UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~April 29, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-7562

THE GAP, INC.

(Exact name of registrant as specified in its charter)


Delaware						94-1697231
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

Two Folsom Street

San Francisco, California 94105

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (415) 427-0100

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.05 par value

GPS

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The number of shares of the registrant’s common stock outstanding as of ~~November 15, 2022~~May 19, 2023 was ~~365,048,522.~~368,056,655.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements other than those that are purely historical are forward-looking statements. Words such as “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan,” “project,” and similar expressions also identify forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding the following:

•the potential impact of global economic conditions on the assumptions and estimates used when preparing the Condensed Consolidated Financial Statements;

•the impact of recent accounting pronouncements;

•the timing of revenue recognition of upfront payments related to our new credit card program agreements with Barclays and Mastercard;

•costs expected to be incurred in connection with our restructuring plan and the timing of actions associated with the reduction of our workforce;

•the timing of recognition in income of unrealized gains and losses from designated cash flow hedges;

•the impact of losses due to indemnification obligations on the Condensed Consolidated Financial Statements;

•the outcome of proceedings, lawsuits, disputes, and claims, including the impact of such actions on the Condensed Consolidated Financial Statements and our financial results;

•our arrangements with third parties to operate stores and websites selling apparel and related products under our brand names;

•our plans to ~~introduce certain stored inventory into the market and the impact on inventory expenditures in future periods;~~

•~~our plans to~~ rationalize the Gap and Banana Republic store fleet by reducing the number of Gap and Banana Republic stores in North America;

•managing inventory to support a healthy merchandise margin;

•reducing and optimizing our fixed cost structure to improve profitability and manage through current macroeconomic challenges;

•driving ~~improved~~ sales through assortment improvements and a balanced and relevant category mix;

•~~reducing our fixed cost structure~~driving creative excellence and delivering product that offers value to ~~improve profitability~~customers through a combination of fit, quality, brand, and ~~manage through current macro-economic challenges;~~

•~~leveraging our scale to navigate disruptions and constraints in the global supply chain;~~

•~~managing inventory to support a healthy merchandise margin;~~price;

•prioritizing asset-light growth through licensing, online, and franchise partnerships globally;

•~~creating product that offers value to our customers through a combination of fit, quality, brand and price;~~

•optimizing investments in our four purpose-led lifestyle brands to drive relevance and gain market share;

•~~growing our online business;~~

•attracting and retaining strong talent in our businesses and functions;

•continuing to integrate social and environmental sustainability into business practices to support long-term growth;

•~~our Power Plan strategy and our ability to execute against it, including by leveraging our competitive strengths;~~

•~~the significance and impact of tax expense in the fourth quarter of fiscal 2022;~~

•our ability to supplement near-term liquidity, if necessary, with the ABL Facility or other available market instruments;

•the impact of seasonality and global economic conditions on certain asset and liability accounts as well as cash inflows and outflows;

•the ability of our cash flows from our operations, current balances of cash and cash equivalents, the Senior Notes and the ABL Facility, and other available market instruments to support our business operations and liquidity requirements;

•the importance of our sustained ability to generate free cash flow, which is a non-GAAP financial measure and is defined and discussed in more detail in Item 2 of Part 1 of this Form 10-Q below;

•our dividend policy, including the potential timing and amounts of future dividends; and

•the impact of changes in internal control over financial reporting, and assessing the impact of our restructuring plan on our internal control over financial reporting.

Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, the following:

•the overall global economic and geopolitical environment and the impact on consumer spending ~~patterns and risks associated with the COVID-19 pandemic;~~patterns;

•the risk that inflationary pressures continue to negatively impact gross margins or that we ~~may be~~are unable to ~~manage our inventory effectively and the resulting impact on our gross margins and sales;~~pass along price increases;

•the risk that ~~inflation continues to rise, which could increase our expenses and negatively impact consumer demand;~~

•~~the risk that our estimates regarding consumer demand are inaccurate, or that global economic conditions worsen beyond what we currently estimate;~~

•~~the risk that we fail to manage key executive succession and retention and to continue to attract qualified personnel;~~

•~~the risk that we may be unable to mitigate the impact of global supply chain disruptions on~~restructuring our business may not generate the intended benefits and ~~operations and maintain inventory commensurate with consumer demand;~~

•projected cost savings to the ~~risk that global supply chain delays will result in receiving inventory after~~extent or on the ~~applicable selling season and lead to significant impairment charges;~~timeline as expected;

•the risk that we or our franchisees may be unsuccessful in gauging apparel trends and changing consumer preferences or responding with sufficient lead time;

•the risk that we may be unable to manage or protect our inventory effectively and the resulting impact on our gross margins, sales and results of operations;

•the risk that we fail to manage key executive succession and retention and to continue to attract and retain qualified personnel;

•the risk that we fail to maintain, enhance, and protect ~~our brand image and reputation;~~

•~~the risk that increased public focus on our ESG initiatives or our inability to meet our stated ESG goals could affect~~ our brand image and reputation;

•the highly competitive nature of our business in the United States and internationally;

•engaging in or seeking to engage in strategic transactions that are subject to various risks and uncertainties;

•the risk that our investments in customer, digital, and omni-channel shopping initiatives may not deliver the results we anticipate;

•the risks to our business, including our costs and ~~global~~ supply chain, associated with global sourcing and manufacturing;

•the risks to our reputation or operations associated with importing merchandise from foreign countries, including failure of our vendors to adhere to our Code of Vendor Conduct;

•the risk of data or other security breaches or vulnerabilities that may result in increased costs, violations of law, significant legal and financial exposure, and a loss of confidence in our security measures;

•the risk that failures of, or updates or changes to, our IT systems may disrupt our operations;

•natural disasters, public health crises, political crises, negative global climate patterns, or other catastrophic events;

•the ongoing conflict between Russia and Ukraine and the impact on global market stability;

•the risk that our efforts to expand internationally may not be successful;

•the risk that our franchisees and licensees could impair the value of our ~~brands;~~brands or fail to make payments for which we are liable;

•the risk that trade matters could increase the cost or reduce the supply of apparel available to us;

•the risk of foreign currency exchange rate fluctuations;

•the risk that our comparable sales and margins may experience fluctuations, that the seasonality of our business may experience changes, or that we may fail to meet financial market expectations;

•natural disasters, public health crises (similar to and including the ongoing COVID-19 pandemic), political crises (such as the ongoing conflict between Russia and Ukraine), negative global climate patterns, or other catastrophic events;

•the risk that we or our franchisees may be unsuccessful in identifying, negotiating, and securing new store locations and renewing, modifying, or terminating leases for existing store locations effectively;

•the adverse effects of climate change on our operations and those of our franchisees, vendors and other business partners;

•the risk that we will not be successful in defending various proceedings, lawsuits, disputes, and claims;

•our failure to comply with applicable laws and regulations and changes in the regulatory or administrative landscape;

•our failure to satisfy regulations and market expectations related to our ESG initiatives;

•reductions in income and cash flow from our credit card arrangement related to our private label and co-branded credit cards;

•the risk that worsening global economic and geopolitical conditions could result in changes to the assumptions and estimates used when preparing the Condensed Consolidated Financial Statements;

•the risk that changes in our business structure, our performance or our industry could result in reductions in our pre-tax income or utilization of existing tax carryforwards in future periods, and require additional deferred tax valuation allowances;

•the risk that changes in the geographic mix and level of income or losses, the expected or actual outcome of audits, changes in deferred tax valuation allowances, and new legislation could impact our effective tax rate;

•the risk that our level of indebtedness may impact our ability to operate and expand our business;

•the risk that we and our subsidiaries may be unable to meet our obligations under our indebtedness agreements;

•the risk that changes in our credit profile or deterioration in market conditions may limit our access to the capital markets; and

•the risk that the adoption of new accounting pronouncements will impact future ~~results; and~~

•~~the risk that we do not repurchase some or all of the shares we anticipate purchasing pursuant to our repurchase program.~~results.

Additional information regarding factors that could cause results to differ can be found in our Annual Report on Form 10-K for the fiscal year ended January ~~29, 2022~~28, 2023 and our other filings with the U.S. Securities and Exchange Commission.

Future economic and industry trends that could potentially impact net sales and profitability are difficult to predict. These forward-looking statements are based on information as of ~~November 22, 2022.~~May 26, 2023. We assume no obligation to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

We suggest that this document be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended January ~~29, 2022.~~28, 2023.

THE GAP, INC.

TABLE OF CONTENTS


		Page
	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets as of ~~October~~Apri 29l 2 9 , ~~2022,~~2023 , January ~~29, 2022,~~2 8 , 202 3 , and ~~October~~April 30, 20 ~~, 2021~~2 2	1

	Condensed Consolidated Statements of Operations for the 13 Weeks Ended April 29, 202 3 and 39 ~~Weeks Ended~~ ~~October 29~~,April 30, 2022 ~~and~~ ~~October 30, 2021~~	2

	Condensed Consolidated Statements of Comprehensive ~~Income (Loss)~~Loss for the 13 Weeks Ended April 29, 202 3 and 39April ~~Weeks Ended~~ 30, 20 ~~October 29~~2 ~~, 2022 and~~ ~~October 30,2021~~2	3

	Condensed Consolidated Statements of Stockholders' Equity for the 13 Weeks Ended April 29 , 202 3 and 39 ~~Weeks Ended~~ ~~October 29~~,April 30, 2022 ~~and~~ ~~October 30, 2021~~	4

	Condensed Consolidated Statements of Cash Flows for the 3913 Weeks Ended ~~October~~April 29, 202 ,3 and A pril 30, 2022 ~~and~~ ~~October~~ 30 ~~, 2021~~	65

	Notes to Condensed Consolidated Financial Statements	76

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1715

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2522

Item 4.	Controls and Procedures	2523

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	2624

Item 1A.	Risk Factors	2624

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2625

Item 6.	Exhibits	2726

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

THE GAP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


($ and shares in millions except par value)	($ and shares in millions except par value)	October 29, 2022		January 29, 2022		October 30, 2021		($ and shares in millions except par value)	April 29, 2023		January 28, 2023		April 30, 2022
ASSETS	ASSETS							ASSETS
Current assets:	Current assets:							Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	679	$	877	$	801	Cash and cash equivalents	$	1,170	$	1,215	$	845
Short-term investments		—		—		275

Merchandise inventory	Merchandise inventory	3,043		3,018		2,721		Merchandise inventory	2,299		2,389		3,169
Other current assets	Other current assets	1,316		1,270		1,410		Other current assets	814		1,013		991
Total current assets	Total current assets	5,038		5,165		5,207		Total current assets	4,283		4,617		5,005
Property and equipment, net of accumulated depreciation of $4,957, $5,071 and $5,486		2,788		3,037		2,924
Property and equipment, net of accumulated depreciation of $4,878, $4,837 and $4,967								Property and equipment, net of accumulated depreciation of $4,878, $4,837 and $4,967	2,646		2,688		2,791
Operating lease assets	Operating lease assets	3,341		3,675		3,788		Operating lease assets	3,123		3,173		3,587
Other long-term assets	Other long-term assets	833		884		861		Other long-term assets	880		908		874
Total assets	Total assets	$	12,000	$	12,761	$	12,780	Total assets	$	10,932	$	11,386	$	12,257
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:							Current liabilities:
Accounts payable	Accounts payable	$	1,388	$	1,951	$	1,630	Accounts payable	$	1,199	$	1,320	$	1,599
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	1,245		1,367		1,414		Accrued expenses and other current liabilities	1,051		1,219		1,127
Current portion of operating lease liabilities	Current portion of operating lease liabilities	691		734		746		Current portion of operating lease liabilities	658		667		717
Income taxes payable	Income taxes payable	57		25		33		Income taxes payable	10		50		29
Total current liabilities	Total current liabilities	3,381		4,077		3,823		Total current liabilities	2,918		3,256		3,472
Long-term liabilities:	Long-term liabilities:							Long-term liabilities:
Revolving credit facility	Revolving credit facility	350		—		—		Revolving credit facility	350		350		350
Long-term debt	Long-term debt	1,486		1,484		1,484		Long-term debt	1,487		1,486		1,485
Long-term operating lease liabilities	Long-term operating lease liabilities	3,673		4,033		4,163		Long-term operating lease liabilities	3,453		3,517		3,921
Other long-term liabilities	Other long-term liabilities	539		445		523		Other long-term liabilities	539		544		575
Total long-term liabilities	Total long-term liabilities	6,048		5,962		6,170		Total long-term liabilities	5,829		5,897		6,331
Commitments and contingencies (see Note 9)
Commitments and contingencies (see Note 10)								Commitments and contingencies (see Note 10)
Stockholders’ equity:	Stockholders’ equity:							Stockholders’ equity:
Common stock $0.05 par value	Common stock $0.05 par value							Common stock $0.05 par value
Authorized 2,300 shares for all periods presented; Issued and Outstanding 365, 371, and 374 shares		18		19		19
Authorized 2,300 shares for all periods presented; Issued and Outstanding 368, 366, and 369 shares								Authorized 2,300 shares for all periods presented; Issued and Outstanding 368, 366, and 369 shares	18		18		19
Additional paid-in capital	Additional paid-in capital	16		43		71		Additional paid-in capital	47		27		—
Retained earnings	Retained earnings	2,468		2,622		2,681		Retained earnings	2,067		2,140		2,389
Accumulated other comprehensive income	Accumulated other comprehensive income	69		38		16		Accumulated other comprehensive income	53		48		46
Total stockholders’ equity	Total stockholders’ equity	2,571		2,722		2,787		Total stockholders’ equity	2,185		2,233		2,454
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	12,000	$	12,761	$	12,780	Total liabilities and stockholders’ equity	$	10,932	$	11,386	$	12,257

