest and foreign currency exchange rates and credit availability; government austerity measures; changes and uncertainties related to government fiscal, monetary, and tax policies including changes in interest rates, tax rates, duties, tariffs, and other restrictions; fluctuating fuel and other energy costs; fluctuating commodity prices; and reduced consumer confidence and general uncertainty regarding the overall future economic environment.
Moreover, in the event of a significant disruption in the supply of the fabrics or raw materials used by our vendors in the manufacture of our products, our vendors might not be able to locate alternative suppliers of materials of comparable quality at an acceptable price.
Moreover, in the event of a significant disruption in the supply of the fabrics or raw materials used by our vendors in the manufacture of our products, our vendors might not be able to locate alternative suppliers of materials of comparable quality or at an acceptable price.
In addition, in many of these locations, the real estate, employment and labor, transportation and logistics, and other operating requirements differ dramatically from those in the places where we have more experience.
In addition, in many of these locations, real estate, employment and labor, transportation and logistics, and other operating requirements differ dramatically from those in the places where we have more experience.
Our level of indebtedness could impact our business in the following ways: • make it more difficult for us to satisfy our debt obligations, including with respect to the Senior Notes and ABL Facility; • increase our vulnerability to general adverse economic and external conditions; • impair our ability to obtain additional debt or equity financing in the future for working capital, capital expenditures, acquisitions or general corporate or other purposes; • require us to dedicate a material portion of our cash flows from operations to the payment of principal and interest on our indebtedness, thereby reducing the availability of our cash flows to fund working capital needs, capital expenditures, acquisitions and other general corporate purposes; • expose us to the risk of increased interest rates for borrowings under the ABL Facility, which bear interest at a variable rate; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • place us at a disadvantage compared to our competitors that have less indebtedness; and 17 • limit our ability to adjust to changing market conditions.
Our level of indebtedness could impact our business in the following ways: • make it more difficult for us to satisfy our debt obligations, including with respect to the Senior Notes and ABL Facility; • increase our vulnerability to general adverse economic and external conditions; • impair our ability to obtain additional debt or equity financing in the future for working capital, capital expenditures, acquisitions, or general corporate or other purposes; • require us to dedicate a material portion of our cash flows from operations to the payment of principal and interest on our indebtedness, thereby reducing the availability of our cash flows to fund working capital needs, capital expenditures, acquisitions, and other general corporate purposes; • expose us to the risk of increased interest rates for borrowings under the ABL Facility, which bear interest at a variable rate; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • place us at a disadvantage compared to our competitors that have less indebtedness; and • limit our ability to adjust to changing market conditions.
Our ability to deliver strong comparable sales results and margins depends in large part on accurately forecasting demand and apparel trends, selecting effective marketing techniques, providing an appropriate mix of merchandise for our broad and diverse customer base, managing inventory effectively, using effective pricing strategies, and optimizing store performance.
Our ability to deliver strong comparable sales results and margins depends in large part on accurately forecasting demand and apparel trends; selecting effective marketing techniques; providing an appropriate mix of merchandise for our broad and diverse customer base; managing inventory effectively; using effective pricing strategies; and optimizing store and online performance.
Many of these Actions raise complex factual and legal issues and are subject to uncertainties. Actions filed against us from time to time include commercial, intellectual property, customer, employment, securities, and data privacy claims, including class action lawsuits. The plaintiffs in some Actions seek unspecified damages or injunctive relief, or both.
Many of these Actions raise complex factual, tax, and legal issues and are subject to uncertainties. Actions filed against us from time to time include commercial, intellectual property, customer, employment, securities, and data privacy claims, including class action lawsuits. The plaintiffs in some Actions seek unspecified damages or injunctive relief, or both.
Failure to comply with applicable laws and regulations, and changes in the regulatory or administrative landscape, could adversely affect our business, financial condition and results of operations. Laws and regulations at the local, state, federal, and international levels frequently change, and the ultimate cost of compliance cannot be precisely estimated.
Failure to comply with applicable laws and regulations, and changes in the regulatory or administrative landscape, could adversely affect our business, financial condition, and results of operations. 19 Laws and regulations at the local, state, federal, and international levels frequently change, and the ultimate cost of compliance cannot be precisely estimated.
Transportation shortages, factory closures, labor shortages, port congestion and other supply chain disruptions have in the past and may in the future lead to prolonged delays in receiving inventory. The global apparel retail business fluctuates according to changes in consumer preferences, dictated in part by apparel trends and season.
In addition, transportation shortages, factory closures, labor shortages, port congestion, and other supply chain disruptions have in the past and may in the future lead to prolonged delays in receiving inventory. The global apparel retail business fluctuates according to changes in consumer preferences, dictated in part by apparel trends and season.
To the extent we misjudge the market for our merchandise or the products suitable for local markets, or fail to execute trends and deliver products to the market as timely as our competitors, our sales will be adversely affected, and the markdowns required to move the resulting excess inventory will adversely affect our margins and results of operations.
To the extent we misjudge the market for our merchandise or the products suitable for local markets, or fail to execute trends and deliver products to the market as timely as our competitors, our sales will be adversely affected, and the markdowns required to move the resulting excess inventory will adversely affect our gross margins and results of operations.
Risks Related to Sustainability and Climate Change Our business is subject to evolving regulations and expectations with respect to environmental, social and governance (“ESG”) matters that could expose us to numerous risks. Increasingly regulators, customers, investors, employees and other stakeholders are focusing on ESG matters and related disclosures.
Risks Related to Sustainability and Climate Change Our business is subject to evolving regulations and expectations with respect to environmental, social, and governance ("ESG") matters that could expose us to numerous risks. Increasingly regulators, customers, investors, employees, and other stakeholders are focusing on ESG matters and related disclosures.
Our ability to make scheduled payments on our indebtedness depends upon our future operating performance and on our ability to generate cash flows in the future, which is subject to general economic, financial, business, competitive, legislative, regulatory and other factors that are beyond our control.
Our ability to make scheduled payments on our indebtedness depends upon our future operating performance and on our ability to generate cash flows in the future, which is subject to general economic, financial, business, 17 competitive, legislative, regulatory, and other factors that are beyond our control.
These factors may cause our comparable sales results and margins to differ materially from prior periods and from financial market expectations. Our comparable sales, including the associated comparable online sales, have fluctuated significantly in the past on an annual and quarterly basis.
These factors may cause our comparable sales results and margins to differ materially from prior periods and from financial market expectations. Our comparable sales, including comparable online sales, have fluctuated significantly in the past on an annual and quarterly basis.
In addition, these transactions may be complex in nature, and unanticipated developments or changes, including changes in law, the macroeconomic environment, market conditions, the retail industry or political conditions may affect our ability to complete such transactions.
In addition, these transactions may be complex, and unanticipated developments or changes, including changes in law, the macroeconomic environment, market conditions, the retail industry, or political conditions may affect our ability to complete such transactions.
These developments have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting ESG-related requirements and expectations.
These developments have resulted in, and are likely to continue to result in, increased 18 general and administrative expenses and increased management time and attention spent complying with or meeting ESG-related requirements and expectations.
Executing these transactions may require significant time and attention from our senior management and employees, which could disrupt our ongoing business and adversely 13 affect our results of operations.
Executing these transactions may require significant time and attention from our senior management and employees, which could disrupt our ongoing business and adversely affect our results of operations.
Consumer tastes and trends may differ in these locations and, as a result, the sales of our products may not be successful or result in the margins we anticipate. If our international expansion plans are unsuccessful or do not deliver an appropriate return on our investments, our results of operations could be adversely affected.
Consumer tastes and trends may differ in these locations and, as a result, the sales of our products may not be successful, or we may not achieve the results we anticipate. If our international expansion plans are unsuccessful or do not deliver an appropriate return on our investments, our results of operations could be adversely affected.
We have and may continue to engage in or seek to engage in strategic transactions, such as acquisitions, partnerships, divestitures or other dispositions. In recent years, we transferred our European, Mexico and China businesses to a partnership model, and are awaiting regulatory approvals to transfer our Taiwan business.
We have and may continue to engage in or seek to engage in strategic transactions, such as acquisitions, partnerships, divestitures, or other dispositions. In recent years, we transferred our Europe, Mexico, and China businesses to a partnership model, and are awaiting regulatory approvals to transfer our Taiwan business.
A variety of factors affect comparable sales and margins, including but not limited to apparel trends, competition, current economic conditions (including due to macroeconomic pressures and geopolitical instability), the timing of new merchandise releases and promotional events, changes in our merchandise mix, the success of our marketing programs (including our loyalty program), supply chain disruptions and transitory costs, foreign currency fluctuations, industry traffic trends, and weather conditions.
A variety of factors affect comparable sales and margins, including but not limited to apparel trends; competition; current economic conditions (including macroeconomic pressures and geopolitical instability); the timing of new merchandise releases and promotional events; changes in our merchandise mix; the success of our marketing programs (including our loyalty program); supply chain disruptions and transitory costs; foreign currency exchange rate fluctuations; industry traffic trends; and weather conditions.
The global apparel retail industry is highly competitive. We and our franchisees compete with local, national, and global department stores, mass-market retailers, specialty and discount store chains, independent retail stores, and online businesses that market similar lines of merchandise.
The global apparel retail industry is highly competitive. We and our franchisees compete with local, national, and global department stores, mass-market retailers, specialty and discount store chains, independent retail stores, and digital businesses that market similar lines of merchandise.
Risks Related to Strategic Transactions and Investments We have and may continue to engage in or seek to engage in strategic transactions, such as acquisitions, partnerships, divestitures and other dispositions, that are subject to various risks and uncertainties and which could disrupt or adversely affect our business.
We have and may continue to engage in or seek to engage in strategic transactions, such as acquisitions, partnerships, divestitures, and other dispositions, that are subject to various risks and uncertainties and which could disrupt or adversely affect our business.
Risks Related to Our Business Operations If we are unable to manage our inventory effectively, our results of operations could be adversely affected. Fluctuations in the global apparel retail markets impact the levels of inventory maintained by apparel retailers.
Risks Related to Our Business Operations If we are unable to manage our inventory and fulfillment operations effectively, our results of operations could be adversely affected. Fluctuations in the global apparel retail markets impact the levels of inventory maintained by apparel retailers.
We may not be able to complete strategic transactions on anticipated terms or time frames or at all, and such transactions may not generate some or all of the expected strategic, financial, operational or other benefits if and when completed on such anticipated time frames or at all.
We may not be able to complete strategic transactions on anticipated terms or time frames or at all, and such transactions may not generate any or all of the expected strategic, financial, operational, or other benefits if and when completed on anticipated time frames or at all.
We must maintain our reputation and brand image. Our brands have wide recognition, and the success of our business depends in large part on our ability to maintain, enhance and protect our brand image and reputation and our customers’ connection to our brands.
We must maintain our reputation and brand image. Our brands have wide recognition, and the success of our business depends in large part on our ability, and the ability of our franchisees and licensees, to maintain, enhance, and protect our brand image and reputation and our customers’ connection to our brands.
The failure to successfully transition and assimilate key employees, including our new CEO, the effectiveness of our leaders, and any further transitions could adversely affect our results of operations. Our business and future success depends in part on our ability to attract and retain key personnel in our design, merchandising, sourcing, marketing, and other functions.
The failure to successfully transition and assimilate key employees, the effectiveness of our leaders, and any further transitions could adversely affect our results of operations. Our business and future success depends in part on our ability to attract and retain key personnel in our design, merchandising, sourcing, marketing, and other functions.
Our agreement with Barclays provides for certain payments to be made by Barclays to us, including a share of revenues from the performance of the credit card portfolios.
