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Gap Inc. Reports Third Quarter Earnings Per Share Of $0.63 – Up From $0.38 Last Year

Operating Margin

The company now expects operating margin for fiscal year 2012 to be about 12 percent, up from its previous guidance of about 11 percent.

Effective Tax Rate

The effective tax rate was 38.3 percent for the third quarter of fiscal year 2012. The company now expects the full year effective tax rate to be about 39.0 percent for fiscal year 2012, down from previous guidance of about 39.5 percent.

Inventory

On a year-over-year basis, inventory dollars per store were down 4 percent at the end of the third quarter of fiscal year 2012. The company expects inventory dollars per store to be up in the low single digits at the end of fiscal year 2012 compared with the end of the 2011 fiscal year.

Cash, Cash Equivalents, and Short-Term Investments

As previously communicated, the company repaid the $360 million balance on its term loan during the third quarter of fiscal year 2012. The company ended the third quarter of fiscal year 2012 with $1.8 billion in cash, cash equivalents, and short-term investments. Year-to-date, free cash flow, defined as net cash provided by operating activities less purchases of property and equipment, was an inflow of $776 million compared with an inflow of $222 million last year. Please see the reconciliation of free cash flow, a non-GAAP financial measure, from the GAAP financial measure in the tables at the end of this press release.

Share Repurchases

The company has repurchased $463 million in shares year-to-date. Third quarter share repurchases were 2.7 million shares for $96 million, and the company ended the third quarter of fiscal year 2012 with 480 million shares outstanding.

Dividends

The company paid a dividend of $0.125 per share during the third quarter of fiscal year 2012, which was an increase of 11 percent compared with the third quarter last year. The company announced on Monday of this week that its Board of Directors authorized a quarterly dividend of $0.125 per share payable on or after January 30, 2013 to shareholders of record at the close of business on January 2, 2013. With this announcement, the company will pay a total of $0.50 per share in dividends for fiscal year 2012.

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