See Accompanying Notes to Condensed Consolidated Financial Statements

THE GAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		13 Weeks Ended				39 Weeks Ended					13 Weeks Ended
($ and shares in millions except per share amounts)	($ and shares in millions except per share amounts)	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021		($ and shares in millions except per share amounts)	April 29, 2023		April 30, 2022
Net sales	Net sales	$	4,039	$	3,943	$	11,373	$	12,145	Net sales	$	3,276	$	3,477
Cost of goods sold and occupancy expenses	Cost of goods sold and occupancy expenses	2,530		2,282		7,438		7,031		Cost of goods sold and occupancy expenses	2,062		2,381
Gross profit	Gross profit	1,509		1,661		3,935		5,114		Gross profit	1,214		1,096
Operating expenses	Operating expenses	1,323		1,508		3,974		4,312		Operating expenses	1,224		1,293
Operating income (loss)		186		153		(39)		802
Loss on extinguishment of debt		—		325		—		325
Operating loss										Operating loss	(10)		(197)

Interest expense	Interest expense	22		44		63		149		Interest expense	23		20
Interest income	Interest income	(4)		(1)		(6)		(3)		Interest income	(13)		(1)
Income (loss) before income taxes		168		(215)		(96)		331
Income taxes		(114)		(63)		(167)		59
Net income (loss)		$	282	$	(152)	$	71	$	272
Loss before income taxes										Loss before income taxes	(20)		(216)
Income tax benefit										Income tax benefit	(2)		(54)
Net loss										Net loss	$	(18)	$	(162)
Weighted-average number of shares - basic	Weighted-average number of shares - basic	365		376		367		377		Weighted-average number of shares - basic	367		370
Weighted-average number of shares - diluted	Weighted-average number of shares - diluted	366		376		370		385		Weighted-average number of shares - diluted	367		370
Earnings (loss) per share - basic		$	0.77	$	(0.40)	$	0.19	$	0.72
Earnings (loss) per share - diluted		$	0.77	$	(0.40)	$	0.19	$	0.71
Net loss per share - basic										Net loss per share - basic	$	(0.05)	$	(0.44)
Net loss per share - diluted										Net loss per share - diluted	$	(0.05)	$	(0.44)

See Accompanying Notes to Condensed Consolidated Financial Statements

THE GAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME (LOSS)~~LOSS

(Unaudited)


		13 Weeks Ended				39 Weeks Ended					13 Weeks Ended
($ in millions)	($ in millions)	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021		($ in millions)	April 29, 2023		April 30, 2022
Net income (loss)		$	282	$	(152)	$	71	$	272
Net loss										Net loss	$	(18)	$	(162)
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax									Other comprehensive income (loss), net of tax
Foreign currency translation	Foreign currency translation	6		4		13		2		Foreign currency translation	(1)		3
Change in fair value of derivative financial instruments, net of tax of $1, $—, $3, and $—		31		1		40		(6)
Reclassification adjustment for losses (gains) on derivative financial instruments, net of tax benefit of $—, $2, $—, and $3		(14)		3		(22)		11
Change in fair value of derivative financial instruments, net of tax expense of $2 and $2										Change in fair value of derivative financial instruments, net of tax expense of $2 and $2	8		7
Reclassification adjustment for gains on derivative financial instruments, net of tax expense of $— and $(1)										Reclassification adjustment for gains on derivative financial instruments, net of tax expense of $— and $(1)	(2)		(2)
Other comprehensive income, net of tax	Other comprehensive income, net of tax	23		8		31		7		Other comprehensive income, net of tax	5		8
Comprehensive income (loss)		$	305	$	(144)	$	102	$	279
Comprehensive loss										Comprehensive loss	$	(13)	$	(154)

See Accompanying Notes to Condensed Consolidated Financial Statements

THE GAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


		Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income					Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income
($ and shares in millions except per share amounts)	($ and shares in millions except per share amounts)	Shares	Amount								Total		($ and shares in millions except per share amounts)	Shares	Amount								Total
Balance as of July 30, 2022		364	$	18	$	—	$	2,241	$	46	$	2,305
Net income for the 13 weeks ended October 29, 2022							282				282
Balance as of January 28, 2023													Balance as of January 28, 2023	366	$	18	$	27	$	2,140	$	48	$	2,233
Net loss for the 13 weeks ended April 29, 2023													Net loss for the 13 weeks ended April 29, 2023						(18)				(18)
Other comprehensive income (loss), net of tax													Other comprehensive income (loss), net of tax
Foreign currency translation													Foreign currency translation								(1)		(1)
Change in fair value of derivative financial instruments													Change in fair value of derivative financial instruments								8		8
Amounts reclassified from accumulated other comprehensive income													Amounts reclassified from accumulated other comprehensive income								(2)		(2)

Issuance of common stock related to stock options and employee stock purchase plans													Issuance of common stock related to stock options and employee stock purchase plans	—	—		7						7
Issuance of common stock and withholding tax payments related to vesting of stock units													Issuance of common stock and withholding tax payments related to vesting of stock units	2	—		(10)						(10)
Share-based compensation, net of forfeitures													Share-based compensation, net of forfeitures				23						23
Common stock dividends declared and paid ($0.15 per share)													Common stock dividends declared and paid ($0.15 per share)						(55)				(55)
Balance as of April 29, 2023													Balance as of April 29, 2023	368	$	18	$	47	$	2,067	$	53	$	2,185

Balance as of January 29, 2022													Balance as of January 29, 2022	371	$	19	$	43	$	2,622	$	38	$	2,722

Net loss for the 13 weeks ended April 30, 2022													Net loss for the 13 weeks ended April 30, 2022						(162)				(162)
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax												Other comprehensive income (loss), net of tax
Foreign currency translation	Foreign currency translation								6		6		Foreign currency translation								3		3
Change in fair value of derivative financial instruments	Change in fair value of derivative financial instruments								31		31		Change in fair value of derivative financial instruments								7		7
Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income								(14)		(14)		Amounts reclassified from accumulated other comprehensive income								(2)		(2)
Repurchases and retirement of common stock	Repurchases and retirement of common stock	(2)	—		(12)						(12)		Repurchases and retirement of common stock	(4)	—		(39)		(15)				(54)
Issuance of common stock related to stock options and employee stock purchase plans	Issuance of common stock related to stock options and employee stock purchase plans	1	—		8						8		Issuance of common stock related to stock options and employee stock purchase plans	1	—		7						7
Issuance of common stock and withholding tax payments related to vesting of stock units	Issuance of common stock and withholding tax payments related to vesting of stock units	2	—		(2)						(2)		Issuance of common stock and withholding tax payments related to vesting of stock units	1	—		(14)						(14)
Share-based compensation, net of forfeitures	Share-based compensation, net of forfeitures				22						22		Share-based compensation, net of forfeitures				3						3
Common stock dividends declared and paid ($0.15 per share)	Common stock dividends declared and paid ($0.15 per share)						(55)				(55)		Common stock dividends declared and paid ($0.15 per share)						(56)				(56)
Balance as of October 29, 2022		365	$	18	$	16	$	2,468	$	69	$	2,571

Balance as of July 31, 2021		376	$	19	$	114	$	2,879	$	8	$	3,020

Net loss for the 13 weeks ended October 30, 2021							(152)				(152)
Other comprehensive income (loss), net of tax
Foreign currency translation									4		4
Change in fair value of derivative financial instruments									1		1
Amounts reclassified from accumulated other comprehensive income									3		3
Repurchases and retirement of common stock		(3)	—		(73)						(73)
Issuance of common stock related to stock options and employee stock purchase plans		1	—		7						7
Issuance of common stock and withholding tax payments related to vesting of stock units		—	—		(2)						(2)
Share-based compensation, net of forfeitures					25						25
Common stock dividends declared and paid ($0.12 per share)							(46)				(46)
Balance as of October 30, 2021		374	$	19	$	71	$	2,681	$	16	$	2,787
Balance as of April 30, 2022													Balance as of April 30, 2022	369	$	19	$	—	$	2,389	$	46	$	2,454

See Accompanying Notes to Condensed Consolidated Financial Statements

THE GAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS’ EQUITY~~

~~(Unaudited)~~

Common Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income
($ and shares in millions except per share amounts) Shares Amount Total
Balance as of January 29, 2022 371 $ 19 $ 43 $ 2,622 $ 38 $ 2,722
Net income for the 39 weeks ended October 29, 2022 71 71
Other comprehensive income (loss), net of tax
Foreign currency translation 13 13
Change in fair value of derivative financial instruments 40 40
Amounts reclassified from accumulated other comprehensive income (22) (22)
Repurchases and retirement of common stock (11) (1) (63) (59) (123)
Issuance of common stock related to stock options and employee stock purchase plans 2 — 23 23
Issuance of common stock and withholding tax payments related to vesting of stock units 3 — (17) (17)
Share-based compensation, net of forfeitures 30 30
Common stock dividends declared and paid ($0.45 per share) (166) (166)
Balance as of October 29, 2022 365 $ 18 $ 16 $ 2,468 $ 69 $ 2,571
Balance as of January 30, 2021 374 $ 19 $ 85 $ 2,501 $ 9 $ 2,614
Net income for the 39 weeks ended October 30, 2021 272 272
Other comprehensive income (loss), net of tax
Foreign currency translation 2 2
Change in fair value of derivative financial instruments (6) (6)
Amounts reclassified from accumulated other comprehensive income 11 11
Repurchases and retirement of common stock (5) — (128) (128)
Issuance of common stock related to stock options and employee stock purchase plans 3 — 48 48
Issuance of common stock and withholding tax payments related to vesting of stock units 2 — (34) (34)
Share-based compensation, net of forfeitures 100 100
Common stock dividends declared and paid ($0.24 per share) (92) (92)
Balance as of October 30, 2021 374 $ 19 $ 71 $ 2,681 $ 16 $ 2,787

~~See Accompanying Notes to Condensed Consolidated Financial Statements~~

~~THE GAP, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF~~ CASH FLOWS (Unaudited)


		39 Weeks Ended					13 Weeks Ended
($ in millions)	($ in millions)	October 29, 2022		October 30, 2021		($ in millions)	April 29, 2023		April 30, 2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income		$	71	$	272
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Net loss						Net loss	$	(18)	$	(162)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:						Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Depreciation and amortization	Depreciation and amortization	402		372		Depreciation and amortization	137		130

Share-based compensation	Share-based compensation	28		97		Share-based compensation	23		1
Impairment of operating lease assets		16		6

Impairment of store assets	Impairment of store assets	10		1		Impairment of store assets	1		3

Loss on extinguishment of debt		—		325

Amortization of debt issuance costs	Amortization of debt issuance costs	5		11		Amortization of debt issuance costs	1		2
Non-cash and other items	Non-cash and other items	(8)		21		Non-cash and other items	26		(3)
Loss on divestiture activity		35		59

Gain on sale of building	Gain on sale of building	(83)		—		Gain on sale of building	(47)		—
Deferred income taxes	Deferred income taxes	32		(28)		Deferred income taxes	5		(1)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Merchandise inventory	Merchandise inventory	(78)		(288)		Merchandise inventory	83		(166)
Other current assets and other long-term assets	Other current assets and other long-term assets	(34)		(168)		Other current assets and other long-term assets	9		57

Accounts payable	Accounts payable	(503)		(119)		Accounts payable	(102)		(336)
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	(123)		239		Accrued expenses and other current liabilities	(22)		(236)
Income taxes payable, net of receivables and other tax-related items	Income taxes payable, net of receivables and other tax-related items	216		(94)		Income taxes payable, net of receivables and other tax-related items	(49)		369
Other long-term liabilities	Other long-term liabilities	(7)		49		Other long-term liabilities	(11)		20
Operating lease assets and liabilities, net	Operating lease assets and liabilities, net	(91)		(73)		Operating lease assets and liabilities, net	(21)		(40)
Net cash provided by (used for) operating activities	Net cash provided by (used for) operating activities	(112)		682		Net cash provided by (used for) operating activities	15		(362)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment	Purchases of property and equipment	(577)		(486)		Purchases of property and equipment	(117)		(228)
Net proceeds from sale of buildings		458		—
Net proceeds from sale of building						Net proceeds from sale of building	76		333

Purchases of short-term investments		—		(634)
Proceeds from sales and maturities of short-term investments		—		768
Payments for acquisition activity, net of cash acquired		—		(135)
Net cash paid for divestiture activity		—		(21)

Net cash used for investing activities		(119)		(508)

Net proceeds from divestiture activity						Net proceeds from divestiture activity	11		—

Net cash provided by (used for) investing activities						Net cash provided by (used for) investing activities	(30)		105
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Proceeds from revolving credit facility	Proceeds from revolving credit facility	350		—		Proceeds from revolving credit facility	—		350

Proceeds from issuance of long-term debt		—		1,500
Payments to extinguish debt		—		(2,546)
Payments for debt issuance costs		(6)		(16)

Proceeds from issuances under share-based compensation plans	Proceeds from issuances under share-based compensation plans	23		48		Proceeds from issuances under share-based compensation plans	7		7
Withholding tax payments related to vesting of stock units	Withholding tax payments related to vesting of stock units	(17)		(34)		Withholding tax payments related to vesting of stock units	(10)		(14)
Repurchases of common stock	Repurchases of common stock	(123)		(128)		Repurchases of common stock	—		(54)

Cash dividends paid	Cash dividends paid	(166)		(182)		Cash dividends paid	(55)		(56)
Other		(1)		—

Net cash provided by (used for) financing activities	Net cash provided by (used for) financing activities	60		(1,358)		Net cash provided by (used for) financing activities	(58)		233
Effect of foreign exchange rate fluctuations on cash, cash equivalents, and restricted cash	Effect of foreign exchange rate fluctuations on cash, cash equivalents, and restricted cash	(25)		(3)		Effect of foreign exchange rate fluctuations on cash, cash equivalents, and restricted cash	(2)		(7)
Net decrease in cash, cash equivalents, and restricted cash	Net decrease in cash, cash equivalents, and restricted cash	(196)		(1,187)		Net decrease in cash, cash equivalents, and restricted cash	(75)		(31)
Cash, cash equivalents, and restricted cash at beginning of period	Cash, cash equivalents, and restricted cash at beginning of period	902		2,016		Cash, cash equivalents, and restricted cash at beginning of period	1,273		902
Cash, cash equivalents, and restricted cash at end of period	Cash, cash equivalents, and restricted cash at end of period	$	706	$	829	Cash, cash equivalents, and restricted cash at end of period	$	1,198	$	871

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid for interest during the period	Cash paid for interest during the period	$	70	$	178	Cash paid for interest during the period	$	35	$	32
Cash paid (received) for income taxes during the period, net of refunds		$	(407)	$	181
Cash paid for income taxes during the period, net of refunds						Cash paid for income taxes during the period, net of refunds	$	46	$	(420)

See Accompanying Notes to Condensed Consolidated Financial Statements

THE GAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Accounting Policies

Basis of Presentation

In the opinion of The Gap, Inc. (the “Company,” “we,” and “our”) management, the accompanying unaudited Condensed Consolidated Financial Statements contain all normal and recurring adjustments (except as otherwise disclosed) considered necessary to present fairly our financial position, results of operations, comprehensive ~~income (loss),~~loss, stockholders' equity, and cash flows as of ~~October~~April 29, ~~2022~~2023 and ~~October~~April 30, ~~2021~~2022 and for all periods presented. The Condensed Consolidated Balance Sheet as of January ~~29, 2022~~28, 2023 has been derived from our audited financial statements.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted from these interim financial statements, although the Company believes that the disclosures made are adequate to make the information not misleading. We suggest that you read these Condensed Consolidated Financial Statements in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January ~~29, 2022.~~28, 2023.