Our arrangement with Barclays provides for certain payments to be made by Barclays to us, including a share of revenues from the performance of the credit card portfolios.
Such events have the potential to disrupt our operations and those of our franchisees, vendors and other business partners, cause store and factory closures, and impact our customers, employees and workers in our supply chain, all of which may adversely affect our business .
Such events have the potential to disrupt our operations and those of our franchisees, vendors, and other business partners, cause store and factory closures, and impact our customers, employees, and workers in our supply chain, all of which may adversely affect our business, financial condition, and results of operations .
Increases in transportation costs or delays in the shipment or delivery of our products due to the availability of transportation, work stoppages, port strikes, port and infrastructure congestion, public health crises, social unrest, changes in local economic conditions, political upheavals, or other factors, and costs and delays associated with transitioning between vendors, could adversely affect our results of operations.
Increases in transportation costs or delays in the shipment or delivery of our products due to the availability of transportation, work stoppages, port strikes, port and infrastructure congestion, public health crises, social unrest, changes in local economic conditions, geopolitical instability, or other factors, and costs and delays associated with transitioning between vendors, could adversely affect our results of operations.
Because independent vendors manufacture virtually all of our products outside of our principal sales markets, third parties must transport our products over large geographic distances.
Because independent vendors manufacture almost all of our products outside of our principal sales markets, third parties must transport our products over large geographic distances.
The income and cash flow that we receive from Barclays is dependent upon a number of factors, including the level of sales on private label and co-branded accounts, the level of balances carried on the accounts, payment rates on the accounts, finance charge rates and other fees on the accounts, the level of credit losses for the accounts, Barclay’s ability to extend credit to our customers, as well as the cost of customer rewards programs.
The income and cash flow that we receive from Barclays depends upon a number of factors, including the level of sales on private label and co-branded accounts; the level of balances carried on the accounts; payment rates on the accounts; finance charge rates and other fees on the accounts; the level of credit losses for the accounts; Barclays’ ability to extend credit to our customers; as well as the cost of customer rewards programs.
Natural disasters, such as hurricanes, tornadoes, floods, earthquakes, wildfires, and other extreme weather conditions; unforeseen public health crises, such as pandemics and epidemics; political crises, such as terrorist attacks, war, labor unrest, and other political instability; negative global climate patterns, especially in water stressed regions; or other catastrophic events or disasters occurring in or impacting the areas in which our stores, distribution centers, corporate offices or our vendors’ manufacturing facilities are located, whether occurring in the United States or internationally, could disrupt our, our franchisees' and our vendors' operations.
Natural disasters, such as hurricanes, tornadoes, floods, earthquakes, wildfires, droughts, and other extreme weather conditions; unforeseen public health crises, such as pandemics and epidemics; political crises, such as terrorist attacks, war, labor unrest, and other political instability; negative global climate patterns, especially in water stressed regions; or other catastrophic events or disasters occurring in or impacting the areas in which our stores, distribution centers, corporate offices, or our vendors’ manufacturing facilities are located, whether occurring in the United States or internationally, could disrupt our operations and the operations of our vendors and other third-party partners.
Our franchise and licensing businesses are subject to certain risks not directly within our control that could impair the value of our brands. We have entered into franchise agreements to operate stores and websites in many countries around the world.
Risks Related to Strategic Transactions and Investments Our franchise and licensing businesses are subject to certain risks not directly within our control that could impair the value of our brands. We have entered into franchise agreements to operate stores and websites in many countries around the world.
Over the past five fiscal years, our reported annual comparable sales have ranged from a high of 6 percent in fiscal 2021 to a low of of negative 7 percent in fiscal 2022.
Over the past four fiscal years, our reported annual comparable sales have ranged from a high of 6 percent 16 in fiscal 2021 to a low of negative 7 percent in fiscal 2022.
For example, developing and acting on ESG-related initiatives, including design, sourcing and operations decisions, and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including the SEC’s recently approved climate-related reporting requirements and sustainability reporting requirements in the European Union.
For example, developing and acting on ESG-related initiatives, including design, sourcing, and operations decisions, and collecting, measuring, and reporting ESG-related information and metrics can be costly, difficult, and time consuming, and is subject to evolving reporting standards, including climate and sustainability reporting requirements in the United States and European Union.
In addition, the process of completing these transactions may be time-consuming and involve considerable costs and expenses, which may be significantly higher than what we anticipate and may not yield a benefit if the transactions are not completed successfully.
In addition, the process of completing these transactions may be time-consuming and involve considerable costs and expenses, which may be significantly higher than anticipated and may not yield a benefit if the transactions are not completed successfully.
The value of our brands could be impaired to the extent that these third parties do not operate their stores or websites or sell our branded products in a manner consistent with our requirements regarding our brand identities and customer experience standards.
The value of our brands could be impaired to the extent that our franchisees and licensees do not operate their stores or websites or sell our branded products in a manner consistent with our requirements regarding our brand identities and customer experience standards.
We have strategic initiatives designed to optimize our inventory levels and increase the efficiency and responsiveness of our supply chain, including vendor fabric platforming, product testing, and in-season response to demand.
We are continuing to invest in strategic initiatives designed to optimize our inventory levels and increase the efficiency and responsiveness of our supply chain, including vendor fabric platforming, product testing, and in-season response to demand.
For example, in fiscal 2023, approximately 29 percent and 18 percent of our merchandise, by dollar value, was purchased from factories in Vietnam and Indonesia, respectively. Delays in production and added costs in these countries have in the past and may in the future adversely affect our results of operations.
For example, in fiscal 2024, approximately 27 percent and approximately 19 percent of our merchandise, by dollar value, was purchased from factories in Vietnam and Indonesia, respectively. Delays in production and added costs in these countries have in the past and may in the future adversely affect our results of operations.
Risks Related to Data Privacy and Cybersecurity We are subject to data and security risks, which could adversely affect our operations and consumer confidence in our security measures or result in liability.
Risks Related to Information Security and Technology We are subject to data and security risks, which could adversely affect our operations and consumer confidence in our security measures or result in liability.
Changes in tax and trade policy, such as the imposition of new duties or tariffs on imported products, or disruptions to our sourcing operations in our sourcing countries, could increase the cost or reduce the supply of apparel available to us and adversely affect our business and results of operations. The global market for real estate is competitive.
Changes in tax and trade policy, such as the imposition of new duties or tariffs on imported products, or disruptions to our sourcing operations in our sourcing countries, could increase the cost or reduce the supply of apparel available to us and adversely affect our business and results of operations.
Our failure to comply with these and other data privacy laws or to secure personal or confidential information could result in significant legal and financial exposure, and a loss of consumer confidence in our security measures, which could adversely affect our results of operations and our reputation. Failures of, or updates or changes to, our IT systems may disrupt operations.
Our failure to comply with these and other data privacy laws or to secure personal or confidential information could result in significant legal and financial exposure, and a loss of consumer confidence in our security measures, which could adversely affect our results of operations and our reputation.
Measures we implement to protect against cyberattacks and address vulnerabilities may also have the potential to impact our customers’ shopping experience or decrease activity on our websites by making them more difficult to use.
Measures we implement to protect against cyberattacks and address vulnerabilities may also have the potential to impact our customers’ shopping experience or decrease activity on our e-commerce platform by making it more difficult to use.
Any violation that is not waived could result in an event of default and, as a result, our lenders under the ABL Facility could declare all outstanding principal and interest to be due and payable, could suspend commitments to make any advances or could require any outstanding letters of credit to be collateralized by an interest bearing cash account, any or all of which could adversely affect our business, financial condition and results of operations. 18 Changes in our credit profile or deterioration in market conditions may limit our access to the capital markets and adversely impact our business and financial condition.
Any violation that is not waived could result in an event of default and, as a result, our lenders under the ABL Facility could declare all outstanding principal and interest to be due and payable, could suspend commitments to make any advances, or could require any outstanding letters of credit to be collateralized by an interest bearing cash account, any or all of which could adversely affect our business, financial condition, and results of operations.
These ESG-related initiatives and goals could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we could be criticized for the accuracy, adequacy or completeness of our disclosures.
These ESG-related initiatives and goals could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we could be criticized or sued for the accuracy, adequacy, or completeness of our disclosures. Separately, there is increased scrutiny of companies’ diversity, equity, and inclusion initiatives.
If the implementation of our customer, digital, and omni-channel initiatives is not successful, or we do not realize the return on our investments in these initiatives that we anticipate, our results of operations would be adversely affected.
Our competitors are also investing in omni-channel initiatives, some of which may be more successful than our initiatives. If the implementation of our customer, digital, and omni-channel initiatives is not successful, or we do not realize the return on our investments in these initiatives that we anticipate, our results of operations would be adversely affected.
Fluctuations in foreign currency exchange rates could impact consumer spending or adversely affect the profitability of our foreign operations or those of our franchisees and licensees. Global economic and geopolitical uncertainty, such as the ongoing conflicts between Russia and Ukraine and Israel and Hamas, have in the past and may in the future result in volatility in foreign exchange rates.
Fluctuations in foreign currency exchange rates could also impact consumer spending or adversely affect the profitability of our foreign operations or those of our franchisees and licensees. Global economic and geopolitical uncertainty have in the past and may in the future result in volatility in foreign exchange rates.
As we continue to move to their platforms, our reliance on third-party systems means that any downtime or security issues they experience poses a greater risk of a single point of failure. Any failure by our third-party service providers could disrupt our operations and adversely affect our results of operations.
As we continue to move to their platforms, our reliance on third-party systems means that any downtime or security issues they experience poses a greater risk of a single point of failure.
We face a variety of competitive challenges in an increasingly complex and fast-paced environment, including: • anticipating and quickly responding to changing apparel trends and customer demands; • attracting customer traffic both in stores and online; • competitively pricing our products and achieving customer perception of value; • maintaining favorable brand recognition and effectively marketing our products to customers in diverse market segments and geographic locations; 9 • anticipating and responding to changing customer shopping preferences and practices, including the increasing shift to digital brand engagement, social media communication, and online shopping; • developing innovative, high-quality products in sizes, colors, and styles that appeal to customers of varying demographics and tastes; • purchasing and stocking merchandise to match seasonal weather patterns, and our ability to react to shifts in weather that impact consumer demand; • sourcing and allocating merchandise efficiently; and • improving the effectiveness and efficiency of our processes in order to deliver cost savings to fund growth.
We face a variety of competitive challenges in an increasingly complex and fast-paced environment, including: • anticipating and quickly responding to changing apparel trends and customer demands; • attracting customer traffic both in stores and on our e-commerce platform; • competitively pricing our products and achieving customer perception of value; • maintaining favorable brand recognition, establishing relationships with athletes, performers, influencers, and other celebrities to promote our brands and products, and effectively marketing our products to customers in diverse market segments and geographic locations; 8 • anticipating and responding to changing customer shopping preferences and practices, including the increasing shift to digital brand engagement, social media communication, and digital shopping; • developing innovative, high-quality products in sizes, colors, and styles that appeal to customers of varying demographics and tastes; • purchasing and stocking merchandise to match seasonal weather patterns, and our ability to react to shifts in weather that impact consumer demand; • sourcing and allocating merchandise efficiently; • successfully managing our order-taking and fulfillment operations in our distribution centers and on our e-commerce platform; • adapting to changes in technology, including the successful utilization of data science and artificial intelligence; and • improving the effectiveness and efficiency of our processes in order to deliver cost savings to fund growth.
The factors affecting the income and cash flow that we receive from our credit card arrangement can also vary based on a variety of economic, legal, social, and other factors that we cannot control.
