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This excerpt taken from the GPS 8-K filed Apr 21, 2005. Outlook for 2005 and Beyond
Gap Inc.’s Chief Financial Officer, Byron Pollitt, will highlight the improvements in Gap Inc.’s operations and strengthened financial position. In addition, Mr. Pollitt will outline the company’s strategy to deliver shareholder value through balanced EPS growth coupled with cash distributions. As a result of the initiatives described above, the company now expects to achieve the following:
Earnings
The company reiterated its 2005 EPS guidance of $1.41-$1.45. In addition, the company announced that it expects to grow annual EPS in 2006 by about 12%.
Cash and Debt
The company expects at least $1 billion in free cash flow in each fiscal year of 2005, 2006 and 2007. Please see the reconciliation of free cash flow to a GAAP financial measure in the table at the end of this release. In addition, the company expects to substantially reduce restricted cash in 2005.
The company expects annual gross interest expense to be about $50 million in 2006.
Dividends
The company reiterated that in 2005, it is doubling its annual dividend per share to $0.18. The company expects to increase dividends per share at a rate greater than its growth in net income.
Share Repurchases
Since the third quarter of 2004 and through April 18, 2005, the company has repurchased about 64 million shares, 16 million of which have been repurchased in 2005.
Margins
The company reiterated its operating margin guidance of about 13 percent for 2005 and stated that for 2006 the company expects operating margins to continue to expand into the range of 13 to 14 percent. The expected improvement in operating margins will be driven primarily by gross margins.
Capital Expenditures
The company expects capital expenditures in 2005 to be about $625 million and introduced capital expenditure guidance for each of 2006 and 2007 of about $725 million, driven by new stores and remodels.
Real Estate
Cumulative net new store openings for Gap Inc. through 2007 are expected to be 260, with about 200 weighted towards Old Navy. This represents about a 2 percent increase in total square footage for the company in 2005; about a 3 percent increase in 2006; and about a 5 percent increase in 2007. In addition, the company expects fleet rationalization to continue at Gap Brand through 2006.
The following table represents the total planned store openings and closings at year end by division.
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