The results of operations for the 13 ~~and 39~~ weeks ended ~~October~~April 29, ~~2022~~2023 are not necessarily indicative of the operating results that may be expected for the ~~52-week~~53-week period ending ~~January 28, 2023.~~February 3, 2024.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Additionally, these estimates and assumptions may change as a result of the impact of global economic conditions such as the uncertainty regarding global inflationary pressures, the ~~coronavirus ("COVID-19") pandemic,~~Russia-Ukraine crisis, and ~~the Russia-Ukraine crisis.~~distress in global credit and banking markets. We will continue to consider the impact of the global economic conditions on the assumptions and estimates used when preparing these Condensed Consolidated Financial Statements including inventory valuation, income taxes and valuation allowances, sales return and bad debt allowances, and the impairment of long-lived ~~store assets and operating lease~~ assets. If the global economic conditions worsen beyond what is currently estimated by management, such future changes may have an adverse impact on the Company's results of operations and financial position.

Restricted Cash

As of ~~October~~April 29, ~~2022,~~2023, restricted cash primarily included consideration that serves as collateral for certain obligations occurring in the normal course of business and our insurance obligations. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within our Condensed Consolidated Balance Sheets to the total shown on our Condensed Consolidated Statements of Cash Flows:


($ in millions)	($ in millions)	October 29, 2022		January 29, 2022		October 30, 2021		($ in millions)	April 29, 2023		January 28, 2023		April 30, 2022
Cash and cash equivalents, per Condensed Consolidated Balance Sheets	Cash and cash equivalents, per Condensed Consolidated Balance Sheets	$	679	$	877	$	801	Cash and cash equivalents, per Condensed Consolidated Balance Sheets	$	1,170	$	1,215	$	845
Restricted cash included in other current assets	Restricted cash included in other current assets	1		—		3		Restricted cash included in other current assets	—		32		—
Restricted cash included in other long-term assets	Restricted cash included in other long-term assets	26		25		25		Restricted cash included in other long-term assets	28		26		26
Total cash, cash equivalents, and restricted cash, per Condensed Consolidated Statements of Cash Flows	Total cash, cash equivalents, and restricted cash, per Condensed Consolidated Statements of Cash Flows	$	706	$	902	$	829	Total cash, cash equivalents, and restricted cash, per Condensed Consolidated Statements of Cash Flows	$	1,198	$	1,273	$	871

Accounting Pronouncements

Except as noted below, the Company has considered all recent accounting pronouncements and concluded that there are no recent accounting pronouncements that may have a material impact on our Condensed Consolidated Financial Statements and disclosures, based on current information.

ASU No. 2022-04, Disclosure of Supplier Finance Program Obligations

In September 2022, the Financial Accounting Standards Board issued accounting standards update ("ASU") No. 2022-04, Disclosure of Supplier Finance Program Obligations. The ASU is intended to enhance the transparency of the use of supplier finance programs by requiring that the buyers in those programs provide additional disclosures about the program’s nature and potential magnitude, including a rollforward of the obligations and activity during the period. The ASU is effective retrospectively for fiscal years and interim periods within those years beginning after December 15, 2022, except for the ~~amendment on~~ rollforward information, which is effective prospectively for fiscal years beginning after December 15, 2023. ~~The amendments in~~We have adopted the ~~update should be applied retrospectively, except for the amendment on rollforward information, which should be applied prospectively. We are currently assessing the impact~~provisions of this ASU ~~on our~~during the 13 weeks ended April 29, 2023. The ASU does not affect the recognition, measurement, or financial statement presentation of supplier finance program obligations. See Note 13 of Notes to Condensed Consolidated Financial Statements ~~and related disclosures.~~for information regarding our supply chain finance program.

Note 2. Revenue

Disaggregation of Net Sales

We disaggregate our net sales ~~between stores and online~~by channel and also by brand and region. Net sales by region are allocated based on the location of the store where the customer paid for and received the merchandise or the distribution center or store from which the products were shipped.

Net sales disaggregated ~~for stores and online sales~~by channel are as follows:


		13 Weeks Ended				39 Weeks Ended					13 Weeks Ended
($ in millions)	($ in millions)	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021		($ in millions)	April 29, 2023		April 30, 2022

Store sales (1)		$	2,478	$	2,456	$	7,168	$	7,668
Store and franchise sales										Store and franchise sales	$	2,053	$	2,137
Online sales ~~(2)~~(1)	Online sales ~~(2)~~(1)	1,561		1,487		4,205		4,477		Online sales ~~(2)~~(1)	1,223		1,340
Total net sales	Total net sales	$	4,039	$	3,943	$	11,373	$	12,145	Total net sales	$	3,276	$	3,477

__________

(1)~~Store sales primarily include sales made at our Company-operated stores and franchise sales.~~

~~(2)~~Online sales primarily include sales originating from our online channel including those that are picked up or shipped from ~~stores.~~stores and net sales from revenue-generating strategic initiatives.

Net sales disaggregated by brand and region are as follows:


($ in millions)	($ in millions)	Old Navy Global				Gap Global		Banana Republic Global				Athleta Global				Other (2)		Total				($ in millions)		Old Navy Global				Gap Global			Banana Republic Global			Athleta Global			Other (2)			Total
13 Weeks Ended October 29, 2022
13 Weeks Ended April 29, 2023																						13 Weeks Ended April 29, 2023					Old Navy Global			Gap Global			Banana Republic Global			Athleta Global			Other (2)			Total
U.S. (1)	U.S. (1)			$	1,936					$	690			$	448					$	326	$	4		$	3,404						U.S. (1)
Canada	Canada	184				95		47				7				—		333				Canada		145				61					36				10						—	252
Europe	Europe	1				58		1				1				—		61				Europe		—				29			1			1			—			31
Asia	Asia	—				143		14				—				—		157				Asia		1				77			14			—			—			92
Other regions	Other regions	16				55		7				6				—		84				Other regions		23				29			7			1			—			60
Total	Total	$	2,137			$	1,041	$	517			$	340			$	4	$	4,039			Total		$	1,828			$	692		$	432		$	321		$	3		$	3,276

($ in millions) Old Navy Global Gap Global Banana Republic Global Athleta Global Other Total
13 Weeks Ended October 30, 2021
U.S. (1) $ 1,899 $ 676 $ 410 $ 317 $ — $ 3,302
Canada 185 102 47 3 — 337
Europe 1 89 2 — — 92
Asia — 141 14 — — 155
Other regions 20 31 6 — — 57
Total $ 2,105 $ 1,039 $ 479 $ 320 $ — $ 3,943

($ in millions) Old Navy Global Gap Global Banana Republic Global Athleta Global Other (2) Total
39 Weeks Ended October 29, 2022
U.S. (1) $ 5,489 $ 1,752 $ 1,324 $ 1,005 $ 10 $ 9,580
Canada 514 241 143 23 — 921
Europe 2 163 4 3 — 172
Asia 1 425 48 — — 474
Other regions 62 132 19 13 — 226
Total $ 6,068 $ 2,713 $ 1,538 $ 1,044 $ 10 $ 11,373


($ in millions)	($ in millions)	Old Navy Global				Gap Global		Banana Republic Global		Athleta Global				Other (3)		Total		($ in millions)			Old Navy Global			Gap Global			Banana Republic Global			Athleta Global			Other (2)			Total
39 Weeks Ended October 30, 2021
13 Weeks Ended April 30, 2022																		13 Weeks Ended April 30, 2022					Old Navy Global			Gap Global			Banana Republic Global			Athleta Global			Other (2)			Total
U.S. (1)	U.S. (1)			$	6,175			$	1,847			$	1,171						$	1,004				$	100					$	10,297		U.S. (1)
Canada	Canada	535				249		124		3				—		911		Canada			147				64			43			9			—					263
Europe	Europe	1				274		6		1				—		282		Europe			1			54			1			2			—			58
Asia	Asia	1				439		49		—				—		489		Asia			—			141			16			—			—			157
Other regions	Other regions	63				90		13		—				—		166		Other regions			20			35			6			5			—			66
Total	Total	$	6,775			$	2,899	$	1,363	$	1,008			$	100	$	12,145	Total			$	1,841		$	791		$	482		$	360		$	3		$	3,477

__________

(1)U.S. includes the United States and Puerto Rico.

(2)Primarily consists of net sales from revenue-generating strategic initiatives.

~~(3)Primarily consists of net sales for the Intermix brand, which was divested on May 21, 2021. Also includes net sales for the Janie and Jack brand, which was divested on April 8, 2021.~~

Deferred Revenue

We 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. For the 13 weeks ended ~~October~~April 29, ~~2022,~~2023, the opening balance of deferred revenue for these obligations was ~~$321~~$354 million, of which ~~$119~~$131 million was recognized as revenue during the period. The closing balance of deferred revenue for these obligations was $334 million as of April 29, 2023.

For the 3913 weeks ended ~~October 29,~~April 30, 2022, the opening balance of deferred revenue for these obligations was $345 million, of which ~~$212~~$127 million was recognized as revenue during the period. The closing balance of deferred revenue for these obligations was $323 million as of ~~October 29,~~April 30, 2022.

For the 13 weeks ended October 30, 2021, the opening balance of deferred revenue for these obligations was $239 million, of which $98 million was recognized as revenue during the period. For the 39 weeks ended October 30, 2021, the opening balance of deferred revenue for these obligations was $231 million, of which $145 million was recognized as revenue during the period. The closing balance of deferred revenue for these obligations was $270 million as of October 30, 2021.

The increase in the revenue recognition during the 39 weeks ended October 29, 2022 is primarily due to our new integrated loyalty program across the U.S. and Puerto Rico, which launched in July 2021 and allows for faster accumulation and redemption of rewards.

In April 2021, the Company entered into agreements with Barclays and Mastercard relating to a new long-term credit card program. In May 2022, the Company launched the new credit card program with Barclays and Mastercard and accordingly, our prior credit card program with Synchrony Financial was discontinued. The Company received an upfront payment of $60 million related to the new agreements prior to the program launch, which is being recognized as revenue over the term of the agreements.

Note 3. Restructuring

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 includes a reduction in workforce of approximately 1,800 employees, primarily in headquarters locations.

In connection with the Plan, the Company incurred $75 million in restructuring costs during the 13 weeks ended April 29, 2023 on a pre-tax basis. The costs incurred in connection with the Plan are as follows:


	13 Weeks Ended April 29, 2023
($ in millions)	Cost of Goods Sold and Occupancy Expenses		Operating Expenses		Total Costs
Employee-related costs	$	4	$	58	$	62
Consulting and other associated costs	—		13		13
Total restructuring costs	$	4	$	71	$	75

Including the costs incurred during the 13 weeks ended April 29, 2023, the Company estimates that it will incur approximately $100 million to $120 million in aggregate pre-tax cash expenditures in connection with the Plan, which consists of approximately $75 million to $85 million in employee-related costs and $25 million to $35 million in consulting and other associated costs. The actions associated with the reduction of the Company's workforce under the Plan are expected to be substantially completed by the end of the first half of fiscal 2023.

The following table summarizes restructuring costs that will be settled with cash payments and the related liability balances as of April 29, 2023, which are primarily included in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheet:


($ in millions)	Employee-Related Costs		Consulting and Other Associated Costs		Total
Balance at January 28, 2023	$	—	$	—	$	—
Provision	62		13		75
Cash payments	—		(10)		(10)
Balance at April 29, 2023	$	62	$	3	$	65

Note 4. Income Taxes

The effective income tax rate was 10.0 percent for the 13 weeks ended April 29, 2023, compared with 25.0 percent for the 13 weeks ended April 30, 2022. The decrease in the effective tax rate for the 13 weeks ended April 29, 2023 compared with the 13 weeks ended April 30, 2022 is primarily due to changes in the amount and jurisdictional mix of pre-tax operations.