All of these factors can vary based on changes in federal and state credit card, banking, and consumer protection laws. The factors affecting the income and cash flow that we receive from our credit card arrangement can also vary based on a variety of economic, legal, social, and other factors that we cannot control.
There are inherent climate-related risks wherever business is conducted. Our properties and operations, and those of our franchisees, vendors and other business partners, may be vulnerable to the adverse effects of climate change, which may include an increase in the frequency and severity of weather conditions and other natural cycles such as wildfires and droughts and shifts in climate patterns.
Our properties and operations, and those of our franchisees, vendors, and other business partners, may be vulnerable to the adverse effects of climate change, which may include an increase in the frequency and severity of weather conditions and other natural cycles such as hurricanes, tornadoes, floods, earthquakes, wildfires, and droughts, as well as shifts in climate patterns.
The loss of one or more of our key personnel or the inability to effectively identify a suitable successor to a key role could adversely affect our business. We made significant changes to our executive leadership team in recent years, including hiring a new President and Chief Executive Officer in 2023.
The loss of one or more of our key personnel or the inability to effectively identify a suitable successor to a key role could adversely affect our business. We made significant changes to our executive leadership team in recent years and are currently searching for a new brand president for Banana Republic.
Accordingly, developments, settlements, or resolutions may occur and impact income in the quarter of such development, settlement, or resolution. An unfavorable outcome could adversely affect our business, financial condition and results of operations. Item 1B. Unresolved Staff Comments. None. 20
Additionally, defending against or pursuing Actions may involve significant expense and diversion of management's attention and resources. Accordingly, developments, settlements, or resolutions may occur and impact income in the quarter of such development, settlement, or resolution. An unfavorable outcome could adversely affect our business, financial condition, and results of operations. Item 1B. Unresolved Staff Comments. None.
If our vendors, or any raw material suppliers on which our vendors rely, suffer prolonged manufacturing or transportation disruptions due to pandemics and public health crises, extreme weather conditions and natural disasters, geopolitical instability, or other unforeseen events, our ability to source product could be adversely impacted which would adversely affect our sales and results of operations.
If our vendors, or any raw material suppliers on which our vendors rely, suffer prolonged manufacturing or transportation disruptions due to pandemics and public health crises, extreme weather conditions and natural disasters, geopolitical instability, or other unforeseen events, our ability to source product could be adversely impacted which would adversely affect our sales and results of operations. 11 Risks associated with importing merchandise from foreign countries, including failure of our vendors to adhere to our Code of Vendor Conduct, could harm our business.
Security breaches and vulnerabilities impacting our systems and those of our business partners and third-party service providers could cause harm to our systems or compromise data stored on our networks or those of our business partners and third-party service providers, and could expose us to remedial, legal and other costs which could be material.
These networks and systems are subject to an increasing threat of continually evolving data and security risks, which we must manage. 14 Security breaches and vulnerabilities impacting our systems and those of our business partners and third-party service providers could cause harm to our systems or compromise data stored on our networks or those of our business partners and third-party service providers, and could expose us to remedial, legal, and other costs which could be material.
Transportation shortages, factory closures, labor shortages, port congestion and other supply chain disruptions may lead to prolonged delays in receiving inventory. As a result, we are vulnerable to demand and pricing shifts and to suboptimal selection and timing of merchandise purchases. We have not always predicted our customers’ preferences and acceptance levels of our trend items with accuracy.
Transportation shortages, factory closures, labor shortages, port congestion, and other supply chain disruptions have in the past and may in the future lead to prolonged delays in receiving inventory. As a result, we are vulnerable to demand and pricing shifts and to suboptimal selection and timing of merchandise purchases.
We may also experience increased difficulties in attracting, retaining and motivating employees and/or attracting and retaining customers during the pendency or following the completion of any of these transactions, which could harm our business. Changes in our business strategy or restructuring our operations may not generate the intended benefits or projected cost savings we anticipate.
We may also experience increased difficulties in attracting, retaining, and motivating employees and/or attracting and retaining customers during the pendency or following the completion of any of these transactions, which could harm our business.
Deteriorating economic conditions or geopolitical instability in any of the regions in which we and our franchisees sell our products could reduce consumer confidence and adversely impact consumer spending patterns, and thereby could adversely affect our sales and results of operations, and result in changes to the assumptions and estimates used when preparing our Consolidated Financial Statements.
Deteriorating economic conditions or geopolitical instability in any of the regions in which we and our franchisees sell our products could reduce consumer confidence and negatively impact consumer spending, and thereby could adversely affect our sales and results of operations.
We have also provided loan guarantees to various lenders on behalf of certain franchisees, and have guaranteed or are contingently liable for certain franchisees' leases.
We have also provided loan guarantees to various lenders on behalf of certain franchisees, and have guaranteed or are contingently liable for certain franchisees' leases. These arrangements could have an adverse effect on our liquidity and results of operations.
Customer sentiment could also be shaped by our partnerships with artists, athletes and other public figures, as well as our sustainability policies and related sourcing and operations decisions. Failure to maintain, enhance and protect our brand image could adversely affect our business and results of operations.
Customer sentiment could also be shaped by our partnerships with athletes, performers, influencers, and other celebrities, as well as our sustainability policies and related sourcing and operations decisions. Our, or our franchisees' or licensees', failure to maintain, enhance, and protect our brand image could adversely affect our business and results of operations. We must successfully implement our marketing efforts.
Risk of loss or theft of assets, including inventory shortage, is inherent in the retail business. Loss may be caused by error or misconduct of employees, customers, vendors or other third parties including through organized retail crime and professional theft, which may be further impacted by macroeconomic factors, including the enforcement environment.
Loss may be caused by error or misconduct of employees, customers, vendors, or other third parties including through organized retail crime and professional theft, which may be further impacted by macroeconomic factors, including the enforcement environment. In addition, retail theft may impact guest perceptions regarding the safety of our stores.
We may not successfully maintain or launch these systems as planned or implement them without disruptions to our operations. IT system disruptions or failures, if not anticipated and appropriately mitigated, or failure to successfully implement new or upgraded systems, could disrupt our operations and adversely affect our results of operations.
Information technology system disruptions or failures, if not anticipated and appropriately mitigated, or failure to successfully implement new or upgraded systems, could disrupt our operations and adversely affect our results of operations.
The secure operation of our networks and systems, and those of our business partners, suppliers and third-party service providers, including those on which this type of information is stored, processed and maintained is critical to our business operations. These networks and systems are subject to an increasing threat of continually evolving data and security risks, which we must manage.
The secure operation of our networks and systems, and those of our business partners, suppliers, and third-party service providers, including those on which this type of information is stored, processed, and maintained is critical to our business operations.
These arrangements could have an adverse effect on our liquidity and results of operations. 14 Other risks that may affect these third parties include general economic conditions in specific countries or markets, foreign exchange rates, changes in diplomatic and trade relationships, restrictions on the transfer of funds, and geopolitical instability.
Other risks that may affect our franchisees and licensees include general economic conditions in specific countries or markets, foreign exchange rates, changes in diplomatic and trade relationships, restrictions on the transfer of funds, and geopolitical instability.
Financial instruments that we use to hedge certain foreign currency risks may not succeed in fully offsetting the negative impact of foreign currency rate movements and generally only delay the impact of adverse foreign currency rate movements on our business and results of operations . 16 We experience fluctuations in our comparable sales and margins, which could adversely affect the market price of our common stock, our credit ratings and our liquidity.
Financial instruments that we use to hedge certain foreign currency risks may not succeed in fully offsetting the negative impact of foreign currency rate movements and generally only delay the impact of adverse foreign currency rate movements on our business and results of operations .
We must also adapt to a rapidly changing media environment, including our increasing reliance on social media and online dissemination of advertising campaigns. Even if we react appropriately to negative posts or comments about us or our brands on social media and online, our customers’ perception of our brand image and our reputation could be negatively impacted.
Even if we, or our franchisees or licensees, react appropriately to negative posts or comments about us or our brands on social media and online, our customers’ perception of our brand image and our reputation could be negatively impacted.
We currently have corporate credit ratings of BB with a negative outlook from Standard & Poor's and Ba3 with a negative outlook from Moody’s. Any reduction in our credit ratings could result in reduced access to the credit and capital markets, more restrictive covenants in future financing documents and higher interest costs, and potentially increased lease or hedging costs.
Any reduction in our credit ratings could result in reduced access to the credit and capital markets, more restrictive covenants in future financing documents and higher interest costs, and potentially increased lease or hedging costs.
Global economic conditions have and could continue to impact our business and other businesses around the world.
Global economic conditions have impacted and could continue to impact our business.
Data and security breaches can also occur as a result of non-technical issues, including intentional or inadvertent breaches by our employees or by persons with whom we have commercial relationships that result in the unauthorized release of personal or confidential information. 15 The global regulatory environment surrounding data privacy and cybersecurity is increasingly demanding, and we are required to comply with new and constantly evolving laws, such as various state-level privacy laws in the United States and international laws such as the General Data Protection Regulation in the European Union and United Kingdom, which give consumers the right to control how their personal information is collected, used, shared and retained.
The global regulatory environment surrounding data privacy and cybersecurity is increasingly demanding, and we are required to comply with new and constantly evolving laws, such as various state-level privacy laws in the United States and international laws such as the General Data Protection Regulation in the European Union and United Kingdom, which give consumers the right to control how their personal information is collected, used, shared, and retained.
We maintain a complex technology platform consisting of both legacy and modern systems, and we also increasingly rely on third-party service providers for public cloud infrastructure that powers our e-commerce platform and other systems. Our owned and operated systems require continual maintenance, upgrades and changes, some of which are significant.
Failures of, or updates or changes to, our information technology systems may disrupt operations. We maintain a complex technology platform consisting of both legacy and modern systems. We also increasingly rely on third-party service providers for public cloud infrastructure that powers our e-commerce platform and other systems.
A third party, Barclays Bank Delaware ("Barclays"), currently issues and services our portfolios of private label credit card and co-branded credit card programs for our Gap, Old Navy, Banana Republic and Athleta brands.
Financial Risks Reductions in income and cash flow from our private label and co-branded credit card programs could adversely affect our results of operations and financial condition. A third party, Barclays Bank Delaware ("Barclays"), currently issues and services our private label and co-branded credit cards for our Old Navy, Gap, Banana Republic, and Athleta brands.
If sales do not meet expectations, including due to the impact of current macroeconomic conditions on consumer demand, too much inventory may cause excessive markdowns and, therefore, lower-than-planned gross margins. We could also be 10 required to take significant impairment charges on delayed or unproductive inventory, which we experienced in 2022.
We have not always predicted our customers’ preferences and acceptance levels of our trend items with accuracy. If sales do not meet expectations, too much inventory may cause excessive markdowns and, therefore, lower-than-planned margins. We could also be required to take significant impairment charges on delayed or unproductive inventory, which we experienced in 2022.
In addition, we may seek to downsize, consolidate, reposition, relocate, or close some of our real estate locations, which in most cases requires a modification or termination of an existing store lease. Beginning in fiscal 2020 through the end of fiscal 2023, we closed, net of openings, 344 Gap and Banana Republic stores in North America.
In addition, we may seek to downsize, consolidate, reposition, relocate, or close some of our real estate locations, which in most cases requires a modification or termination of an existing store lease.
Our current business strategies include pursuing selective international expansion in a number of countries around the world through a number of channels. This includes our franchisees opening additional stores internationally. We have limited experience operating or franchising in some of these locations. In many of these locations, we face major established competitors.