Note 3.5. Debt and Credit Facilities

Long-term debt recorded on the Condensed Consolidated Balance Sheets consists of the following:


($ in millions)	($ in millions)	October 29, 2022		January 29, 2022		October 30, 2021		($ in millions)	April 29, 2023		January 28, 2023		April 30, 2022

2029 Notes	2029 Notes	750		750		750		2029 Notes	750		750		750
2031 Notes	2031 Notes	750		750		750		2031 Notes	750		750		750
Less: Unamortized debt issuance costs	Less: Unamortized debt issuance costs	(14)		(16)		(16)		Less: Unamortized debt issuance costs	(13)		(14)		(15)
Total long-term debt	Total long-term debt	$	1,486	$	1,484	$	1,484	Total long-term debt	$	1,487	$	1,486	$	1,485

The scheduled maturity of the Senior Notes is as follows:


Scheduled Maturity ($ in millions)	Principal		Interest Rate		Interest Payments

October 1, 2029 (1)	$	750	3.625	%	Semi-Annual
October 1, 2031 (2)	750		3.875	%	Semi-Annual
Total issuance	$	1,500

__________

(1)Includes an option to redeem the 2029 Notes, in whole or in part at any time, subject to a make-whole premium, prior to October 1, 2024. On or after October 1, 2024, includes an option to redeem the 2029 Notes, in whole or in part at any time, at stated redemption prices.

(2)Includes an option to redeem the 2031 Notes, in whole or in part at any time, subject to a make-whole premium, prior to October 1, 2026. On or after October 1, 2026, includes an option to redeem the 2031 Notes, in whole or in part at any time, at stated redemption prices.

On September 27, 2021, we completed the issuance of $1.5 billion aggregate principal amount of 3.625 percent senior notes due 2029 (“2029 Notes”) and 3.875 percent senior notes due 2031 (“2031 Notes”) (the 2029 Notes and the 2031 Notes, collectively, the “Senior Notes”). As of ~~October~~April 29, ~~2022,~~2023, the aggregate estimated fair value of the Senior Notes was ~~$1.06~~$1.05 billion and was based on the quoted market prices for each of the Senior Notes (level 1 inputs) as of the last business day of the fiscal quarter. The aggregate principal amount of the Senior Notes is recorded in long-term debt on the Condensed Consolidated Balance Sheets, net of the unamortized debt issuance ~~cost.~~costs.

On May 7, 2020, we entered into a senior secured asset-based revolving credit agreement (the "ABL Facility"), which was previously scheduled to expire in May 2023. On July 13, 2022, we entered into an amendment and restatement of the ABL Facility. Among other changes, the amendment and restatement extended the maturity of the ABL Facility to July 2027, increased the borrowing capacity from $1.8675 billion to $2.2 billion, modified the reference rate from the London Interbank Offered Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR"), and reduced the applicable interest rate margin. Following the amendment and restatement, the ABL Facility generally bears interest at a per annum rate based on SOFR (subject to a zero floor) plus a margin, depending on borrowing base availability. The ABL Facility is available for working capital, capital expenditures, and other general corporate purposes.

As of ~~October~~April 29, ~~2022,~~2023, the Company's outstanding borrowing under the ABL Facility was $350 million. The variable interest rate on the drawn amount is adjusted SOFR (calculated to include a 0.10% credit adjustment spread) plus a margin of 1.25%. The borrowing was recorded in long-term liabilities on the Condensed Consolidated Balance Sheet as of ~~October~~April 29, ~~2022.~~2023.

On May 15, 2023, the Company repaid $100 million of the outstanding borrowing under the ABL Facility, which reduced the outstanding borrowing to $250 million.

We also have the ability to issue letters of credit on our ABL Facility. As of ~~October~~April 29, ~~2022,~~2023, we had ~~$51~~$49 million in standby letters of credit issued under the ABL Facility.

~~The ABL Facility is secured by specified U.S. and Canadian assets, including a first lien~~Following the closing of the Gap China transaction with Baozun Inc. ("Baozun") on ~~inventory, certain receivables, and related assets. The ABL Facility contains customary covenants restricting~~January 31, 2023, the Company's activities, as well as those of its subsidiaries, including limitations on the ability to sell assets, engage in mergers or other fundamental changes, enter into capital leases or certain leases not in the ordinary course of business, enter into transactions involving related parties or derivatives, incur or prepay indebtedness, grant liens or negative pledges on its assets, make loans or other investments, pay dividends or repurchase stock or other securities, guarantee third-party obligations, engage in sale and lease-back transactions and make changes in its corporate structure. There are exceptions to these covenants, and some are only applicable when unused availability falls below specified thresholds. In addition, the ABL Facility includes, as a financial covenant, a springing fixed charge coverage ratio which arises when availability falls below a specified threshold.

~~We also maintain multiple agreements with third parties that make unsecured revolving~~respective Gap China credit facilities ~~available~~were terminated. See Note 12 of Notes to Condensed Consolidated Financial Statements for our operations in foreign locations (the “Foreign Facilities”). The Foreign Facilities are uncommitted and had a total capacity of $44 million as of October 29, 2022. As of October 29, 2022, there were no borrowings under the Foreign Facilities. There were $7 million in bank guarantees issued and outstanding primarily related ~~to store leases under the Foreign Facilities as of October 29, 2022.~~disclosures.

Note 4.6. Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring ~~basis, including derivatives and available-for-sale debt securities.~~basis. The Company categorizes financial assets and liabilities recorded at fair value based upon a three-level hierarchy that considers the related valuation techniques.

There were no material purchases, sales, issuances, or settlements related to recurring level 3 measurements for the 13 ~~and 39~~ weeks ended ~~October~~April 29, ~~2022~~2023 or ~~October~~April 30, ~~2021. There were no transfers of financial assets or liabilities into or out of level 1, level 2, and level 3 for the 13 and 39 weeks ended October 29, 2022 or October 30, 2021.~~2022.

109

~~Financial Assets and Liabilities~~

Financial assets and liabilities measured at fair value on a recurring basis and cash equivalents held at amortized cost are as follows:


				Fair Value Measurements at Reporting Date Using									Fair Value Measurements at Reporting Date Using
($ in millions)	($ in millions)	October 29, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		($ in millions)	April 29, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:	Assets:									Assets:
Cash equivalents	Cash equivalents	$	19	$	—	$	19	$	—	Cash equivalents	$	2	$	—	$	2	$	—

Derivative financial instruments	Derivative financial instruments	46		—		46		—		Derivative financial instruments	19		—		19		—
Deferred compensation plan assets	Deferred compensation plan assets	37		37		—		—		Deferred compensation plan assets	33		33		—		—
Other assets	Other assets	4		—		—		4		Other assets	4		—		—		4
Total	Total	$	106	$	37	$	65	$	4	Total	$	58	$	33	$	21	$	4
Liabilities:	Liabilities:									Liabilities:
Derivative financial instruments	Derivative financial instruments	$	2	$	—	$	2	$	—	Derivative financial instruments	$	4	$	—	$	4	$	—
				Fair Value Measurements at Reporting Date Using									Fair Value Measurements at Reporting Date Using
($ in millions)	($ in millions)	January 29, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		($ in millions)	January 28, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:	Assets:									Assets:
Cash equivalents	Cash equivalents	$	27	$	—	$	27	$	—	Cash equivalents	$	15	$	—	$	15	$	—

Derivative financial instruments	Derivative financial instruments	16		—		16		—		Derivative financial instruments	11		—		11		—
Deferred compensation plan assets	Deferred compensation plan assets	40		40		—		—		Deferred compensation plan assets	34		34		—		—
Other assets	Other assets	4		—		—		4		Other assets	4		—		—		4
Total	Total	$	87	$	40	$	43	$	4	Total	$	64	$	34	$	26	$	4
Liabilities:	Liabilities:									Liabilities:
Derivative financial instruments	Derivative financial instruments	$	2	$	—	$	2	$	—	Derivative financial instruments	$	20	$	—	$	20	$	—
				Fair Value Measurements at Reporting Date Using									Fair Value Measurements at Reporting Date Using
($ in millions)	($ in millions)	October 30, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		($ in millions)	April 30, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:	Assets:									Assets:
Cash equivalents	Cash equivalents	$	146	$	—	$	146	$	—	Cash equivalents	$	16	$	—	$	16	$	—
Short-term investments		275		216		59		—

Derivative financial instruments	Derivative financial instruments	10		—		10		—		Derivative financial instruments	44		—		44		—
Deferred compensation plan assets	Deferred compensation plan assets	49		49		—		—		Deferred compensation plan assets	40		40		—		—
Other assets	Other assets	4		—		—		4		Other assets	4		—		—		4
Total	Total	$	484	$	265	$	215	$	4	Total	$	104	$	40	$	60	$	4
Liabilities:	Liabilities:									Liabilities:
Derivative financial instruments	Derivative financial instruments	$	13	$	—	$	13	$	—	Derivative financial instruments	$	1	$	—	$	1	$	—

We have highly liquid fixed and variable income investments classified as cash equivalents. ~~With the exception of our available-for-sale investments noted below, we~~We value these investments at their original purchase prices plus interest that has accrued at the stated rate. Our cash equivalents are placed primarily in time deposits.

Our available-for-sale securities are comprised of investments in debt securities and are recorded in both short-term investments and cash and cash equivalents on the Condensed Consolidated Balance Sheet. These securities are recorded at fair value using market prices. As of October 29, 2022 and January 29, 2022, the Company held no available-for-sale debt securities on the Condensed Consolidated Balance Sheets. As of October 30, 2021, the Company held $275 million of available-for-sale debt securities with maturity dates greater than three months and less than two years within short-term investments on the Condensed Consolidated Balance Sheet. In addition, as of October 30, 2021, the Company held $125 million of available-for-sale debt securities with maturities of three months or less at the time of purchase within cash and cash equivalents on the Condensed Consolidated Balance Sheet. Unrealized gains and losses on available-for-sale debt securities included within accumulated other comprehensive income were not material as of October 30, 2021.

The Company regularly reviews any available-for-sale debt securities for other-than-temporary impairment. For the 13 and 39 weeks ended October 30, 2021, the Company did not consider any of its securities to be other-than-temporarily impaired and, accordingly, did not recognize any impairment loss.

Derivative financial instruments primarily include foreign exchange forward contracts. ~~The fair value of the Company’s derivative financial instruments is determined using pricing models based on current market rates.~~ See Note 67 of Notes to Condensed Consolidated Financial Statements for information regarding currencies hedged against the U.S. dollar.

We maintain the Gap, Inc. Deferred Compensation Plan (“DCP”), which allows eligible employees to defer base compensation and bonus up to a maximum percentage, and non-employee directors to defer receipt of a portion of their Board fees. Plan investments are directed by participants and are recorded at market value and designated for the DCP. The fair value of the Company’s DCP assets is determined based on quoted market prices, and the assets are recorded in other long-term assets on the Condensed Consolidated Balance Sheets.

Nonfinancial Assets

We review the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The fair value of the long-lived assets is determined using level 3 inputs and based on discounted future cash flows of the asset or asset group using a discount rate commensurate with the risk. 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, which for our retail stores is at the store level.

During the 39 weeks ended October 29, 2022, the Company recorded impairment of store assets of $10 million and impairment of operating lease assets of $16 million. The impairment of the store assets reduced the carrying amount of the applicable long-lived assets of $12 million to their estimated fair value of $2 million. The impairment of operating lease assets reduced the carrying amount of the applicable long-lived assets of $62 million to their estimated fair value of $46 million. The impairment charges were recorded in operating expenses on the Condensed Consolidated Statement of Operations.

During the 39 weeks ended October 30, 2021, the Company recorded impairment of operating lease assets of $6 million. The impairment of the operating lease assets reduced the carrying amount of the applicable long-lived assets of $16 million to their estimated fair value of $10 million. The impairment charges were recorded in operating expenses on the Condensed Consolidated Statement of Operations. There were no material impairment charges recorded for ~~store~~long-lived assets during the 3913 weeks ended ~~October~~April 29, 2023 or April 30, ~~2021.~~2022.

We review the carrying amount of goodwill and other indefinite-lived intangible assets for impairment annually and whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount may not be recoverable.

There were no impairment charges recorded for goodwill or other indefinite-lived intangible assets for the 13 ~~and 39~~ weeks ended ~~October~~April 29, ~~2022~~2023 or ~~October~~April 30, ~~2021.~~2022.

~~Note 5. Income Taxes~~

The effective income tax rate was negative 67.9 percent for the 13 weeks ended October 29, 2022, compared with 29.3 percent for the 13 weeks ended October 30, 2021. The decrease in the effective tax rate for the 13 weeks ended October 29, 2022 compared with the 13 weeks ended October 30, 2021 is primarily due to changes in the amount and jurisdictional mix of pre-tax earnings and the cumulative impact of a change in the Company’s estimated annual effective tax rate.

The effective income tax rate was 174.0 percent for the 39 weeks ended October 29, 2022, compared with 17.8 percent for the 39 weeks ended October 30, 2021. The increase in the effective tax rate for the 39 weeks ended October 29, 2022 compared with the 39 weeks ended October 30, 2021 is primarily due to changes in the amount and jurisdictional mix of pre-tax earnings and the cumulative impact of a change in the Company’s estimated annual effective tax rate.

Note 6.7. Derivative Financial Instruments

We operate in foreign countries, which exposes us to market risk associated with foreign currency exchange rate fluctuations. We use derivative financial instruments to manage our exposure to foreign currency exchange rate risk and do not enter into derivative financial contracts for trading purposes. Consistent with our risk management guidelines, we hedge a portion of our transactions related to merchandise purchases for foreign operations and certain intercompany transactions using foreign exchange forward contracts. These contracts are entered into with large, reputable financial institutions that are monitored for counterparty risk. The currencies hedged against changes in the U.S. dollar are the Canadian dollar, Japanese yen, British pound, New Taiwan dollar, Mexican peso, ~~British pound,~~ and Euro. Cash flows from derivative financial instruments are classified as cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows.

Derivative financial instruments are recorded at fair value on the Condensed Consolidated Balance Sheets as other current assets, other long-term assets, accrued expenses and other current liabilities, or other long-term liabilities.

Cash Flow Hedges

We designate foreign exchange forward contracts used to hedge forecasted merchandise purchases and related costs denominated in U.S. dollars made by our international subsidiaries whose functional currencies are their local currencies as cash flow hedges. The foreign exchange forward contracts entered into to hedge forecasted merchandise purchases and related costs generally have terms of 12up to 24 months. The effective portion of the gain or loss on the derivative financial instruments is reported as a component of other comprehensive income (loss) and is recognized into net income (loss) during the period in which the underlying transaction impacts the Condensed Consolidated Statements of Operations.

Other Derivatives Not Designated as Hedging Instruments

We use foreign exchange forward contracts to hedge our market risk exposure associated with foreign currency exchange rate fluctuations for certain intercompany balances denominated in currencies other than the functional currency of the entity with the intercompany balance. The gain or loss on the derivative financial instruments that represent economic hedges, as well as the remeasurement impact of the underlying intercompany balances, is recorded in operating expenses on the Condensed Consolidated Statements of Operations in the same period and generally offset each other.

Outstanding Notional Amounts

We had foreign exchange forward contracts outstanding in the following notional amounts:


($ in millions)	($ in millions)	October 29, 2022		January 29, 2022		October 30, 2021		($ in millions)	April 29, 2023		January 28, 2023		April 30, 2022
Derivatives designated as cash flow hedges	Derivatives designated as cash flow hedges	$	491	$	524	$	532	Derivatives designated as cash flow hedges	$	330	$	441	$	373
Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments	583		702		717		Derivatives not designated as hedging instruments	599		645		758
Total	Total	$	1,074	$	1,226	$	1,249	Total	$	929	$	1,086	$	1,131

Quantitative Disclosures about Derivative Financial Instruments

The fair values of foreign exchange forward contracts are as follows:


($ in millions)	($ in millions)	October 29, 2022		January 29, 2022		October 30, 2021		($ in millions)	April 29, 2023		January 28, 2023		April 30, 2022
Derivatives designated as cash flow hedges:	Derivatives designated as cash flow hedges:							Derivatives designated as cash flow hedges:
Other current assets	Other current assets	$	25	$	10	$	3	Other current assets	$	13	$	9	$	16
Other long-term assets		4		—		1

Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	—		—		6		Accrued expenses and other current liabilities	1		5		—
Other long-term liabilities		—		—		1

Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:							Derivatives not designated as hedging instruments:
Other current assets	Other current assets	17		6		6		Other current assets	6		2		28
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	2		2		6		Accrued expenses and other current liabilities	3		15		1

Total derivatives in an asset position	Total derivatives in an asset position	$	46	$	16	$	10	Total derivatives in an asset position	$	19	$	11	$	44
Total derivatives in a liability position	Total derivatives in a liability position	$	2	$	2	$	13	Total derivatives in a liability position	$	4	$	20	$	1

Substantially all of the unrealized gains and losses from designated cash flow hedges as of ~~October~~April 29, ~~2022~~2023 will be recognized in income (loss) within the next 12 months at the then-current values, which may differ from the fair values as of ~~October~~April 29, ~~2022~~2023 shown above.

Our foreign exchange forward contracts are subject to master netting arrangements with each of our counterparties and such arrangements are enforceable in the event of default or early termination of the contract. We do not elect to offset the fair values of our derivative financial instruments on the Condensed Consolidated Balance Sheets, and as such, the fair values shown above represent gross amounts. The amounts subject to enforceable master netting arrangements were not material for all periods presented.

See Note 46 of Notes to Condensed Consolidated Financial Statements for disclosures on the fair value measurements of our derivative financial instruments.

The pre-tax amounts recognized in net ~~income (loss)~~loss related to derivative instruments are as follows:


		Location and Amount of (Gain) Loss Recognized in Income (Loss)									Location and Amount of Gain Recognized in Net Loss
		13 Weeks Ended October 29, 2022				13 Weeks Ended October 30, 2021					13 Weeks Ended April 29, 2023				13 Weeks Ended April 30, 2022
($ in millions)	($ in millions)	Cost of goods sold and occupancy expenses		Operating expenses		Cost of goods sold and occupancy expenses		Operating expenses		($ in millions)	Cost of goods sold and occupancy expenses		Operating expenses		Cost of goods sold and occupancy expenses		Operating expenses
Total amount of expense line items presented in the Condensed Consolidated Statements of Operations in which the effects of derivatives are recorded	Total amount of expense line items presented in the Condensed Consolidated Statements of Operations in which the effects of derivatives are recorded	$	2,530	$	1,323	$	2,282	$	1,508	Total amount of expense line items presented in the Condensed Consolidated Statements of Operations in which the effects of derivatives are recorded	$	2,062	$	1,224	$	2,381	$	1,293

(Gain) loss recognized in net income (loss)
Gain recognized in net loss										Gain recognized in net loss
Derivatives designated as cash flow hedges	Derivatives designated as cash flow hedges	(14)		—		5		—		Derivatives designated as cash flow hedges	(2)		—		(3)		—

Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments	—		(51)		—		(7)		Derivatives not designated as hedging instruments	—		(8)		—		(22)
Total (gain) loss recognized in net income (loss)		$	(14)	$	(51)	$	5	$	(7)
Total gain recognized in net loss										Total gain recognized in net loss	$	(2)	$	(8)	$	(3)	$	(22)

Location and Amount of (Gain) Loss
Recognized in Income (Loss)
39 Weeks Ended
October 29, 2022 39 Weeks Ended
October 30, 2021
($ in millions) Cost of goods sold and occupancy expenses Operating expenses Cost of goods sold and occupancy expenses Operating expenses
Total amount of expense line items presented in the Condensed Consolidated Statements of Operations in which the effects of derivatives are recorded $ 7,438 $ 3,974 $ 7,031 $ 4,312
(Gain) loss recognized in net income (loss)
Derivatives designated as cash flow hedges (22) — 14 —
Derivatives not designated as hedging instruments — (80) — (2)
Total (gain) loss recognized in net income (loss) $ (22) $ (80) $ 14 $ (2)

Note 7.8. Share Repurchases

Share repurchase activity is as follows:
13 Weeks Ended 39 Weeks Ended
($ and shares in millions except average per share cost) October 29,
2022 October 30,
2021 October 29,
2022 October 30,
2021
Number of shares repurchased (1) 1.2 2.9 10.6 4.7
Total cost $ 12 $ 73 $ 123 $ 128
Average per share cost including commissions $ 10.20 $ 24.73 $ 11.59 $ 27.28


	13 Weeks Ended
($ and shares in millions except average per share cost)	April 29, 2023		April 30, 2022
Number of shares repurchased (1)	—		3.7
Total cost	$	—	$	54
Average per share cost including commissions	$	—	$	14.47

_________

(1)Excludes shares withheld to settle employee statutory tax withholding related to the vesting of stock units.

In February 2019, the Company's Board of Directors (the "Board") approved a $1.0 billion share repurchase authorization (the "February 2019 repurchase program"). The February 2019 repurchase program had $476 million remaining as of ~~October~~April 29, ~~2022.~~2023. All common stock repurchased is immediately retired.

Note ~~8. Earnings (Loss)~~9. Net Loss Per Share

Weighted-average number of shares used for ~~earnings (loss)~~net loss per share is as follows:


		13 Weeks Ended		39 Weeks Ended			13 Weeks Ended
(shares in millions)	(shares in millions)	October 29, 2022	October 30, 2021	October 29, 2022	October 30, 2021	(shares in millions)	April 29, 2023	April 30, 2022
Weighted-average number of shares - basic	Weighted-average number of shares - basic	365	376	367	377	Weighted-average number of shares - basic	367	370
Common stock equivalents (1)	Common stock equivalents (1)	1	—	3	8	Common stock equivalents (1)	—	—
Weighted-average number of shares - diluted	Weighted-average number of shares - diluted	366	376	370	385	Weighted-average number of shares - diluted	367	370

_________

(1)For the 13 weeks ended ~~October~~April 29, 2023 and April 30, ~~2021,~~2022, the dilutive impact of outstanding options and awards was excluded from dilutive shares as a result of the Company's net loss for the ~~period.~~periods.

The anti-dilutive shares related to stock options and other stock awards excluded from the computation of weighted-average number of shares – diluted were 147 million and 812 million for the 13 weeks ended ~~October~~April 29, ~~2022~~2023 and ~~October~~April 30, ~~2021, respectively, and 14 million and 6 million for the 39 weeks ended October 29,~~ 2022, ~~and October 30, 2021,~~ respectively, as their inclusion would have an anti-dilutive effect on ~~earnings (loss)~~net loss per share.

Note 9.10. Commitments and Contingencies

We are a party to a variety of contractual agreements under which we may be obligated to indemnify the other party for certain matters. These contracts primarily relate to our commercial contracts, operating leases, trademarks, intellectual property, financial agreements, and various other agreements. Under these contracts, we may provide certain routine indemnifications relating to representations and warranties (e.g., ownership of assets, environmental or tax indemnifications), or personal injury matters. The terms of these indemnifications range in duration and may not be explicitly defined. Generally, the maximum obligation under such indemnifications is not explicitly stated, and as a result, the overall amount of these obligations cannot be reasonably estimated. Historically, we have not made significant payments for these indemnifications. We believe that if we were to incur a loss in any of these matters, the loss would not have a material effect on our Condensed Consolidated Financial Statements taken as a whole.

As a multinational company, we are subject to various proceedings, lawsuits, disputes, and claims ("Actions") arising in the ordinary course of our business. Many of these Actions raise complex factual and legal issues and are subject to uncertainties. As of ~~October~~April 29, ~~2022,~~2023, Actions filed against us included 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. Actions are in various procedural stages and some are covered in part by insurance. As of ~~October~~April 29, ~~2022,~~2023, January ~~29,~~28, 2023, and April 30, 2022, ~~and October 30, 2021,~~ we recorded a liability for an estimated loss if the outcome of an Action is expected to result in a loss that is considered probable and reasonably estimable. The liability recorded was not material for any individual Action or in total for all periods presented. Subsequent to ~~October~~April 29, ~~2022,~~2023, and through the filing date of this Quarterly Report on Form 10-Q, no information has become available that indicates a change is required that would be material to our Condensed Consolidated Financial Statements taken as a whole.

We cannot predict with assurance the outcome of Actions brought against us. However, we do not believe that the outcome of any current Action would have a material effect on our Condensed Consolidated Financial Statements taken as a whole.

Note ~~10.~~11. Segment Information

We identify our operating segments according to how our business activities are managed and evaluated. As of ~~October~~April 29, ~~2022,~~2023, our operating segments included: Old Navy Global, Gap Global, Banana Republic Global, and Athleta Global. Each operating segment has a brand president who is responsible for various geographies and channels. Each of our brands serves customer demand through stores and online channels, leveraging our omni-channel capabilities that allow customers to shop seamlessly across all of our brands. 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 as of ~~October~~April 29, ~~2022.~~2023. We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our reportable segments.

See Note 2 of Notes to Condensed Consolidated Financial Statements for disaggregation of revenue ~~for stores and online~~by channel and by brand and region.

Note ~~11.~~12. Divestitures

On ~~August 10,~~November 7, 2022, we ~~completed the~~signed agreements to transition of our ~~United Kingdom~~Gap China and ~~Ireland online~~Gap Taiwan ("Gap Greater China") operations to a third party, ~~Next Plc,~~Baozun, to operate Gap Greater China stores and the ~~online operations~~in-market website as a franchise ~~partner.~~ partner, subject to regulatory approvals and closing conditions. On January 31, 2023, the Gap China transaction closed with Baozun. The impact to the Condensed Consolidated Financial Statements upon divestiture was not material for the 13 weeks ended April 29, 2023. The Gap Taiwan operations will continue to operate as usual until regulatory approvals and closing conditions are met.

On February 1, 2022, we completed the transition of our Gap Italy operations to a third party, OVS S.p.A. ("OVS"), to operate Gap Italy stores as a franchise partner. The ~~impacts from these transactions were not material~~impact to ~~our~~the Condensed Consolidated Financial Statements ~~for the 39 weeks ended October 29, 2022.~~

On October 1, 2021, we also completed the transition of our Gap France operations to a third party, Hermione People & Brands, to operate Gap France stores as a franchise partner. The impact from the transactionupon divestiture was not material ~~to our Condensed Consolidated Financial Statements~~ for the 13 ~~and 39~~ weeks ended ~~October~~April 30, ~~2021.~~

2022. As ~~our European partnership model transition is now complete, we~~of April 30, 2022, the Company also reclassified certain assets as held for sale assets that were expected to be sold in the next 12 months related to our distribution center in Rugby, ~~England~~England. The aggregate carrying amount of the assets held for ~~$125~~sale, primarily consisting of fixed assets, was $45 million ~~on September 30, 2022. As a result of this transaction, the Company recognized a pre-tax gain on sale of $83 million~~and was recorded within ~~operating expenses~~other current assets on the Condensed Consolidated ~~Statement~~Balance Sheet as of ~~Operations during~~April 30, 2022.

Note 13. Supply Chain Finance Program

Our voluntary supply chain finance ("SCF") program provides certain suppliers with the ~~13 weeks ended October 29, 2022.~~

~~On August 1, 2022, we completed~~opportunity to sell their receivables due from us to participating financial institutions at the ~~transition~~sole discretion of both the suppliers and the financial institutions. We are not a party to the agreements between our ~~Old Navy Mexico operations to~~suppliers and the financial institutions and our payment terms are not impacted by whether a ~~third party, Grupo Axo, to operate Old Navy Mexico stores as a franchise partner. As a result of this transaction, the Company recognized a pre-tax loss of $35 million~~supplier participates in the ~~second quarter~~SCF program.

We may agree to side letters with participating financial institutions related to the SCF program that require us to transfer a certain amount of ~~fiscal~~cash to be used as collateral for our payment obligations in a specified period. These collateral amounts, if applicable, are classified as restricted cash on our Condensed Consolidated Balance Sheets. There were no collateral amounts under the SCF program as of April 29, 2023 and April 30, 2022. The collateral amount under the SCF program was $30 million as of January 28, 2023. Additionally, our lenders under the ABL Facility who also participate in the SCF program have their related financings secured pursuant to the terms of the ABL Facility.