This includes our franchisees opening additional stores internationally. We have limited experience operating or franchising in some of these locations. In many of these locations, we face major established competitors.
Risks associated with importing merchandise from foreign countries, including failure of our vendors to adhere to our Code of Vendor Conduct, could harm our business. We purchase merchandise from third-party vendors in many different countries, and we require those vendors to adhere to a Code of Vendor Conduct, which includes anti-corruption, environmental, labor, health, and safety standards.
We purchase merchandise from third-party vendors in many different countries, and we require those vendors to adhere to a Code of Vendor Conduct, which includes anti-corruption, environmental, labor, health, and safety standards. From time to time, our vendors and their suppliers may not be in compliance with these standards or applicable local laws.
We have a secured asset-based revolving credit agreement (the "ABL Facility") which has a borrowing capacity of $2.2 billion. We have also issued $1.5 billion aggregate principal amount of Senior Notes due 2029 and 2031 (the “Senior Notes”), which remain outstanding. As a result, we are subject to risks relating to our indebtedness.
We have a secured asset-based revolving credit agreement (the "ABL Facility"). As of February 1, 2025, we had $2.2 billion in principal amount of undrawn commitments available for borrowings under the ABL Facility, subject to borrowing base availability. We also have $1.5 billion aggregate principal amount of Senior Notes due 2029 and 2031 (the “Senior Notes”) outstanding.
If we are unable to implement these initiatives and integrate these additional capabilities successfully, we may not realize the return on our investments that we anticipate, and our results of operations could be adversely affected. Failure to protect our inventory from loss and theft may adversely affect our results of operations.
If we are unable to implement these initiatives and integrate these additional capabilities successfully, we may not realize the return on our investments that we anticipate, and our results of operations could be adversely affected. We must also maintain efficient and uninterrupted fulfillment operations to timely and effectively deliver merchandise to our stores and e-commerce customers.
Our success is largely dependent upon our ability to gauge the tastes of our customers and to provide merchandise that satisfies customer demand in a timely manner. However, lead times for many of our design and purchasing decisions may make it more difficult for us to respond rapidly to new or changing apparel trends or consumer acceptance of our products.
However, lead times for many of our design and purchasing decisions may make it more difficult for us to respond rapidly to new or changing apparel trends or consumer acceptance of our products.
One of our strategic priorities is to further develop an omni-channel shopping experience for our customers through the integration of our store and digital shopping channels. Our omni-channel initiatives include cross-channel logistics optimization and exploring additional ways to develop an omni-channel shopping experience, including further digital integration and customer personalization.
Our investments in customer, digital, omni-channel, and other strategic initiatives may not deliver the results we anticipate. 13 One of our strategic priorities is to further develop an omni-channel shopping experience for our customers through the integration of our store and digital shopping channels.
Significant or continuing noncompliance with such standards and laws by one or more vendors, suppliers or other third parties could subject us to liability, and could adversely affect our reputation, business and results of operations. 12 Trade matters may disrupt our supply chain. Our operations are subject to complex trade and customs laws, regulations and tax requirements.
Significant or continuing noncompliance with such standards and laws by one or more of our vendors, suppliers or other third parties could subject us to liability, and could adversely affect our reputation, business, and results of operations. Our failure to manage key executive succession and retention and to continue to attract qualified personnel could adversely affect our results of operations.
Disasters occurring at our vendors’ manufacturing facilities could impact our reputation and our customers’ perception of our brands. To the extent any of these events occur, our business and results of operations could be adversely affected. Several military conflicts are taking place around the world which may adversely affect our business.
These types of events could also negatively impact consumer spending in the impacted regions or globally, depending upon the severity. Disasters occurring at our vendors’ manufacturing facilities could impact our reputation and our customers’ perception of our brands. To the extent any of these events occur, our business and results of operations could be adversely affected.
If our employment proposition is not perceived as favorable compared to other companies, including due to our requirements or expectations about when or how often certain employees work on-site or remotely, it could negatively impact our ability to attract and retain our employees. 11 If we are unable to retain, attract, and motivate talented employees with the appropriate skill sets, or if changes to our organizational structure or business model adversely affect morale or retention, we may not achieve our objectives and our business could be adversely affected.
Traditional geographic competition for talent has changed as a result of the shift to remote work. If our employment proposition is not perceived as favorable compared to other companies, including due to our requirements or expectations about when or how often certain employees work on-site or remotely, it could negatively impact our ability to attract and retain talent.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

9 edited+2 added−2 removed5 unchanged
Biggest changeThe CISO and/or CDTO provide a quarterly update on the cybersecurity program, on an alternating basis to the Audit and Finance Committee or the full Board. 21 Our Internal Audit department facilitates an annual ERM assessment that is designed to gather information regarding key enterprise risks, emerging risks, critical risk events, and key third-party dependencies that could impact our objectives and strategies.
Biggest changeOur Internal Audit department facilitates an annual enterprise risk assessment ("ERA") that is designed to gather information regarding key enterprise risks, emerging risks, and critical risk events that could impact our objectives and strategies. The Internal Audit department partners with our Information Security, Information Technology, and Privacy teams to gather information about risks related to cybersecurity threats.
The CISO informs senior management regarding the prevention, detection, mitigation and remediation of cybersecurity incidents. The CISO, CDTO, and members of the Information Security, Information Technology and Privacy teams have broad experience and expertise in selecting, deploying and operating cybersecurity technologies, initiatives and processes around the world.
The CISO informs senior management regarding the prevention, detection, mitigation, and remediation of cybersecurity incidents. The CISO, CTO, and members of the Information Security, Information Technology, and Privacy teams have broad experience and expertise in selecting, deploying, and operating cybersecurity technologies, initiatives and processes around the world.
In partnership with external consultants, we periodically conduct “tabletop” exercises with management and members of our Information Security, Information Technology and Privacy teams during which we simulate real-life cybersecurity incident scenarios to assess our preparedness, test our incident response plans and highlight potential areas for improvement.
In partnership with external consultants, we periodically conduct “tabletop” exercises with management, our Board and members of our Information Security, Information Technology, and Privacy teams during which we simulate real-life cybersecurity incident scenarios to assess our preparedness, test our incident response plan and highlight potential areas for improvement.
We maintain incident response plans to coordinate activities taken to respond to and remediate cybersecurity incidents. We consult with outside counsel as appropriate, including on materiality analysis and disclosure matters, and senior management makes final materiality determination and disclosure decisions. Our cybersecurity risk management processes are based on industry-recognized standards.
We maintain an incident response plan to coordinate activities taken to respond to and remediate cybersecurity incidents. We consult with outside counsel as appropriate, including on materiality 20 analysis and disclosure matters, and senior management makes final materiality determination and disclosure decisions. Our cybersecurity risk management processes are based on industry-recognized standards.
For more information on our cybersecurity-related risks, see “Risks Related to Data Privacy and Cybersecurity” in Item 1A, Risk Factors, of this Form 10-K. Governance Gap Inc.’s Chief Information Security Officer (“CISO”) oversees the cybersecurity program. The CISO reports to the Chief Digital & Technology Officer (“CDTO”) and is responsible for assessing and maintaining the Company’s cybersecurity risk management processes.
For more information on our cybersecurity-related risks, see “Risks Related to Information Security and Technology” in Item 1A, Risk Factors, of this Form 10-K. Governance Gap Inc.’s Chief Information Security Officer (“CISO”) oversees the cybersecurity program. The CISO reports to the Chief Technology Officer (“CTO”) and is responsible for assessing and maintaining the Company’s cybersecurity risk management processes.
We maintain a cybersecurity program with technical and organizational safeguards that is designed to identify, assess, manage, mitigate and respond to cybersecurity threats, including threats associated with the use of third-party systems. The program leverages our overall enterprise risk management (“ERM”) processes. Cybersecurity risk management processes are also embedded within our operating procedures, internal controls and information systems.
We maintain a cybersecurity program with technical and organizational safeguards that is designed to identify, assess, manage, mitigate, and respond to cybersecurity threats, including threats associated with the use of third-party systems. The program leverages our overall enterprise risk management and business continuity planning processes.
The Audit and Finance Committee of the Board oversees the Company’s cybersecurity program as well as risk exposures and steps taken by management to monitor and mitigate cybersecurity risks.
The Audit and Finance Committee of the Board oversees the Company’s cybersecurity program as well as risk exposures and steps taken by management to monitor and mitigate cybersecurity risks. The CISO provides a quarterly update on the cybersecurity program, on an alternating basis to the Audit and Finance Committee or the full Board.
Annually, employees receive cybersecurity training, and we provide additional targeted cybersecurity awareness and education activities throughout the year.
Cybersecurity risk management processes are also embedded within our operating procedures, internal controls, and information systems. Annually, employees receive cybersecurity training, and we provide additional targeted cybersecurity awareness and education activities throughout the year.
On a quarterly basis, Gap Inc.’s Chief Audit Executive updates the Audit and Finance Committee on the Internal Audit plan and any updates to the Company’s enterprise risk profile, including identified cybersecurity risks.
The ERA is presented to the Board and provides the foundation for the annual Internal Audit plan, management’s monitoring and risk mitigation efforts, and ongoing Board-level oversight. On a quarterly basis, Gap Inc.’s Chief Audit Executive updates the Audit and Finance Committee on the Internal Audit plan.
Removed
Information about our executive officers’ work experience, including our CDTO, is included in “Information about our Executive Officers” in Item 1, Business, of this Form 10-K. Our Board understands the importance of maintaining a robust and effective cybersecurity program.
Added
Our CISO has nearly 25 years of experience in the information security and information technology fields. Our CTO has nearly 35 years of experience in these fields, including in technology leadership roles for large companies across multiple industries. Our Board understands the importance of maintaining a robust and effective cybersecurity program.
Removed
The Internal Audit department partners with our Information Security, Information Technology and Privacy teams to gather information about risks related to cybersecurity threats. The ERM assessment is presented to the Board and provides the foundation for the annual Internal Audit plan, management’s monitoring and risk mitigation efforts, and ongoing Board-level oversight.
Added
The Audit and Finance Committee also reviews updates to the Company’s enterprise risk profile, including identified cybersecurity risks, throughout the year. Additionally, key third-party dependencies are monitored as part of our overall business continuity planning, with the Audit and Finance Committee receiving periodic updates.

Item 2. Properties

Properties — owned and leased real estate

4 edited+0 added−0 removed1 unchanged
Biggest changeWe own approximately 0.8 million square feet of corporate office space located in: San Francisco, Pleasanton, and Rocklin, California. We lease approximately 0.5 million square feet of corporate office space located in: San Francisco, California; New York, New York; Albuquerque, New Mexico; and Hyderabad, India. We also lease regional offices in North America and in various international locations.
Biggest changeTerms vary by type and location of store. 21 We own approximately 0.8 million square feet of corporate office space located in: San Francisco, Pleasanton, and Rocklin, California. We lease approximately 0.5 million square feet of corporate office space located in: San Francisco, California; New York, New York; Albuquerque, New Mexico; and Hyderabad, India.
We lease approximately 0.5 million square feet of distribution space located in: Phoenix, Arizona; and Erlanger and Hebron, Kentucky. Third-party logistics companies provide logistics services to us through distribution warehouses in: Chiba, Japan; Hong Kong, China; and New Taipei City, Taiwan.
We lease approximately 0.5 million square feet of distribution space located in: Phoenix, Arizona and Hebron, Kentucky. Third-party logistics companies provide logistics services to us through distribution warehouses in: Chiba, Japan; Hong Kong, China; and New Taipei City, Taiwan.