The Company's outstanding obligations under the SCF program were $322 million, $316 million, and $238 million as of April 29, 2023, January 28, 2023, and April 30, 2022, ~~when the assets~~respectively, and were ~~reclassified as held for sale. The pre-tax loss was recognized within operating expenses~~included in accounts payable on the Condensed Consolidated ~~Statement of Operations.~~

On November 7, 2022, we signed agreements to transition our Gap Greater China operations to a third party, Baozun Inc., to operate Gap Greater China stores and the in-market website as a franchise partner, subject to regulatory approvals and closing conditions.

On April 8, 2021 and May 21, 2021, we completed the divestitures of the Janie and Jack and Intermix brands, respectively. As a result of these transactions, the Company recognized a pre-tax loss of $59 million within operating expenses on the Condensed Consolidated Statement of Operations for the 39 weeks ended October 30, 2021.

Balance Sheets.

1614

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

OUR BUSINESS

We are a collection of purpose-led, lifestyle brands offering apparel, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, and Athleta brands. We have Company-operated stores in the United States, Canada, Japan, ~~China,~~ and Taiwan. Our products are available to customers online through Company-owned websites and through ~~the use of~~ third ~~parties that provide logistics and fulfillment services.~~party arrangements. We also have franchise agreements ~~with unaffiliated franchisees~~ 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. 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. Our omni-channel services, including curbside pick-up, 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.

OVERVIEW

Financial results for the ~~third~~first quarter of fiscal ~~2022~~2023 are as follows:

•Net sales for the ~~third~~first quarter of fiscal ~~2022 increased 2~~2023 decreased 6 percent compared with the ~~third~~first quarter of fiscal ~~2021.~~2022.

•Online sales for the ~~third~~first quarter of fiscal 2023 decreased 9 percent compared with the first quarter of fiscal 2022 ~~increased 5~~and store and franchise sales for the first quarter of fiscal 2023 decreased 4 percent compared with the ~~third~~first quarter of fiscal ~~2021 and store sales for the third quarter of fiscal 2022 increased 1 percent compared with the third quarter of fiscal 2021.~~2022.

•Gross profit for the ~~third~~first quarter of fiscal ~~2022~~2023 was ~~$1.51~~$1.21 billion compared with ~~$1.66~~$1.10 billion for the ~~third~~first quarter of fiscal ~~2021.~~2022. Gross margin for the ~~third~~first quarter of fiscal ~~2022~~2023 was ~~37.4~~37.1 percent compared with ~~42.1~~31.5 percent for the ~~third~~first quarter of fiscal ~~2021.~~2022.

•Operating ~~income~~loss for the ~~third~~first quarter of fiscal ~~2022~~2023 was ~~$186~~$(10) million compared with ~~operating income of $153~~$(197) million for the ~~third~~first quarter of fiscal ~~2021.~~2022.

•The effective income tax rate for the ~~third~~first quarter of fiscal ~~2022~~2023 was ~~negative 67.9~~10.0 percent compared with ~~29.3~~25.0 percent for the ~~third~~first quarter of fiscal ~~2021.~~2022.

•Net ~~income~~loss for the ~~third~~first quarter of fiscal ~~2022~~2023 was ~~$282~~$(18) million compared with ~~net loss of $(152)~~$(162) million for the ~~third~~first quarter of fiscal ~~2021.~~2022.

•Diluted ~~earnings~~loss per share was ~~$0.77~~$(0.05) for the ~~third~~first quarter of fiscal ~~2022~~2023 compared with ~~diluted loss per share of $(0.40)~~$(0.44) for the ~~third~~first quarter of fiscal ~~2021.~~2022.

•Merchandise inventory as of the ~~third~~first quarter of fiscal ~~2022 increased 12~~2023 decreased 27 percent compared with the ~~third~~first quarter of fiscal ~~2021.~~2022.

~~During~~On April 25, 2023, the ~~third quarter~~Company's management committed to the Plan as part of ~~fiscal 2022 we made progress~~the Company's previously announced efforts to simplify and optimize its operating model and structure. The Plan includes a reduction in workforce of approximately 1,800 employees, primarily in headquarters locations.

In connection with the Plan, the Company incurred $75 million in restructuring costs during the 13 weeks ended April 29, 2023 on ~~right-sizing our inventory levels~~a pre-tax basis, which includes employee-related costs of $62 million and ~~rebalancing our assortment; however our gross margins were impacted by high levels~~consulting and other associated costs of ~~promotional activity. We have reduced inventory buys, primarily at Old Navy Global, and we continue~~$13 million. Including the costs incurred during the 13 weeks ended April 29, 2023, the Company estimates that it will incur approximately $100 million to ~~have select seasonal product being stored at distribution centers for expected introduction into the market through fiscal 2023.~~

~~The Company has continued to take steps to optimize profitability and~~$120 million in aggregate pre-tax cash flow to drive long-term improvements across our business. These steps include reducing open and existing corporate roles, renegotiating our advertising agency contracts, reducing technology operating costs, and rationalizing digital investments. The Company did not incur material chargesexpenditures in connection with ~~these steps during~~ the ~~third quarter~~Plan, which consists of approximately $75 million to $85 million in employee-related costs and $25 million to $35 million in consulting and other associated costs. The actions associated with the reduction of the Company's workforce under the Plan are expected to be substantially completed by the end of the first half of fiscal ~~2022.~~

~~During the third quarter of fiscal 2022, t~~he Company ended our Yeezy Gap contract and recorded pre-tax impairment costs of $53 million, primarily related to inventory, as a result of the decision. The costs were recorded in costs of goods sold and occupancy expenses on the Condensed Consolidated Statement of Operations.2023.

The Company is also continuing to reduce the number of Gap and Banana Republic stores in North America by approximately 350 stores from the beginning of fiscal 2020 to the end of fiscal 2023. As of ~~October~~April 29, ~~2022,~~2023, we have closed, net of openings, ~~279~~315 Gap and Banana Republic stores in North America since the beginning of fiscal 2020.

Additionally, we completed the transition of our United Kingdom and Ireland online operations to a franchise partner on August 10, 2022. We also completed the transition of our Gap France operations and Gap Italy operations to franchise partners on October 1, 2021 and February 1, 2022, respectively. As our European partnership model transition is now complete, during the third quarter of fiscal 2022, we sold the distribution center in Rugby, England for $125 million and recorded a pre-tax gain on sale of $83 million within operating expenses on the Condensed Consolidated Statement of Operations.

On August 1, 2022, we completed the transition of our Old Navy Mexico operations to a third party, Grupo Axo, to operate Old Navy Mexico stores as a franchise partner. As a result of this transaction, the Company recognized a pre-tax loss of $35 million in the second quarter of fiscal 2022 when the assets were reclassified as held for sale. The pre-tax loss was recognized within operating expenses on the Condensed Consolidated Statement of Operations.

On November 7, 2022, we signed agreements to transition our Gap Greater China operations to a third party, Baozun, ~~Inc.,~~ 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. The impact to the Condensed Consolidated Financial Statements upon divestiture was not material for the 13 weeks ended April 29, 2023. The Gap Taiwan operations will continue to operate as usual until regulatory approvals and closing conditions are met.

During the 13 weeks ended April 29, 2023, the Company sold a building for $76 million and recorded a pre-tax gain on sale of $47 million within operating expenses on the Condensed Consolidated Statement of Operations.

We remain focused on the following strategic priorities in the near term:

•managing inventory to support a healthy merchandise margin;

•reducing and optimizing our fixed cost structure to improve profitability and manage through current macroeconomic challenges;

•driving ~~improved~~ sales through assortment improvements and a balanced and relevant category mix;

•~~reducing~~driving creative excellence and delivering product that offers value to our ~~fixed cost structure to improve profitability~~customers through a combination of fit, quality, brand, and ~~manage through current macro-economic challenges;~~

•~~leveraging our scale to navigate disruptions and constraints in the global supply chain;~~

•~~managing inventory to support a healthy merchandise margin;~~price;

•rationalizing the Gap and Banana Republic store fleet;

•prioritizing asset-light growth through licensing, online, and franchise partnerships globally;

•~~creating product that offers value to our customers through a combination of fit, quality, brand, and price;~~

•optimizing investments in our four purpose-led lifestyle brands to drive relevance and ~~gain~~ market share;

•~~growing our online business;~~

•attracting and retaining strong talent in our businesses and functions; and

•continuing to integrate social and environmental sustainability into business practices to support long-term growth.

~~We believe focusing on these priorities in the near term will enable the Company to execute against its Power Plan strategy, including leveraging:~~

•~~The Power of its Brands, reflected by the Company’s four purpose-led, lifestyle brands: Old Navy, Gap, Banana Republic, and Athleta;~~

•~~The Power of its Portfolio, which enables growth synergies across key customer categories; and~~

•The Power of its Platform, which leverages the Company’s powerful platform to both enable growth, such as through competitive omni-channel capabilities, as well as cost synergies, fueled by its scaled operations.

1816

RESULTS OF OPERATIONS

Net Sales

See Note 2 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, for net sales disaggregation.

Comparable Sales ("Comp Sales")

Comp Sales include the results of Company-operated stores and sales through our online ~~channels.~~channel. The calculation of ~~Gap Inc.~~ Comp Sales excludes the results of our franchise business. ~~Gap Inc.~~ Comp Sales also included the results of ~~Janie and Jack and Intermix~~certain foreign operations until ~~the divestitures~~their respective transitions to third party franchise partners. See Note 12 of ~~those brands~~Notes to Condensed Consolidated Financial Statements included in ~~fiscal 2021.~~Part I, Item 1 of this Form 10-Q, for related disclosures.

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. 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 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. When a temporarily closed store reopens, the store will be placed in the Comp/Non-comp status it was in prior to its closure. If a store was in Closed status for three or more days in the prior year, the store will be in Non-comp status for the same days the following year.

Current year foreign exchange rates are applied to both current year and prior year Comp Sales to achieve a consistent basis for comparison.

The percentage change in Comp Sales by global brand and for The Gap, Inc., as compared with the preceding year, is as follows:


		13 Weeks Ended				39 Weeks Ended					13 Weeks Ended
		October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021			April 29, 2023		April 30, 2022
Old Navy Global	Old Navy Global	(1)	%	(9)	%	(13)	%	3	%	Old Navy Global	(1)	%	(22)	%
Gap Global	Gap Global	4	%	7	%	(4)	%	8	%	Gap Global	1	%	(11)	%
Banana Republic Global	Banana Republic Global	10	%	28	%	14	%	22	%	Banana Republic Global	(8)	%	27	%
Athleta Global	Athleta Global	—	%	2	%	(5)	%	13	%	Athleta Global	(13)	%	(7)	%
The Gap, Inc.	The Gap, Inc.	1	%	(1)	%	(8)	%	7	%	The Gap, Inc.	(3)	%	(14)	%

1917

Store count, openings, closings, and square footage for our stores are as follows:


		January 29, 2022	39 Weeks Ended October 29, 2022		October 29, 2022				January 28, 2023			13 Weeks Ended April 29, 2023			April 29, 2023
		Number of Store Locations	Number of Stores Opened	Number of Stores Closed		Number of Store Locations		Square Footage (in millions)			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)		1,252	25	6		1,247		20.0
Old Navy North America										Old Navy North America	1,238		15	1		1,252		20.0
Gap North America	Gap North America	520	2	18		504		5.4		Gap North America	493		—	5		488		5.1
Gap Asia		329	4	74		259		2.2
Gap Europe (2)		11	—	—		—		—
Gap Asia (1)										Gap Asia (1)	232		1	1		143		1.2

Banana Republic North America	Banana Republic North America	446	2	15		433		3.6		Banana Republic North America	419		—	6		413		3.5
Banana Republic Asia	Banana Republic Asia	50	2	3		49		0.2		Banana Republic Asia	46		2	2		46		0.2
Athleta North America	Athleta North America	227	29	5		251		1.0		Athleta North America	257		3	1		259		1.1
Company-operated stores total	Company-operated stores total	2,835	64	121		2,743		32.4		Company-operated stores total	2,685		21	16		2,601		31.1
Franchise (1) (2)		564	77	39		637		N/A
Franchise (1)										Franchise (1)	667		57	6		852		N/A
Total	Total	3,399	141	160		3,380		32.4		Total	3,352		78	22		3,453		31.1
Decrease over prior year						(2.3)	%	(3.9)	%
Increase (decrease) over prior year										Increase (decrease) over prior year						1.1	%	(6.3)	%

		January 30, 2021	39 Weeks Ended October 30, 2021		October 30, 2021				January 29, 2022			13 Weeks Ended April 30, 2022			April 30, 2022
		Number of Store Locations	Number of Stores Opened	Number of Stores Closed		Number of Store Locations		Square Footage (in millions)			Number of Store Locations		Number of Stores Opened	Number of Stores Closed		Number of Store Locations		Square Footage (in millions)
Old Navy North America	Old Navy North America	1,220	42	5		1,257		20.1		Old Navy North America	1,252		9	3		1,258		20.2
Gap North America	Gap North America	556	1	19		538		5.7		Gap North America	520		1	9		512		5.4
Gap Asia	Gap Asia	340	11	16		335		2.8		Gap Asia	329		3	4		328		2.7
Gap Europe ~~(3)~~(2)	Gap Europe ~~(3)~~(2)	117	1	86		11		0.1		Gap Europe ~~(3)~~(2)	11		—	—		—		—
Banana Republic North America	Banana Republic North America	471	2	12		461		3.9		Banana Republic North America	446		1	2		445		3.7
Banana Republic Asia	Banana Republic Asia	47	6	2		51		0.2		Banana Republic Asia	50		1	—		51		0.2

Athleta North America	Athleta North America	199	22	1		220		0.9		Athleta North America	227		6	2		231		1.0
Intermix North America (4)		31	—	—		—		—
Janie and Jack North America (4)		119	—	—		—		—
Company-operated stores total	Company-operated stores total	3,100	85	141		2,873		33.7		Company-operated stores total	2,835		21	20		2,825		33.2
Franchise (3)		615	58	108		586		N/A
Franchise (2)										Franchise (2)	564		23	9		589		N/A
Total	Total	3,715	143	249		3,459		33.7		Total	3,399		44	29		3,414		33.2
Decrease over prior year	Decrease over prior year					(8.6)	%	(5.1)	%	Decrease over prior year						(4.4)	%	(4.3)	%

__________

(1)The ~~24 Old Navy Mexico~~89 Gap China stores that were transitioned to ~~Grupo Axo~~Baozun during the period are not included as store closures or openings for Company-operated and Franchise store activity. The ending balance for ~~Old Navy North America~~Gap Asia excludes ~~these~~Gap China stores and the ending balance for Franchise includes ~~these stores.~~Gap China locations transitioned during the period.

(2)The 11 Gap Italy stores that were transitioned to OVS during the period are not included as store closures or openings for Company-operated and Franchise store activity. The ending balance for Gap Europe excludes ~~these~~Gap Italy stores and the ending balance for Franchise includes ~~these~~Gap Italy stores.

~~(3)~~The 21 Gap France stores that were transitioned to Hermione People & Brands during the period are not included as store closures or openings for Company-operated and Franchise store activity. The ending balance for Gap Europe excludes these stores and the ending balance for Franchise includes these stores.

~~(4)~~On April 8, 2021, the Company completed the divestiture of the Janie and Jack brand. On May 21, 2021, the Company completed the divestiture of the Intermix brand. The 150 stores divested are not included as store closures or in the ending balance for fiscal 2021.

Outlet and factory stores are reflected in each of the respective brands.

2018

Net Sales

Our net sales for the ~~third~~first quarter of fiscal 2022 increased $96 million, or 2 percent, compared with the third quarter of fiscal 2021, in part due to timing of franchise sales. This was partially offset by strategic store closures, as well as an unfavorable impact of foreign exchange of $50 million. The foreign exchange impact is the translation impact if net sales for the third quarter of fiscal 2021 were translated at exchange rates applicable during the third quarter of fiscal 2022.

~~Our net sales for the first three quarters of fiscal 2022~~2023 decreased ~~$772~~$201 million, or 6 percent, compared with the first ~~three quarters~~quarter of fiscal ~~2021,~~2022, driven primarily by ~~Old Navy Global as~~ a ~~result of inventory delays related to global supply chain disruptions, as well as size and assortment imbalances in the first half of fiscal 2022. The~~ decrease in ~~net~~online sales, ~~was also driven by~~the transition of our Gap China business to a partnership model, and strategic store ~~closures and the divestitures of the Janie and Jack and Intermix brands last year, as well as~~closures. Additionally, there was an unfavorable impact of foreign exchange of ~~$101~~$35 million. The foreign exchange impact is the translation impact if net sales for the first ~~three quarters~~quarter of fiscal ~~2021~~2022 were translated at exchange rates applicable during the first ~~three quarters~~quarter of fiscal ~~2022. The decrease in net sales was partially offset by the positive impact of growth in Banana Republic Global net sales.~~2023.

Cost of Goods Sold and Occupancy Expenses


		13 Weeks Ended						39 Weeks Ended							13 Weeks Ended
($ in millions)	($ in millions)	October 29, 2022			October 30, 2021			October 29, 2022			October 30, 2021			($ in millions)	April 29, 2023			April 30, 2022
Cost of goods sold and occupancy expenses	Cost of goods sold and occupancy expenses	$	2,530		$	2,282		$	7,438		$	7,031		Cost of goods sold and occupancy expenses	$	2,062		$	2,381
Gross profit	Gross profit	$	1,509		$	1,661		$	3,935		$	5,114		Gross profit	$	1,214		$	1,096
Cost of goods sold and occupancy expenses as a percentage of net sales	Cost of goods sold and occupancy expenses as a percentage of net sales	62.6		%	57.9		%	65.4		%	57.9		%	Cost of goods sold and occupancy expenses as a percentage of net sales	62.9		%	68.5		%
Gross margin	Gross margin	37.4		%	42.1		%	34.6		%	42.1		%	Gross margin	37.1		%	31.5		%

Cost of goods sold and occupancy expenses ~~increased 4.7 percentage points as a percentage of net sales in the third quarter of fiscal 2022 compared with the third quarter of fiscal 2021.~~

•Cost of goods sold increased 4.8 percentage points as a percentage of net sales in the third quarter of fiscal 2022 compared with the third quarter of fiscal 2021, driven by higher promotional activity primarily at Old Navy Global and Gap Global as well as inventory impairment as a result of the decision to discontinue the Yeezy Gap business. Average unit costs were relatively flat as commodity price increases were offset by a decrease in air freight expense during the third quarter of fiscal 2022.

•~~Occupancy expenses~~ decreased ~~0.1 percentage points as a percentage of net sales in the third quarter of fiscal 2022 compared with the third quarter of fiscal 2021, primarily driven by an increase in net sales.~~

~~Cost of goods sold and occupancy expenses increased 7.5~~5.6 percentage points as a percentage of net sales in the first ~~three quarters~~quarter of fiscal ~~2022~~2023 compared with the first ~~three quarters~~quarter of fiscal ~~2021.~~2022.

•Cost of goods sold ~~increased 6.9~~decreased 6.0 percentage points as a percentage of net sales in the first ~~three quarters~~quarter of fiscal ~~2022~~2023 compared with the first ~~three quarters~~quarter of fiscal ~~2021,~~2022, primarily driven by ~~increased average unit costs which were impacted by higher~~a decrease in air freight expenses ~~and commodity price increases~~ as well as ~~higher~~improved promotional activity. ~~The remaining increase~~This was ~~driven~~partially offset by ~~inventory impairment primarily related to seasonal product and extended size product at Old Navy Global and inventory impairment as a result of the decision to discontinue the Yeezy Gap business.~~commodity price increases.

•Occupancy expenses increased ~~0.6~~0.4 percentage points as a percentage of net sales in the first ~~three quarters~~quarter of fiscal ~~2022~~2023 compared with the first ~~three quarters~~quarter of fiscal ~~2021,~~2022, primarily driven by a decrease in ~~comparable~~online sales without a corresponding decrease in fixed occupancy expenses.

2119

Operating Expenses


		13 Weeks Ended						39 Weeks Ended							13 Weeks Ended
($ in millions)	($ in millions)	October 29, 2022			October 30, 2021			October 29, 2022			October 30, 2021			($ in millions)	April 29, 2023			April 30, 2022
Operating expenses	Operating expenses	$	1,323		$	1,508		$	3,974		$	4,312		Operating expenses	$	1,224		$	1,293
Operating expenses as a percentage of net sales	Operating expenses as a percentage of net sales	32.8		%	38.2		%	34.9		%	35.5		%	Operating expenses as a percentage of net sales	37.4		%	37.2		%
Operating margin	Operating margin	4.6		%	3.9		%	(0.3)		%	6.6		%	Operating margin	(0.3)		%	(5.7)		%

Operating expenses decreased ~~$185~~$69 million, ~~or 5.4 percentage points as a percentage of net sales in the third quarter of fiscal 2022 compared with the third quarter of fiscal 2021 primarily due to the following:~~

•~~a gain of $83 million on sale of building;~~

•~~a decrease in performance-based compensation; and~~

•~~a decrease in advertising expenses.~~

~~Operating expenses decreased $338 million, or 0.6~~but increased 0.2 percentage points as a percentage of net sales in the first ~~three quarters~~quarter of fiscal ~~2022~~2023 compared with the first ~~three quarters~~quarter of fiscal ~~2021~~2022, primarily due to a decrease in net sales as well as the following:

•a decrease in ~~performance-based compensation;~~advertising expenses;

•a gain on sale of building of $47 million; and

•a ~~gain~~decrease in technology-related investments; partially offset by

•restructuring expenses of ~~$83~~$71 million ~~on sale~~incurred during the first quarter of ~~building.~~fiscal 2023 as a result of actions taken to further simplify and optimize our operating model and structure.

Interest Expense


		13 Weeks Ended				39 Weeks Ended					13 Weeks Ended
($ in millions)	($ in millions)	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021		($ in millions)	April 29, 2023		April 30, 2022
Interest expense	Interest expense	$	22	$	44	$	63	$	149	Interest expense	$	23	$	20

Interest expense ~~decreased $22 million or 50 percent during the third quarter of fiscal 2022 compared with the third quarter of fiscal 2021~~primarily includes interest on outstanding borrowings and ~~decreased $86 million or 58 percent during the first three quarters of fiscal 2022 compared with the first three quarters of fiscal 2021 primarily due~~obligations mainly related to ~~lower interest rates and principal for outstanding borrowings.~~our Senior Notes.

Income Taxes


		13 Weeks Ended						39 Weeks Ended							13 Weeks Ended
($ in millions)	($ in millions)	October 29, 2022			October 30, 2021			October 29, 2022			October 30, 2021			($ in millions)	April 29, 2023			April 30, 2022
Income taxes	Income taxes	$	(114)		$	(63)		$	(167)		$	59		Income taxes	$	(2)		$	(54)
Effective tax rate	Effective tax rate	(67.9)		%	29.3		%	174.0		%	17.8		%	Effective tax rate	10.0		%	25.0		%

The decrease in the effective tax rate for the ~~third~~first quarter of fiscal ~~2022~~2023 compared with the ~~third~~first quarter of fiscal ~~2021~~2022 is primarily due to changes in the amount and jurisdictional mix of pre-tax ~~earnings and the cumulative impact of a change in the Company’s estimated annual effective tax rate.~~

The increase in the effective tax rate for the first three quarters of fiscal 2022 compared with the first three quarters of fiscal 2021 is primarily due to changes in the amount and jurisdictional mix of pre-tax earnings and the cumulative impact of a change in the Company’s estimated annual effective tax rate.

We expect the income tax benefit from the third quarter of fiscal 2022 to be offset by significant tax expense in the fourth quarter of fiscal 2022 as a result of fluctuations in quarterly pre-tax earnings.operations.

2220

LIQUIDITY AND CAPITAL RESOURCES

In addition to our cash flows from operating activities, our primary sources of liquidity include cash and cash equivalents, our Senior Notes, and borrowings under our ABL Facility. As of ~~October~~April 29, ~~2022,~~2023, we ~~consider~~had cash and cash equivalents of approximately $1.2 billion. We hold our cash and cash equivalents across a diversified set of reputable financial institutions and monitor the ~~following to be~~credit standing of those financial institutions. In addition, we have issued $1.5 billion aggregate principal amount of our ~~primary measures of liquidity~~Senior Notes, and ~~capital resources:~~

($ in millions) Source of Liquidity Outstanding Indebtedness Total Available Liquidity
Cash and cash equivalents $ 679 $ — $ 679
Debt
3.625% Senior Notes due 2029 750 750 —
3.875% Senior Notes due 2031 750 750 —
Total $ 2,179 $ 1,500 $ 679

We are also able to supplement near-term liquidity, if necessary, with our ABL Facility or other available market instruments. As of ~~October~~April 29, ~~2022,~~2023, the Company's outstanding borrowing under the ABL Facility was $350 million. On May 15, 2023, the Company repaid $100 million of the outstanding borrowing under the ABL Facility, which reduced the outstanding borrowing to $250 million. See Note 35 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, for disclosures on the Senior Notes and ABL Facility.

Our largest source of operating cash flows is cash collections from the sale of our merchandise. 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. ~~Additionally, we have select seasonal product~~ ~~being stored at distribution centers for expected introduction into the market through fiscal 2023, which will impact inventory expenditures in future periods~~. The seasonality of our operations, in addition to the impact of global economic conditions such as the uncertainty surrounding global inflationary pressures, the ~~COVID-19 pandemic,~~Russia-Ukraine crisis, and ~~the Russia-Ukraine crisis,~~distress in global credit and banking markets, 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.

Our voluntary SCF program provides certain suppliers with the opportunity to sell their receivables due from us to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. 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 13 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, for disclosures on the Company's SCF program.

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.

Cash Flows from Operating Activities

Net cash ~~used for~~provided by operating activities was ~~$112~~$15 million during the first ~~three quarters~~quarter of fiscal ~~2022~~2023 compared with ~~$682~~$362 million of net cash ~~provided by~~used for operating activities during the first ~~three quarters~~quarter of fiscal ~~2021,~~2022, primarily due to the following:

Net ~~Income~~Loss

•a ~~decrease in~~ net ~~income;~~

~~Non-cash item~~

•~~a decrease~~loss of ~~$325~~$18 million ~~due to a loss on extinguishment of debt~~ during the first ~~three quarters~~quarter of fiscal ~~2021;~~2023 compared with a net loss of $162 million during the first quarter of fiscal 2022;

Changes in operating assets and liabilities

•~~a decrease~~an increase of ~~$384~~$249 million related to merchandise inventory primarily due to lower inventory levels in the first quarter of fiscal 2023 compared with the first quarter of fiscal 2022;

•an increase of $234 million related to accounts payable primarily due to the timing of payments for inventory during the first ~~three quarters~~quarter of fiscal ~~2022~~2023 compared with the first ~~three quarters~~quarter of fiscal ~~2021;~~2022; and

•~~a decrease~~an increase of ~~$362~~$214 million related to accrued expenses and other current liabilities primarily due to ~~a decrease in performance-based compensation for~~lower bonus payment during the first quarter of fiscal ~~2022~~2023 compared with the first quarter of fiscal ~~2021;~~2022; partially offset by

•~~an increase~~a decrease of ~~$310~~$418 million related to income taxes payable, net of receivables and other tax-related items, primarily due to ~~the~~ receipt of tax refunds during the first ~~three quarters~~quarter of fiscal 2022 related to ~~our~~ fiscal 2020 net operating loss carryback ~~claims; and~~claims.

•an increase of $210 million related to merchandise inventory primarily due to timing of receipts as a result of shipping delays and port congestion that occurred during the first three quarters of fiscal 2021.