We own approximately 9.6 million square feet of distribution space located in: Fresno, California; Fishkill, New York; Groveport, Ohio; Gallatin, Tennessee; Brampton, Ontario, Canada; and Longview, Texas. We also have a distribution center in construction in London, Ontario, Canada with estimated occupancy in fiscal 2025.
We also lease regional offices in North America and in various international locations. We own approximately 9.6 million square feet of distribution space located in: Fresno, California; Fishkill, New York; Groveport, Ohio; Gallatin, Tennessee; Brampton, Ontario, Canada; and Longview, Texas. We also have a distribution center in construction in London, Ontario, Canada with estimated occupancy in fiscal 2025.
Item 2. Properties. As of February 3, 2024, we had 2,562 Company-operated stores in the United States, Canada, Japan, and Taiwan, which totaled approximately 30.6 million square feet. Almost all of these stores are leased, typically with one or more renewal options after the initial term. Terms vary by type and location of store.
Item 2. Properties. As of February 1, 2025, we had 2,506 Company-operated stores in the United States, Canada, Japan, and Taiwan, which totaled approximately 30.1 million square feet. Almost all of these stores are leased, typically with one or more renewal options after the initial term.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+2 added−2 removed0 unchanged
Biggest changeThe Company has paid dividends on a quarterly basis and expects to continue to do so, subject to approval by the Board. Additional dividend information can be found in Liquidity and Capital Resources in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, of this Form 10-K.
Biggest changeAdditional dividend information can be found in the section entitled "Liquidity and Capital Resources" in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of this Form 10-K.
The total stockholder return for our common stock assumes reinvestment of any dividends paid.
Apparel Retailers Index. The total stockholder return for our common stock assumes reinvestment of any dividends paid.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The principal market on which our stock is traded is the New York Stock Exchange under the symbol "GPS". Our website is www.gapinc.com. The number of holders of record of our stock as of March 13, 2024 was 5,394.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The principal market on which our common stock is traded is the New York Stock Exchange (“NYSE”). On August 22, 2024, our common stock began trading on the NYSE under the new ticker symbol "GAP", which replaced our previous ticker symbol "GPS".
The February 2019 repurchase program had $476 million remaining as of February 3, 2024. 23 Stock Performance Graph The graph below compares our cumulative total stockholder return on our common stock for the five-year period ended February 3, 2024, with the cumulative total returns of (i) the S&P 500 Index and (ii) the Dow Jones U.S. Apparel Retailers Index.
(2) In February 2019, we announced that the Board approved a $1 billion share repurchase authorization, which has no expiration date. 23 Stock Performance Graph The graph below compares our cumulative total stockholder return on our common stock for the five-year period ended February 1, 2025, with the cumulative total returns of (i) the S&P 500 Index and (ii) the Dow Jones U.S.
TOTAL RETURN TO STOCKHOLDERS (Assumes $100 investment on 2/2/2019) Total Return Analysis 2/2/2019 2/1/2020 1/30/2021 1/29/2022 1/28/2023 2/3/2024 The Gap, Inc. $ 100.00 $ 73.30 $ 85.25 $ 76.56 $ 60.21 $ 95.36 S&P 500 $ 100.00 $ 121.68 $ 142.67 $ 175.90 $ 161.45 $ 195.06 Dow Jones U.S.
TOTAL RETURN TO STOCKHOLDERS (Assumes $100 investment on 2/1/2020) Total Return Analysis 2/1/2020 1/30/2021 1/29/2022 1/28/2023 2/3/2024 2/1/2025 The Gap, Inc. $ 100.00 $ 116.31 $ 104.44 $ 82.15 $ 130.10 $ 162.33 S&P 500 $ 100.00 $ 117.25 $ 144.56 $ 132.68 $ 160.30 $ 202.59 Dow Jones U.S.
Apparel Retailers $ 100.00 $ 111.46 $ 119.16 $ 131.90 $ 144.08 $ 161.22 Source: Research Data Group, Inc. Item 6. [Reserved] 24
Apparel Retailers $ 100.00 $ 106.91 $ 118.34 $ 129.27 $ 144.65 $ 184.45 Source: Research Data Group, Inc. Item 6. [Reserved] 24
Removed
Purchases of Equity Securities by the Issuer and Affiliated Purchasers In February 2019, the Board approved a $1.0 billion share repurchase authorization (the "February 2019 repurchase program"), which has no expiration date.
Added
The number of holders of record of our stock as of March 12, 2025 was 5,085. The Company has paid dividends on a quarterly basis and expects to continue to do so, subject to approval by the Board.
Removed
There were no shares repurchased, other than shares withheld to settle employee statutory tax withholding related to the vesting of stock units, during the 14 weeks ended February 3, 2024.
Added
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table presents information with respect to purchases of common stock of the Company made during the thirteen weeks ended February 1, 2025 by the Company or any affiliated purchaser, as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended: Total Number of Shares Purchased (1) Average Price Paid Per Share Including Commissions Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs Maximum Number (or approximate dollar amount) of Shares that May Yet be Purchased Under the Plans or Programs (2) Month #1 (November 3 - November 30) — $ — — $ 476 million Month #2 (December 1 - January 4) 1,858,800 $ 24.12 1,858,800 $ 431 million Month #3 (January 5 - February 1) 1,294,000 $ 23.48 1,294,000 $ 401 million Total 3,152,800 $ 23.86 3,152,800 __________ (1) Excludes shares withheld to settle employee tax withholding payments related to the vesting of stock units.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

50 edited+11 added−16 removed29 unchanged
Biggest changeThe impact of commodity costs was relatively flat for fiscal 2023 compared with fiscal 2022. • Occupancy expenses increased 0.4 percentage points as a percentage of net sales in fiscal 2023 compared with fiscal 2022, primarily driven by a decrease in Comp Sales without a corresponding decrease in fixed occupancy expenses. 29 Operating Expenses and Operating Margin ($ in millions) Fiscal Year 2023 2022 Operating expenses $ 5,215 $ 5,428 Operating expenses as a percentage of net sales 35.0 % 34.8 % Operating margin 3.8 % (0.4) % Operating expenses decreased $213 million, but increased 0.2 percentage points as a percentage of net sales during fiscal 2023 compared with fiscal 2022, due to a decrease in net sales as well as the following: • a decrease in advertising expenses; • a decrease in payroll expenses related to our operating model and structure changes; • a decrease due to the transition of our China business to a partnership model; • a decrease in technology-related investments; • a gain on sale of building of $47 million that occurred during fiscal 2023; and • a loss on divestiture activity of $35 million that occurred during fiscal 2022 related to the transition of the Old Navy Mexico business; partially offset by • an increase in performance-based compensation; and • restructuring expenses of $89 million incurred during fiscal 2023 as a result of actions taken to simplify and optimize our operating model and structure.
Biggest changeOperating Expenses and Operating Margin ($ in millions) Fiscal Year 2024 2023 Operating expenses $ 5,115 $ 5,215 Operating expenses as a percentage of net sales 33.9 % 35.0 % Operating margin 7.4 % 3.8 % Operating expenses decreased $100 million, or 1.1 percentage points as a percentage of net sales during fiscal 2024 compared with fiscal 2023, primarily due to the following: • a decrease in advertising expenses of $102 million; • restructuring expenses of $89 million incurred during fiscal 2023 as a result of actions taken to simplify and optimize our operating model and structure; and • a decrease in payroll expenses related to our operating model and structure changes; partially offset by • an increase in performance-based compensation; and • a gain on sale of building of $47 million that occurred during the first quarter of fiscal 2023.
Our effective tax rate in a given financial statement period may also be materially impacted by changes in the geographic mix and level of income or losses, changes in the expected or actual outcome of audits, and changes in the deferred tax valuation allowances or new tax legislation.
Our effective tax rate in a given financial statement period may also be materially impacted by changes in the geographic mix and level of income or losses, changes in the expected or actual outcome of audits, changes in deferred tax valuation allowances, or new tax legislation.
If actual results and conditions are not consistent with the estimates and assumptions used in our calculations, we may be exposed to additional impairments of long-lived assets. See Note 8 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for additional information and disclosures about impairment of long-lived assets.
If actual results and conditions are not consistent with the estimates and assumptions used in our calculations, we may be exposed to additional impairments of long-lived assets. See Note 7 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for additional information and disclosures about impairment of long-lived assets.
A store is considered non-comparable (“Non-comp”) when it has been open and operated by the Company for less than one year or has changed its selling square footage by 15 percent or more within the past year. A store is considered “Closed” if it is temporarily closed for three or more full consecutive days or it is permanently closed.
A store is considered non-comparable (“Non-comp”) when it has been open and operated by the Company for less than one year or has changed its selling square footage by 15 percent or more within the past year. 26 A store is considered “Closed” if it is temporarily closed for three or more full consecutive days or it is permanently closed.
We review our inventory levels in order to identify slow-moving merchandise and broken assortments (items no longer in stock in a sufficient range of sizes or colors), and we primarily use promotions and markdowns to clear merchandise. We record an adjustment to inventory when future estimated selling price is less than cost.
We review our inventory levels in order to identify slow-moving merchandise and broken assortments (items no longer in stock in a sufficient range of sizes or colors), and we primarily use markdowns to clear merchandise. We record an adjustment to inventory when future estimated selling price is less than cost.
Such adverse impacts may be material. 34 At any point in time, many tax years are subject to or in the process of being audited by various U.S. and foreign tax jurisdictions. These audits include reviews of our tax filing positions, including the timing and amount of deductions taken and the allocation of income between tax jurisdictions.
Such adverse impacts may be material. 33 At any point in time, many tax years are subject to or in the process of being audited by various U.S. and foreign tax jurisdictions. These audits include reviews of our tax filing positions, including the timing and amount of deductions taken and the allocation of income between tax jurisdictions.
We are not a party to the agreements between our suppliers and the financial institutions and our payment terms are not impacted by whether a supplier participates in the SCF program. See Note 18 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K, for disclosures on the Company's SCF program.
We are not a party to the agreements between our suppliers and the financial institutions and our payment terms are not impacted by whether a supplier participates in the SCF program. See Note 17 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K, for disclosures on the Company's SCF program.
See Note 5 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for additional information on income taxes. Revenue Recognition The Company’s revenues primarily include merchandise sales at stores, online, and through franchise and licensing agreements.
See Note 4 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for additional information on income taxes. Revenue Recognition The Company’s revenues primarily include merchandise sales at stores, online, and through franchise and licensing agreements.
We also defer revenue when cash payments are received in advance of performance for unsatisfied obligations related to our gift cards, licensing agreements, outstanding loyalty points, and reimbursements of loyalty program discounts associated with our credit card agreement.
We also defer revenue when cash payments are received in advance of performance for unsatisfied obligations related to our gift cards, licensing agreements, outstanding loyalty points, and reimbursements of loyalty program rewards associated with our credit card agreement.
However, this non-GAAP financial measure is not intended to supersede or replace our GAAP results. 32 The following table reconciles free cash flow, a non-GAAP financial measure, from net cash provided by operating activities, a GAAP financial measure.
However, this non-GAAP financial measure is not intended to supersede or replace our GAAP results. 31 The following table reconciles free cash flow, a non-GAAP financial measure, from net cash provided by operating activities, a GAAP financial measure.
However, if estimates regarding consumer demand are inaccurate, or if economic conditions including global inflationary pressures change beyond what is currently estimated by management, our operating results could be affected. 33 Impairment of Long-Lived Assets Long-lived assets, which primarily consist of property and equipment and operating lease assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.
However, if estimates regarding consumer demand are inaccurate, or if global economic conditions change beyond what is currently estimated by management, our operating results could be affected. 32 Impairment of Long-Lived Assets Long-lived assets, which primarily consist of property and equipment and operating lease assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.
We are party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the Consolidated Balance Sheet as of February 3, 2024, while others are considered future obligations.
We are party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the Consolidated Balance Sheet as of February 1, 2025, while others are considered future obligations.
We have determined that each of our operating segments share similar economic and other qualitative characteristics, and, therefore, the results of our operating segments are aggregated into one reportable segment. 26 Results of Operations A discussion regarding our results of operations for fiscal year 2023 compared with fiscal year 2022 is presented below.
We have determined that each of our operating segments share similar qualitative and economic characteristics, and, therefore, the results of our operating segments are aggregated into one reportable segment. Results of Operations A discussion regarding our results of operations for fiscal year 2024 compared with fiscal year 2023 is presented below.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Our Business We are a collection of lifestyle brands offering apparel, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, and Athleta brands.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Our Business We are a house of iconic brands offering apparel, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, and Athleta brands.
In February 2024, the Board authorized a dividend of $0.15 per share for the first quarter of fiscal 2024. Share Repurchases Certain financial information about the Company's share repurchases is set forth under the heading "Share Repurchases" in Note 10 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K.
In February 2025, the Board authorized a dividend of $0.165 per share for the first quarter of fiscal 2025. Share Repurchases Certain information about the Company's share repurchases is set forth under the heading "Share Repurchases" in Note 9 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K.
Stores in which the selling square footage has changed by 15 percent or more as a result of a remodel, expansion, or reduction are excluded from the Comp Sales calculations until the first day they have comparable prior year sales.
A store is included in the Comp Sales calculations on the first day it has comparable prior year sales. Stores in which the selling square footage has changed by 15 percent or more as a result of a remodel, expansion, or reduction are excluded from the Comp Sales calculations until the first day they have comparable prior year sales.
Dividend Policy In determining whether and at what level to declare a dividend, we consider a number of factors including sustainability, operating performance, liquidity, and market conditions. We paid an annual dividend of $0.60 per share in fiscal 2023 and fiscal 2022.
Dividend Policy In determining whether and at what level to declare a dividend, our Board considers a number of factors including sustainability, operating performance, liquidity, and market conditions. We paid an annual dividend of $0.60 per share in fiscal 2024 and fiscal 2023.
Fiscal Year ($ in millions) 2023 2022 Net cash provided by operating activities $ 1,532 $ 607 Less: Purchases of property and equipment (420) (685) Free cash flow $ 1,112 $ (78) Debt and Credit Facilities Certain financial information about the Company's debt and credit facilities is set forth under the headings "Debt and Credit Facilities" in Note 7 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K.
Fiscal Year ($ in millions) 2024 2023 Net cash provided by operating activities $ 1,486 $ 1,532 Less: Purchases of property and equipment (447) (420) Free cash flow $ 1,039 $ 1,112 Debt and Credit Facilities Certain financial information about the Company's debt and credit facilities is set forth under the headings "Debt and Credit Facilities" in Note 6 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K.
A discussion regarding our results of operations for fiscal year 2022 compared with fiscal year 2021 can be found under Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on the Form 10-K for the year ended January 28, 2023, filed with the SEC on March 14, 2023.
A discussion regarding our results of operations for fiscal year 2023 compared with fiscal year 2022 can be found under Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on the Form 10-K for the year ended February 3, 2024, filed with the SEC on March 19, 2024.
Interest Expense ($ in millions) Fiscal Year 2023 2022 Interest expense $ 90 $ 88 Interest expense primarily includes interest on outstanding borrowings and obligations mainly related to our Senior Notes.
Interest Expense ($ in millions) Fiscal Year 2024 2023 Interest expense $ 87 $ 90 Interest expense primarily includes interest on outstanding borrowings and obligations mainly related to our Senior Notes and tax-related interest expense.
There were no borrowings under the ABL Facility as of February 3, 2024. See Note 7 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for disclosures on the ABL Facility. Our largest source of operating cash flows is cash collections from the sale of our merchandise.
See Note 6 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for disclosures on the ABL Facility. Our largest source of operating cash flows is cash collections from the sale of our merchandise.
A store is included in the Comp Sales calculations when it has been open and operated by the Company for at least one year and the selling square footage has not changed by 15 percent or more within the past year. A store is included in the Comp Sales calculations on the first day it has comparable prior year sales.
The calculation of Comp Sales excludes the results of the franchise and licensing business. A store is included in the Comp Sales calculations when it has been open and operated by the Company for at least one year and the selling square footage has not changed by 15 percent or more within the past year.
Overview Financial results for fiscal 2023 are as follows: • Net sales for fiscal 2023 decreased 5 percent to $14.9 billion compared with $15.6 billion for fiscal 2022. • Store and franchise sales for fiscal 2023 decreased 3 percent compared with fiscal 2022 and online sales for fiscal 2023 decreased 7 percent compared with fiscal 2022. • Gross profit for fiscal 2023 was $5.8 billion compared with $5.4 billion for fiscal 2022.
Financial results for fiscal 2024 are as follows: • Net sales for fiscal 2024 increased 1 percent to $15.1 billion compared with $14.9 billion for fiscal 2023. • Store and franchise sales for fiscal 2024 were flat compared with fiscal 2023 and online sales for fiscal 2024 increased 4 percent compared with fiscal 2023. • Gross profit for fiscal 2024 was $6.2 billion compared with $5.8 billion for fiscal 2023.
Income Taxes ($ in millions) Fiscal Year 2023 2022 Income tax expense $ 54 $ 63 Effective tax rate 9.7 % (45.3) % The change in the effective tax rate for fiscal 2023 compared with fiscal 2022 was primarily due to changes in the amount and jurisdictional mix of pre-tax earnings, partially offset by prior year divestiture activity, the current year benefit from the impact of changes in valuation allowances, and current year benefit from a U.S. transfer pricing settlement related to our sourcing activities.
Income Taxes ($ in millions) Fiscal Year 2024 2023 Income tax expense $ 293 $ 54 Effective tax rate 25.8 % 9.7 % 29 The change in the effective tax rate for fiscal 2024 compared with fiscal 2023 was primarily due to changes in valuation allowances in the prior year, tax benefits recognized in the prior year from a U.S. transfer pricing settlement related to our sourcing activities, and changes in the amount and mix of jurisdictional earnings, partially offset by a favorable impact from stock-based compensation.
Our primary uses of cash include merchandise inventory purchases, lease and occupancy costs, personnel-related expenses, purchases of property and equipment, shipping costs, and payment of taxes. As our business typically follows a seasonal pattern, with sales peaking during the end-of-year holiday period, we fund inventory expenditures during normal and peak periods through cash flows from operating activities and available cash.
As our business typically follows a seasonal pattern, with sales peaking during the end-of-year holiday period, we fund inventory expenditures during normal and peak periods through cash flows from operating activities and available cash.
In fiscal 2023, cash used for purchases of property and equipment was $420 million primarily related to information technology, store investments, and supply chain to support our omni and digital strategies.
In fiscal 2024, cash used for purchases of property and equipment was $447 million primarily related to store investments, information technology, and supply chain to support the customer experience.
(2) % (7) % 27 Store count, openings, closings, and square footage for our stores are as follows: January 28, 2023 Fiscal 2023 February 3, 2024 Number of Store Locations Number of Stores Opened Number of Stores Closed Number of Store Locations Square Footage (in millions) Old Navy North America 1,238 25 20 1,243 19.8 Gap North America 493 1 22 472 5.0 Gap Asia (1) 232 2 11 134 1.2 Banana Republic North America 419 2 21 400 3.3 Banana Republic Asia 46 4 7 43 0.2 Athleta North America 257 25 12 270 1.1 Company-operated stores total 2,685 59 93 2,562 30.6 Franchise (1) 667 293 96 998 N/A Total 3,352 352 189 3,560 30.6 Increase (decrease) over prior year 6.2 % (3.8) % January 29, 2022 Fiscal 2022 January 28, 2023 Number of Store Locations Number of Stores Opened Number of Stores Closed Number of Store Locations Square Footage (in millions) Old Navy North America (2) 1,252 30 20 1,238 19.8 Gap North America 520 10 37 493 5.2 Gap Asia 329 5 102 232 2.0 Gap Europe (3) 11 — — — — Banana Republic North America 446 2 29 419 3.5 Banana Republic Asia 50 3 7 46 0.2 Athleta North America 227 40 10 257 1.1 Company-operated stores total 2,835 90 205 2,685 31.8 Franchise (2)(3) 564 138 70 667 N/A Total 3,399 228 275 3,352 31.8 Decrease over prior year (1.4) % (4.5) % __________ (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 percentage change in Comp Sales by global brand and for The Gap, Inc., as compared with the preceding year, is as follows: Fiscal Year 2024 2023 Old Navy Global 3 % (1) % Gap Global 4 % 1 % Banana Republic Global 1 % (7) % Athleta Global — % (12) % The Gap, Inc. 3 % (2) % 27 Store count, openings, closings, and square footage for our stores are as follows: February 3, 2024 Fiscal 2024 February 1, 2025 Number of Store Locations Number of Stores Opened Number of Stores Closed Number of Store Locations Square Footage (in millions) Old Navy North America 1,243 20 14 1,249 19.8 Gap North America 472 5 24 453 4.8 Gap Asia 134 1 13 122 1.1 Banana Republic North America 400 4 24 380 3.2 Banana Republic Asia 43 6 7 42 0.1 Athleta North America 270 2 12 260 1.1 Company-operated stores total 2,562 38 94 2,506 30.1 Franchise 998 139 74 1,063 N/A Total 3,560 177 168 3,569 30.1 Increase (decrease) over prior year 0.3 % (1.6) % January 28, 2023 Fiscal 2023 February 3, 2024 Number of Store Locations Number of Stores Opened Number of Stores Closed Number of Store Locations Square Footage (in millions) Old Navy North America 1,238 25 20 1,243 19.8 Gap North America 493 1 22 472 5.0 Gap Asia (1) 232 2 11 134 1.2 Banana Republic North America 419 2 21 400 3.3 Banana Republic Asia 46 4 7 43 0.2 Athleta North America 257 25 12 270 1.1 Company-operated stores total 2,685 59 93 2,562 30.6 Franchise (1) 667 293 96 998 N/A Total 3,352 352 189 3,560 30.6 Increase (decrease) over prior year 6.2 % (3.8) % __________ (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.
We identify our operating segments according to how our business activities are managed and evaluated. As of February 3, 2024, our operating segments included Old Navy Global, Gap Global, Banana Republic Global, and Athleta Global.
We identify our operating segments according to how our business activities are managed and evaluated. As of February 1, 2025, our operating segments included Old Navy Global, Gap Global, Banana Republic Global, and Athleta Global. Our brands have similar products, suppliers, customers, methods of distribution, and regulatory environment.
For impaired assets, we recognize a loss equal to the difference between the carrying amount of the asset or asset group and its estimated fair value. The estimated fair value of the asset or asset group is based on discounted future cash flows of the asset or asset group using a discount rate commensurate with the related risk.
The estimated fair value of the asset or asset group is based on discounted future cash flows of the asset or asset group using a discount rate commensurate with the related risk.
The seasonality of our operations, in addition to the impact of global economic conditions such as the uncertainty surrounding global inflationary pressures, acts of terrorism or war, global credit and banking markets, and new legislation, may lead to significant fluctuations in certain asset and liability accounts as well as cash inflows and outflows between fiscal year-end and subsequent interim periods.