Cash Flows from Investing Activities

Net cash used for investing activities was ~~$119~~$30 million during the first ~~three quarters~~quarter of fiscal ~~2022~~2023 compared with ~~$508~~$105 million of net cash ~~used for~~provided by investing activities during the first ~~three quarters~~quarter of fiscal ~~2021,~~2022, primarily due to the following:

•$~~458~~76 million in net proceeds from the sale of ~~buildings~~a building during the first ~~three quarters~~quarter of fiscal ~~2022; and~~

•~~$135~~2023 compared with $333 million in ~~cash payments for acquisitions in~~net proceeds from the sale of a building during the first ~~three quarters~~quarter of fiscal ~~2021;~~2022; partially offset by

•$~~134~~111 million ~~in net proceeds from available-for-sale securities during the first three quarters of fiscal 2021; and~~

•~~$91 million more~~less purchases of property and equipment during the first ~~three quarters~~quarter of fiscal ~~2022~~2023 compared with the first ~~three quarters~~quarter of fiscal ~~2021.~~2022.

Cash Flows from Financing Activities

Net cash ~~provided by~~used for financing activities was ~~$60~~$58 million during the first ~~three quarters~~quarter of fiscal ~~2022~~2023 compared with ~~$1,358~~$233 million of net cash ~~used for~~provided by financing activities during the first ~~three quarters~~quarter of fiscal ~~2021,~~2022, primarily due to the following:

•~~$2,546 million for payments related to the extinguishment of long-term debt during the first three quarters of fiscal 2021; and~~

•$350 million in proceeds received from borrowing under the ABL Facility during the first quarter of fiscal 2022; partially offset by

•$~~1,500~~54 million in ~~proceeds received for the issuance~~repurchases of ~~long-term debt~~common stock during the first ~~three quarters~~quarter of fiscal ~~2021.~~2022 compared with no repurchases in the first quarter of fiscal 2023.

Free Cash Flow

Free cash flow is a non-GAAP financial measure. We believe free cash flow is an important metric because it represents a measure of how much cash a company has available for discretionary and non-discretionary items after the deduction of capital expenditures. We require regular capital expenditures including technology improvements ~~to automate processes, engage with customers, and optimize our supply chain in addition to~~as well as building and maintaining ~~stores.~~our stores and distribution centers. We use this metric internally, as we believe our sustained ability to generate free cash flow is an important driver of value creation. However, this non-GAAP financial measure is not intended to supersede or replace our GAAP results.

The following table reconciles free cash flow, a non-GAAP financial measure, from a GAAP financial measure.


		39 Weeks Ended					13 Weeks Ended
($ in millions)	($ in millions)	October 29, 2022		October 30, 2021		($ in millions)	April 29, 2023		April 30, 2022
Net cash provided by (used for) operating activities	Net cash provided by (used for) operating activities	$	(112)	$	682	Net cash provided by (used for) operating activities	$	15	$	(362)
Less: Purchases of property and equipment	Less: Purchases of property and equipment	(577)		(486)		Less: Purchases of property and equipment	(117)		(228)

Free cash flow	Free cash flow	$	(689)	$	196	Free cash flow	$	(102)	$	(590)

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 a dividend of $0.15 per share during the ~~third~~first quarter of fiscal ~~2022.~~2023. In ~~November 2022,~~May 2023, the Board authorized a dividend of $0.15 per share for the ~~fourth~~second quarter of fiscal ~~2022.~~2023.

Share Repurchases

Certain financial information about the Company’s share repurchases is set forth in Note 78 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Summary Disclosures about Contractual Cash Obligations and Commercial Commitments

As of October 29, 2022, our merchandise inventory-related purchase obligations have decreased compared with January 29, 2022. In addition to seasonal fluctuations that are inherent to our business, we have reduced inventory buys in an effort to reduce and rebalance inventory levels, primarily at Old Navy Global. The global supply chain challenges have also improved, reducing the need to start the merchandise booking process earlier. There have been no ~~other~~ material changes to our contractual obligations and commercial commitments as disclosed in our Annual Report on Form 10-K as of January ~~29, 2022,~~28, 2023, other than those which occur in the normal course of business. See Note 910 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, for disclosures on commitments and contingencies.

Critical Accounting Policies and Estimates

There have been no significant changes to our critical accounting policies and estimates as discussed in our Annual Report on Form 10-K for the fiscal year ended January ~~29, 2022.~~28, 2023. See Note 1 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, for disclosures on accounting policies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Our market risk profile as of January ~~29, 2022,~~28, 2023, is disclosed in our Annual Report on Form 10-K and has not significantly changed other than the $350 million variable-rate borrowing under our ABL Facility, which is subject to interest rate risk. On July 13, 2022, we entered into an amendment and restatement of the ABL Facility. Among other changes, the amendment and restatement modified the reference rate from LIBOR to SOFR and reduced the applicable interest rate margin.as noted below. See Notes ~~3, 4,~~5, 6, and 67 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, for disclosures on our debt and credit facilities, investments, and derivative financial instruments.

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.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including the interim Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the interim Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

During the third quarter of fiscal 2022, we shifted our legacy enterprise resource planning ("ERP") system to a cloud-based ERP system. As part of the system conversion, we assessed the impact to the control environment and modified internal controls where necessary.

There ~~were~~was no ~~other changes~~change in the Company’s internal control over financial reporting that occurred during the Company’s ~~third~~first quarter of fiscal ~~2022~~2023 that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company reviews its internal control over financial reporting following major organizational restructuring. The impact of the Plan on the Company's internal control over financial reporting will be assessed and monitored throughout the fiscal year. See Note 3 of Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, for disclosures on the Plan.

2523

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

We cannot predict with assurance the outcome of Actions brought against us. Accordingly, developments, settlements, or resolutions may occur and impact operations in the quarter of such development, settlement, or resolution. However, we do not believe that the outcome of any current Action would have a material effect on our financial results.

Item 1A. Risk Factors.

The following risk factors appearing in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 28, 2023 have been updated.

Risks Related to Strategic Transactions and Investments

We may engage in or seek to engage in strategic transactions, such as acquisitions, divestitures and other dispositions, or adjust or restructure our business, all of which are subject to various risks and uncertainties, which could disrupt or adversely affect our business.

We may engage in or seek to engage in strategic transactions, such as acquisitions, divestitures or other dispositions, which we may not be able to complete on anticipated terms or time frames or at all, or which may not generate some or all of the strategic, financial, operational or other benefits we expect to realize from such transactions on such anticipated time frames or at all. 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, 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. 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. 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.

In 2021, we reached agreements to transfer our European business to a franchise model, and in 2022 we reached agreements to transition our Mexico and Greater China businesses to a franchise model. In 2021, we also divested our Janie and Jack and Intermix brands and acquired two technology companies. We incurred costs and expenses in connection with these transactions and may incur such costs and expenses in connection with future strategic reviews, which may require significant attention from our senior management and employees. Executing any transactions resulting from future strategic reviews will be time-consuming, will involve additional costs and expenses, which may be significant, and may result in difficulties attracting, retaining and motivating employees, which could harm our business and adversely affect our results of operations.

We have also adjusted and may further adjust our business strategies to meet changes in our business environment. For example, in 2022, we began taking steps to drive long-term improvements across our business, which include reducing open and existing corporate roles, renegotiating our advertising agency contracts, reducing technology operating costs, and rationalizing digital investments. In March 2023, we shared plans to further simplify and optimize our operating model and structure, including actions such as increasing spans of control and decreasing management layers to improve quality and speed of decision making, as well as creating a consistent organizational structure across all four brands. In connection with those actions, in April 2023, we announced a restructuring plan that includes a reduction of the Company's workforce primarily in headquarters locations. Our ability to achieve the intended benefits and projected cost savings from these actions are subject to many estimates and assumptions. For example, costs associated with these actions could be higher than anticipated, and savings associated with these actions could be lower than anticipated. In addition, these actions may impact our ability to attract and retain qualified personnel, may be distracting to our senior management and employees, and may negatively impact our business operations and reputation. These actions are also subject to execution risk and may not generate the intended benefits and projected cost savings to the extent or on the timeline as expected, and our new organizational structure and strategies could be less successful than our previous organizational structure and strategies.

Risks Relating to Our Indebtedness and Credit Profile

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.

We currently have a corporate credit rating of BB with a negative outlook from Standard & Poor's. In March 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 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. In addition, market conditions such as increased volatility or disruption in the credit markets could adversely affect our ability to obtain financing or refinance existing debt on terms that would be acceptable to us.

There have been no other material changes in our risk factors from those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended January ~~29, 2022.~~28, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~The following table presents information with respect to purchases of common stock of~~In February 2019, we announced that the ~~Company made for the 13 weeks ended October 29, 2022 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 (July 31 - August 27) 1,176,425 $ 10.20 1,176,425 $ 476 million
Month #2 (August 28 - October 1) — $ — — $ 476 million
Month #3 (October 2 - October 29) — $ — — $ 476 million
Total 1,176,425 $ 10.20 1,176,425

~~__________~~

~~(1)Excludes~~Board approved a $1.0 billion share repurchase authorization (the "February 2019 repurchase program"), which has no expiration date. There were no shares repurchased, other than shares withheld to settle employee statutory tax withholding related to the vesting of stock ~~units.~~

~~(2)~~Inunits, during the 13 weeks ended April 29, 2023. The February 2019 ~~the Board approved a $1.0 billion share~~ repurchase ~~authorization, which has no expiration date.~~program had $476 million remaining as of April 29, 2023.

2625

Item 6. Exhibits.

Incorporated by Reference
Exhibit No. Exhibit Description Form File No. Exhibit Filing Date Filed/
Furnished
Herewith
3.1 Amended and Restated Certificate of Incorporation (P) 10-K 1-7562 3.1 April 26, 1993
3.2
Certificate of Amendment of Amended and Restated Certificate of Incorporation 10-K 1-7562 3.2 April 4, 2000
3.3
Amended and Restated Bylaws (effective August 15, 2022) 10-Q 1-7562 3.3 August 26, 2022
10.1*
Fourth Amended and Restated Revolving Credit Agreement dated as of July 13, 2022 X
31.1
Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002) X
31.2
Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002) X
32.1
Certification of the Chief Executive Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X
32.2
Certification of the Chief Financial Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X
101 The following materials from The Gap, Inc.’s Quarterly Report on Form 10-Q for the quarter ended October 29, 2022, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) the Condensed Consolidated Statements of Stockholders' Equity; (v) the Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements X
104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) X

Incorporated by Reference

Exhibit No.

Exhibit Description

Form

File No.

Exhibit

Filing Date

Filed/
Furnished
Herewith

3.1

Amended and Restated Certificate of Incorporation (P)

10-K

1-7562

3.1

April 26, 1993

3.2

Certificate of Amendment of Amended and Restated Certificate of Incorporation

10-K

1-7562

3.2

April 4, 2000

3.3

Amended and Restated Bylaws (effective August 15, 2022)

10-Q

1-7562

3.3

August 26, 2022

10.1†

Letter Agreement dated February 27, 2023 by and between Sally Gilligan and the Registrant

10.2†

Letter Agreement dated March 20, 2023 by and between Gurmeet Singh and the Registrant

10.3†

2023 Form of Non-Qualified Stock Option Agreement under the 2016 Long-Term Incentive Plan

8-K

1-7562

10.1

March 10, 2023

10.4†

2023 Form of Restricted Stock Unit Award Agreement under the 2016 Long-Term Incentive Plan

8-K

1-7562

10.2

March 10, 2023

10.5†

2023 Form of Performance Share Agreement under the 2016 Long-Term Incentive Plan

8-K

1-7562

10.3

March 10, 2023

31.1

Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002)

31.2

Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002)

32.1

Certification of the Chief Executive Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of the Chief Financial Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101

The following materials from The Gap, Inc.’s Quarterly Report on Form 10-Q for the quarter ended April 29, 2023, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Loss, (iv) the Condensed Consolidated Statements of Stockholders' Equity; (v) the Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements

104

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

_____________________________

(P) This Exhibit was originally filed in paper format. Accordingly, a hyperlink has not been provided.

* This Exhibit was originally filed in PDF format and is provided here in HTML format with updated section numbering.†Indicates management contract or compensatory plan or arrangement.

2726

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		THE GAP, INC.

Date:	~~November 22, 2022~~May 26, 2023	By	/s/ Bob L. Martin
			Bob L. Martin
			Interim Chief Executive Officer
			(Principal Executive Officer)

Date:	~~November 22, 2022~~May 26, 2023	By	/s/ Katrina O'Connell
			Katrina O'Connell
			Executive Vice President and Chief Financial Officer
			(Principal Financial and Accounting Officer)

2827


	Location and Amount of (Gain) Loss Recognized in Income (Loss)
	39 Weeks Ended October 29, 2022				39 Weeks Ended October 30, 2021
($ in millions)	Cost of goods sold and occupancy expenses		Operating expenses		Cost of goods sold and occupancy expenses		Operating expenses
Total amount of expense line items presented in the Condensed Consolidated Statements of Operations in which the effects of derivatives are recorded	$	7,438	$	3,974	$	7,031	$	4,312

(Gain) loss recognized in net income (loss)
Derivatives designated as cash flow hedges	(22)		—		14		—
Derivatives not designated as hedging instruments	—		(80)		—		(2)
Total (gain) loss recognized in net income (loss)	$	(22)	$	(80)	$	14	$	(2)


($ in millions)	Source of Liquidity		Outstanding Indebtedness		Total Available Liquidity
Cash and cash equivalents	$	679	$	—	$	679
Debt



3.625% Senior Notes due 2029	750		750		—
3.875% Senior Notes due 2031	750		750		—
Total	$	2,179	$	1,500	$	679


	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 (July 31 - August 27)	1,176,425	$	10.20	1,176,425	$ 476 million
Month #2 (August 28 - October 1)	—	$	—	—	$ 476 million
Month #3 (October 2 - October 29)	—	$	—	—	$ 476 million
Total	1,176,425	$	10.20	1,176,425