The seasonality of our operations, in addition to the impact of global economic conditions such as uncertainty surrounding inflationary pressures, global geopolitical instability, and changes related to government fiscal, monetary, and tax policies including changes in interest rates, tax rates, duties, tariffs, and other restrictions, may lead to significant fluctuations in certain asset and liability accounts as well as cash inflows and outflows between fiscal year-end and subsequent interim periods.
Cash Flows from Financing Activities Net cash used for financing activities was $567 million during fiscal 2023 compared with $6 million of net cash provided by financing activities during fiscal 2022, primarily due to the following: • $350 million from the ABL Facility that was borrowed during fiscal 2022 and repaid during fiscal 2023; partially offset by • $123 million in repurchases of common stock during fiscal 2022 compared with no repurchases during fiscal 2023.
Cash Flows from Financing Activities Net cash used for financing activities decreased $246 million during fiscal 2024 compared with fiscal 2023, primarily due to the following: • $350 million for repayments of revolving credit facility borrowings during fiscal 2023; partially offset by • $75 million in repurchases of common stock during fiscal 2024 compared with no repurchases during fiscal 2023.
Cost of Goods Sold and Occupancy Expenses ($ in millions) Fiscal Year 2023 2022 Cost of goods sold and occupancy expenses $ 9,114 $ 10,257 Gross profit $ 5,775 $ 5,359 Cost of goods sold and occupancy expenses as a percentage of net sales 61.2 % 65.7 % Gross margin 38.8 % 34.3 % Cost of goods sold and occupancy expenses decreased 4.5 percentage points as a percentage of net sales in fiscal 2023 compared with fiscal 2022. • Cost of goods sold decreased 4.9 percentage points as a percentage of net sales in fiscal 2023 compared with fiscal 2022, primarily driven by a decrease in air freight expenses and improved promotional activity.
Cost of Goods Sold and Occupancy Expenses ($ in millions) Fiscal Year 2024 2023 Cost of goods sold and occupancy expenses $ 8,859 $ 9,114 Gross profit $ 6,227 $ 5,775 Cost of goods sold and occupancy expenses as a percentage of net sales 58.7 % 61.2 % Gross margin 41.3 % 38.8 % 28 Cost of goods sold and occupancy expenses decreased 2.5 percentage points as a percentage of net sales in fiscal 2024 compared with fiscal 2023. • Cost of goods sold decreased 2.1 percentage points as a percentage of net sales in fiscal 2024 compared with fiscal 2023, primarily driven by lower commodity costs.
See Note 5 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for further details. 30 Liquidity and Capital Resources We consider the following to be measures of our liquidity and capital resources: ($ in millions) February 3, 2024 January 28, 2023 Cash and cash equivalents $ 1,873 $ 1,215 Debt 3.625 percent Senior Notes due 2029 750 750 3.875 percent Senior Notes due 2031 750 750 Working capital 1,299 1,361 Current ratio 1.42:1 1.42:1 As of February 3, 2024, the majority of our cash and cash equivalents were held in the United States and are generally accessible without any limitations.
Liquidity and Capital Resources We consider the following to be measures of our liquidity and capital resources: ($ in millions) February 1, 2025 February 3, 2024 Cash and cash equivalents $ 2,335 $ 1,873 Short-term investments 253 — Debt 3.625 percent Senior Notes due 2029 750 750 3.875 percent Senior Notes due 2031 750 750 Working capital 1,947 1,299 Current ratio 1.60:1 1.42:1 As of February 1, 2025, the majority of our cash, cash equivalents, and short-term investments were held in the United States and are generally accessible without any limitations.
Interest Income ($ in millions) Fiscal Year 2023 2022 Interest income $ (86) $ (18) Interest income increased $68 million during fiscal 2023 compared with fiscal 2022 primarily due to higher cash balances and higher interest rates, as well as tax-related interest income.
Interest Income ($ in millions) Fiscal Year 2024 2023 Interest income $ (112) $ (86) Interest income increased $26 million during fiscal 2024 compared with fiscal 2023 primarily due to higher cash balances, partially offset by a decrease in tax-related interest income.
See Note 5 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for information related to income taxes. 31 We believe our existing balances of cash and cash equivalents, along with our cash flows from operations, and instruments mentioned above, provide sufficient funds for our business operations as well as capital expenditures, dividends, and other liquidity requirements associated with our business operations over the next 12 months and beyond.
We believe our existing balances of cash, cash equivalents, and short-term investments, along with our cash flows from operations, and instruments mentioned above, provide sufficient funds for our business operations as well as capital expenditures, dividends, share repurchases, and other liquidity requirements associated with our business operations over the next 12 months and beyond.
We are focused on the following strategic priorities in the near term: • maintaining and building upon the financial and operational rigor, through an optimized cost structure and disciplined inventory management; • reinvigorating our brands to drive relevance and an engaging omni-channel experience; • strengthening our platform and evolving with a digital first mindset; • energizing our culture by attracting and retaining strong talent; and • continuing to integrate social and environmental sustainability into business practices to support long-term growth.
Gross margin for fiscal 2024 was 41.3 percent compared with 38.8 percent for fiscal 2023. • Operating income for fiscal 2024 was $1.1 billion compared with $560 million for fiscal 2023. • Effective tax rate for fiscal 2024 was 25.8 percent compared with 9.7 percent for fiscal 2023. • Net income for fiscal 2024 was $844 million compared with $502 million for fiscal 2023. • Diluted earnings per share was $2.20 for fiscal 2024 compared with $1.34 for fiscal 2023. • Merchandise inventory as of fiscal 2024 increased 4 percent compared with fiscal 2023. 25 While we continue to transform, we remain focused on the following strategic priorities in the near term: • maintaining and building upon financial and operational rigor, through an optimized cost structure and disciplined inventory management; • reinvigorating our brands to drive relevance and an engaging omni-channel experience; • strengthening and evolving our operating platform with a digital-first mindset to drive scale and efficiency; • energizing our culture by attracting and retaining strong talent; and • continuing to integrate social and environmental sustainability into business practices to support long-term growth.
Comp Sales included the results of certain foreign operations until their respective transitions to third-party franchise partners. See Note 17 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for further details.
See Note 4 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for further details.
We are also able to supplement near-term liquidity, if necessary, with our senior secured asset-based revolving credit agreement (the "ABL Facility") or other available market instruments. During fiscal 2023, the Company repaid an aggregate of $350 million to reduce the outstanding borrowing under the ABL Facility to zero.
We are also able to supplement near-term liquidity, if necessary, with our senior secured asset-based revolving credit agreement (the "ABL Facility") or other available market instruments. There were no borrowings under the ABL Facility as of February 1, 2025 and February 3, 2024.
Events that result in an impairment review include a significant decrease in the operating performance of the long-lived asset or the decision to close a store, corporate facility, or distribution center. Long-lived assets are considered impaired if the carrying amount exceeds the estimated undiscounted future cash flows of the asset or asset group over the estimated remaining useful life.
Events that result in an impairment review include a significant decrease in the operating performance of the long-lived asset, the decision to close a store, corporate facility, or distribution center, or adverse changes in business climate.
Our contractual obligations primarily consist of operating leases, purchase obligations and commitments, long-term debt and related interest payments, and income taxes. See Notes 7 and 12 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for information related to our debt and operating leases, respectively.
See Note 4 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for information related to income taxes.
As of February 3, 2024, we had Company-operated stores in the United States, Canada, Japan, and Taiwan. Our products are available to customers online through Company-owned websites and through third-party arrangements. We also have franchise agreements to operate Old Navy, Gap, Banana Republic, and Athleta throughout Asia, Europe, Latin America, the Middle East, and Africa.
As of February 1, 2025, we had Company-operated stores in the United States, Canada, Japan, and Taiwan. Our products are available to customers both in stores and online, through Company-operated and franchise stores, websites, and third-party arrangements.
The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets. For our Company-operated stores, the individual store generally represents the lowest level of independent identifiable cash flows and the asset group is comprised of both property and equipment and operating lease assets.
For our Company-operated stores, the individual store generally represents the lowest level of independent identifiable cash flows and the asset group is comprised of both property and equipment and operating lease assets. For impaired assets, we recognize a loss equal to the difference between the carrying amount of the asset or asset group and its estimated fair value.
Net Sales See Note 3 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for net sales disaggregation. Comparable Sales ("Comp Sales") Comp Sales include the results of Company-operated stores and sales through our online channel. The calculation of Comp Sales excludes the results of the franchise and licensing business.
Net Sales See Note 3 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for net sales disaggregation. Comparable Sales ("Comp Sales") Fiscal 2024 consisted of 52 weeks versus 53 weeks in fiscal 2023.
Cash Flows from Investing Activities Net cash used for investing activities increased $107 million during fiscal 2023 compared with fiscal 2022, primarily due to the following: • $76 million in net proceeds from the sale of a building during fiscal 2023 compared with $458 million in net proceeds from the sale of buildings during fiscal 2022; partially offset by • $265 million less purchases of property and equipment during fiscal 2023 compared with fiscal 2022, largely due to rationalizing our technology investments and a decrease in new store and supply chain spend.
Cash Flows from Investing Activities Net cash used for investing activities increased $358 million during fiscal 2024 compared with fiscal 2023, primarily due to the following: • $247 million of net purchases of short-term investments during fiscal 2024; and • $69 million less in net proceeds from the sale of property during fiscal 2024 compared with fiscal 2023.
Under these agreements, third parties operate, or will operate, stores and websites that sell apparel and related products under our brand names. In addition to operating in the specialty, outlet, online, and franchise channels, we use our omni-channel capabilities to bridge the digital world and physical stores to further enhance our shopping experience for our customers.
In addition to operating in the specialty, outlet, online, and franchise channels, we use our omni-channel capabilities to bridge the digital world and physical stores.
Purchase obligations and commitments consist of open purchase orders to purchase inventory as well as commitments for products and services used in the normal course of business. As of February 3, 2024, our purchase obligations and commitments were approximately $4 billion. We expect that the majority of these purchase obligations and commitments will be settled within one year.
As of February 1, 2025, our purchase obligations and commitments were approximately $4 billion. We expect that the majority of these purchase obligations and commitments will be settled within one year. Our contractual obligations related to income taxes are primarily related to unrecognized tax benefits.
Fiscal 2023 consisted of 53 weeks versus 52 weeks in fiscal 2022. Net sales and operating results, as well as other metrics derived from the Consolidated Statement of Operations, include the impact of the additional week; however, the comparable sales calculation excludes the 53rd week. Effective August 22, 2023, Richard Dickson became the Company's President and Chief Executive Officer.
Most of the products sold under our brand names are designed by us and manufactured by independent sources. Overview Fiscal 2024 consisted of 52 weeks versus 53 weeks in fiscal 2023. Fiscal 2023 net sales and operating results, as well as other metrics derived from the Consolidated Statement of Operations, include the impact of the additional week.
Our omni-channel services, including buy online pick-up in store, order-in-store, find-in-store, and ship-from-store, as well as enhanced mobile-enabled experiences, are tailored uniquely across our collection of brands. Most of the products sold under our brand names are designed by us and manufactured by independent sources.
The shopping experience is further enhanced by our omni-channel services, including buy online pick-up in store, order-in-store, and ship-from-store, as well as enhanced mobile-enabled experiences, which allow our customers to shop seamlessly across our brands and channels. Our brands have shared investments in supply chain and inventory management, which allows us to optimize efficiency and responsiveness in our operations.
Cash Flows from Operating Activities Net cash provided by operating activities increased $925 million during fiscal 2023 compared with fiscal 2022, primarily due to the following: Net income (loss) • Net income compared with net loss in the prior year; Changes in operating assets and liabilities • an increase of $582 million related to accounts payable primarily due to the timing of payments for inventory during fiscal 2023 compared with fiscal 2022; and • an increase of $255 million related to accrued expenses and other current liabilities primarily due to an increase in performance-based compensation during fiscal 2023 compared with fiscal 2022; partially offset by • a decrease of $342 million related to income taxes payable, net of receivables and other tax-related items, primarily due to receipt of tax refunds during fiscal 2022 related to fiscal 2020 net operating loss carryback claims; and • a decrease of $171 million related to merchandise inventory primarily due to a continued reduction of inventory during fiscal 2023 that was less than the reduction of inventory during fiscal 2022.
Cash Flows from Operating Activities Net cash provided by operating activities decreased $46 million during fiscal 2024 compared with fiscal 2023, primarily due to the following: Net income • an increase in net income; Non-cash item • an increase of $91 million related to the recognition of deferred tax expense in fiscal 2024 compared with deferred tax benefit in fiscal 2023; Change in operating assets and liabilities • a decrease of $471 million related to merchandise inventory driven by a slight increase in inventory at the end of fiscal 2024 primarily due to the timing of receipts compared with a significant reduction in inventory in fiscal 2023 as a result of an elevated opening balance of inventory in that fiscal year.
The ending balance for Gap Asia excludes Gap China stores and the ending balance for Franchise includes Gap China locations transitioned during the period. (2) The 24 Old Navy Mexico stores that were transitioned to Grupo Axo 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. Outlet and factory stores are reflected in each of the respective brands.
Removed
Gross margin for fiscal 2023 was 38.8 percent compared with 34.3 percent for fiscal 2022. • Operating income for fiscal 2023 was $560 million compared with operating loss of $(69) million for fiscal 2022. • Effective tax rate for fiscal 2023 was 9.7 percent compared with negative 45.3 percent for fiscal 2022. • Net income for fiscal 2023 was $502 million compared with net loss of $(202) million for fiscal 2022. • Diluted earnings per share was $1.34 for fiscal 2023 compared with diluted loss per share of $(0.55) for fiscal 2022. • Merchandise inventory as of the fourth quarter of fiscal 2023 decreased 16 percent compared with the fourth quarter of fiscal 2022.
Added
We also have franchise agreements to operate Old Navy, Gap, Banana Republic, and Athleta throughout Asia, Europe, Latin America, the Middle East, and Africa. Under these agreements, third parties operate, or will operate, stores and websites that sell apparel and related products under our brand names.
Removed
Bob L. Martin, who had been serving as the Company's Chief Executive Officer on an interim basis, remained as the Executive Board Chair until October 28, 2023, when he transitioned to a non-employee Board Chair role.
Added
Macroeconomic factors, including uncertainty surrounding inflationary pressures, global geopolitical instability, and changes related to government fiscal, monetary, and tax policies including changes in interest rates, tax rates, duties, tariffs, and other restrictions, continue to create a complex and challenging retail environment. The macroeconomic environment has had and may continue to have an impact on consumer behavior.
Removed
On April 25, 2023, the Company's management committed to a restructuring plan (the "Plan") as part of the Company's previously announced efforts to simplify and optimize its operating model and structure. The Plan included a reduction in workforce of approximately 1,800 employees, primarily in headquarters locations.
Added
We anticipate continued uncertainty related to the macroeconomic environment during fiscal 2025, and we will continue to monitor macroeconomic conditions, including consumer behavior and the impact of these factors on consumer demand.
Removed
The actions associated with the reduction of the Company's workforce under the Plan were substantially completed in the first half of fiscal 2023 . In connection with the Plan, the Company incurred $93 million in pre-tax restructuring costs during fiscal 2023 , which included employee-related costs of $64 million and consulting and other associated costs of $29 million.
Added
For additional information on the risks and uncertainties to our business caused by macroeconomic factors, see the section entitled “Risk Factors—Risks Related to Macroeconomic Conditions—Global economic conditions have and could continue to adversely affect our business, financial condition, and results of operations” in Item 1A, Risk Factors, of this Form 10-K.
Removed
These restructuring costs were primarily recorded within operating expenses on the Consolidated Statement of Operations. 25 The Company has also completed its initiative of rationalizing the Gap and Banana Republic store fleet by closing, net of openings, 344 Gap and Banana Republic stores in North America from the beginning of fiscal 2020 to the end of fiscal 2023.
Added
Due to the 53rd week in fiscal 2023, in order to maintain consistency, Comp Sales for the 52 weeks ended February 1, 2025 are compared to the 52 weeks ended February 3, 2024. Comp Sales include the results of Company-operated stores and sales through our online channel.
Removed
The majority of the selected stores had leases that expired between these fiscal years, which allowed us to exit stores with a minimal net impact to our Consolidated Statements of Operations.
Added
Net Sales Discussion Our net sales for fiscal 2024 increased $197 million, or 1 percent, compared with fiscal 2023, despite the loss of sales attributable to the incremental 53rd week during fiscal 2023. The increase was primarily due to improved Comp Sales driven by Old Navy Global and Gap Global.
Removed
On November 7, 2022, we signed agreements to transition our Gap Greater China operations to a third party, Baozun, to operate Gap Greater China stores and the in-market website as a franchise partner, subject to regulatory approvals and closing conditions. On January 31, 2023, the Gap China transaction closed with Baozun.
Added
Additionally, there was a benefit from incremental income related to our revenue sharing arrangement from our credit card agreement primarily recognized in the second quarter of fiscal 2024. • Occupancy expenses decreased 0.4 percentage points as a percentage of net sales in fiscal 2024 compared with fiscal 2023, primarily driven by an increase in net sales without a corresponding increase in occupancy expenses.
Removed
The impact upon divestiture was not material to our results of operations for fiscal 2023. The Gap Taiwan operations will continue to operate as usual until regulatory approvals and closing conditions are met.
Added
Our primary uses of cash include merchandise inventory purchases, lease and occupancy costs, personnel-related expenses, purchases of property and equipment, shipping costs, and payment of taxes. In addition, we may have dividend payments and share repurchases.
Removed
During the first quarter of fiscal 2023, the Company also sold a building for $76 million and recorded a pre-tax gain on sale of $47 million within operating expenses on the Consolidated Statement of Operations.
Added
Our contractual obligations primarily consist of operating leases, purchase obligations and commitments, long-term debt and related interest payments, and income taxes.
Removed
The percentage change in Comp Sales by global brand and for The Gap, Inc., as compared with the preceding year, is as follows: Fiscal Year 2023 2022 Old Navy Global (1) % (12) % Gap Global 1 % (4) % Banana Republic Global (7) % 9 % Athleta Global (12) % (5) % The Gap, Inc.
Added
See Notes 6 and 11 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for information related to our debt and operating leases, respectively. 30 Purchase obligations and commitments consist of open purchase orders to purchase inventory as well as commitments for products and services used in the normal course of business.
Removed
The ending balance for Old Navy North America excludes Old Navy Mexico stores and the ending balance for Franchise includes Old Navy Mexico stores. (3) The 11 Gap Italy stores that were transitioned to OVS S.p.A. ("OVS") during the period are not included as store closures or openings for Company-operated and Franchise store activity.
Added
Long-lived assets are considered impaired if the carrying amount exceeds the estimated undiscounted future cash flows of the asset or asset group over the estimated remaining useful life. The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets.
Removed
The ending balance for Gap Europe excludes Gap Italy stores and the ending balance for Franchise includes Gap Italy stores.
Removed
Outlet and factory stores are reflected in each of the respective brands. 28 Net Sales Discussion Our net sales for fiscal 2023 decreased $727 million, or 5 percent, compared with fiscal 2022, driven primarily by a decrease in Comp Sales, the transition of our Gap China business to a partnership model, and other strategic store closures.
Removed
Fiscal 2023 also includes incremental sales attributable to the 53rd week. Additionally, there was an unfavorable impact of foreign exchange of $74 million. The foreign exchange impact is the translation impact if net sales for fiscal 2022 were translated at exchange rates applicable during fiscal 2023.
Removed
Additionally, there was a decrease in inventory impairment charges compared with fiscal 2022.
Removed
Our contractual obligations related to income taxes are primarily related to unrecognized tax benefits.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+6 added−1 removed2 unchanged
Biggest changeDerivative Financial Instruments Certain financial information about the Company's derivative financial instruments is set forth under the heading "Derivative Financial Instruments" in Note 9 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K. 35 We have performed a sensitivity analysis as of February 3, 2024 based on a model that measures the impact of a hypothetical 10 percent adverse change in foreign currency exchange rates to U.S. dollars (with all other variables held constant) on our underlying estimated major foreign currency exposures, net of derivative financial instruments.
Biggest changeDerivative Financial Instruments Certain financial information about the Company's derivative financial instruments is set forth under the heading "Derivative Financial Instruments" in Note 8 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K. 34 We have performed a sensitivity analysis as of February 1, 2025 based on a model that measures the impact of a hypothetical 10 percent adverse change in foreign currency exchange rates to the U.S. dollar (with all other variables held constant) on our underlying estimated major foreign currency exposures, net of derivative financial instruments.
Debt Certain financial information about the Company's debt is set forth under the heading "Debt and Credit Facilities" in Note 7 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K.
Debt Certain financial information about the Company's debt is set forth under the heading "Debt and Credit Facilities" in Note 6 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K.
The sensitivity analysis indicated that a hypothetical 10 percent adverse movement in foreign currency exchange rates would have an unfavorable impact on the underlying cash flow, net of our foreign exchange derivative financial instruments, of $18 million as of February 3, 2024.
The sensitivity analysis indicated that a hypothetical 10 percent adverse movement in foreign currency exchange rates would have an unfavorable impact on the underlying cash flow, net of our foreign exchange derivative financial instruments, of $18 million as of February 1, 2025.
The foreign currency exchange rates used in the model were based on the spot rates in effect as of February 3, 2024.
The foreign currency exchange rates used in the model were based on the spot rates in effect as of February 1, 2025.
Removed
On March 27, 2023, Moody's downgraded our corporate credit rating from Ba2 to Ba3 with a negative outlook and downgraded the rating of our Senior Notes from Ba3 to B1 with a negative outlook. These reductions and any future reduction in our credit ratings could result in an increase to our interest expense on future borrowings. 36
Added
Cash Equivalents and Short-Term Investments Certain financial information about the Company's cash equivalents and short-term investments is set forth under the heading "Fair Value Measurements" in Note 7 of Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K.
Added
We have highly liquid fixed and variable income investments classified as cash and cash equivalents and short-term investments. All highly liquid investments with original maturities of three months or less at the time of purchase are classified as cash and cash equivalents on the Consolidated Balance Sheets.
Added
Our cash equivalents are comprised of money market funds and time deposits recorded at amortized cost, which approximates fair value, as well as debt securities recorded at fair value using market prices for identical or similar assets.
Added
We also have highly liquid investments with original maturities of greater than three months and less than two years that are classified as short-term investments on the Consolidated Balance Sheet. These debt securities are also recorded at fair value using market prices for identical or similar assets. Changes in interest rates impact the fair value of our debt securities.
Added
As of February 1, 2025, we had $253 million in short-term investments which were recorded on the Consolidated Balance Sheet. There were no material realized or unrealized gains or losses or impairment charges related to short-term investments during fiscal 2024. The Company held no short-term investments as of February 3, 2024.
Added
Changes in interest rates also impact the interest income derived from our cash, cash equivalents, and short-term investments. In fiscal 2024 and fiscal 2023, we earned interest income of $112 million and $86 million, respectively. 35

Other GAP 10-K year-over-year comparisons