GAP INC [GPS] Filings

10-Q 1 gps-20211030.htm 10-Q gps-20211030

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 30, 2021


☐			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 17, 2021 was 373,403,244.

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 supply chain disruptions and COVID-19 on the assumptions and estimates used when preparing the quarterly financial statements, and on our results of operations, financial position, and liquidity;

•the impact of recent accounting pronouncements;

•the timing of revenue recognition of revenue deferrals;

•our new credit card program with Barclays and Mastercard, as well as our program with Synchrony Financial;

•compliance with our and our subsidiaries' obligations under the Senior Notes and the ABL Facility (each as defined below);

•unrealized gains and losses from designated cash flow hedges;

•the impact of losses due to indemnification obligations;

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

•our Power Plan 2023 strategy and our ability to execute against it;

•our omni-channel capabilities;

•our Gap Home venture with Walmart.com and other existing and potential future partnerships;

•our integrated loyalty program across the U.S. and Puerto Rico;

•the expected timing, cost, and scope of the strategic review of our operating model in Europe;

•our arrangements with franchise partners to operate stores in Europe;

•the launch of the Athleta brand in Canada;

•the impact of the divestitures of our Janie and Jack and Intermix brands;

•the impact of our expected lease buyout amounts;

•our ability to reach agreements with our landlords regarding suspended rent payments for our temporarily closed stores;

•the impact of COVID-related store closures and supply chain challenges;

•the impact of increased port congestion and COVID-related factory closures;

•our plans to rationalize the Gap and Banana Republic brands in North America, including the targeted closures of North American Gap and Banana Republic stores together with the number and timing thereof and costs associated therewith;

•our plans to invest in store growth for Old Navy and Athleta;

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

•investing 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;

•reducing our fixed cost structure to fuel demand generation investments;

•leveraging our scale to navigate constraints in supply chain;

•managing inventory to support a healthy merchandise margin;

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

•continuing to integrate social and environmental sustainability and inclusivity into business practices;

•our investments in demand generation and the benefits associated therewith;

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

•the ability of our cash flows from our operations, current cash balances, the Senior Notes and the ABL Facility to support our business operations;

•the impact of seasonality and COVID-19 recovery on our operations;

•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 1 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.

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 environment and risks associated with the COVID-19 pandemic;

•the risk that economic conditions worsen beyond what is currently estimated by management;

•the risk that our inability to mitigate the impact of global supply chain disruptions on our business and operations and maintain inventory commensurate with customer demand may adversely affect our results of operations;

•the risk that we or our franchisees will be unsuccessful in gauging apparel trends and changing consumer preferences;

•the risk that failure to maintain, enhance and protect our brand image could have an adverse effect on our results of operations;

•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, loyalty, supply chain and omni-channel shopping initiatives may not deliver the results we anticipate;

•the risk that the failure to manage key executive succession and retention and to continue to attract qualified personnel could have an adverse impact on our results of operations;

•the risk that if we are unable to manage our inventory effectively, our gross margins will be adversely affected;

•the risks to our business, including our costs and 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 that we are subject to data or other security breaches that may result in increased costs, violations of law, significant legal and financial exposure, and a loss of confidence in our security measures, which could have an adverse effect on our results of operations and our reputation;

•the risk that a failure of, or updates or changes to, our information technology systems may disrupt our operations;

•the risks to our efforts to expand internationally, including our ability to operate in regions where we have less experience;

•the risk that our arrangements with franchise partners to operate stores in Europe will not be successful in growing our brands and amplifying our reach;

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

•the risk that our franchisees’ operation of franchise stores is not directly within our control and could impair the value of our brands;

•the risk that trade matters could increase the cost or reduce the supply of apparel available to us and adversely affect our business, financial condition, and results of operations;

•the risk that foreign currency exchange rate fluctuations could adversely impact our financial results;

•the risk that comparable sales and margins will experience fluctuations;

•the risk that natural disasters, public health crises (similar to and including the ongoing COVID-19 pandemic), political crises, negative global climate patterns, or other catastrophic events could adversely affect our operations and financial results, or those of our franchisees or vendors;

•the risk that changes in global economic conditions or consumer spending patterns could adversely impact our results of operations;

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

•the risk that changes in the regulatory or administrative landscape could adversely affect our financial condition and results of operations;

•the risk that reductions in income and cash flow from our credit card arrangement related to our private label and co-branded credit cards could adversely affect our operating results and cash flows;

•the risk that changes in our credit profile or deterioration in market conditions may limit our access to the capital markets and adversely impact our financial position or our business initiatives;

•the risk that we and our subsidiaries may be unable to meet our obligations under the Senior Notes and ABL Facility;

•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.

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 30, 2021 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 24, 2021. 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 30, 2021.

THE GAP, INC.

TABLE OF CONTENTS


		Page
	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets as of October 30, 2021, January 30, 2021, and October 31, 2020	1

	Condensed Consolidated Statements of Operations for the Thirteen Weeks and Thirty-Nine Weeks Ended October 30, 2021 and October 31, 2020	2

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Thirteen Weeks and Thirty-Nine Weeks Ended October 30, 2021 and October 31, 2020	3

	Condensed Consolidated Statements of Stockholders' Equity for the Thirteen Weeks and Thirty-Nine Weeks Ended October 30, 2021 and October 31, 2020	4

	Condensed Consolidated Statements of Cash Flows for the Thirty-Nine Weeks Ended October 30, 2021 and October 31, 2020	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	25

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	26

Item 1A.	Risk Factors	26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 6.	Exhibits	27

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

THE GAP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


($ and shares in millions except par value)	October 30, 2021		January 30, 2021		October 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	801	$	1,988	$	2,471
Short-term investments	275		410		178
Merchandise inventory	2,721		2,451		2,747
Other current assets	1,410		1,159		966
Total current assets	5,207		6,008		6,362
Property and equipment, net of accumulated depreciation of $5,486, $5,608 and $5,891	2,924		2,841		2,846
Operating lease assets	3,788		4,217		4,460
Other long-term assets	861		703		705
Total assets	$	12,780	$	13,769	$	14,373
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:

Accounts payable	$	1,630	$	1,743	$	2,284
Accrued expenses and other current liabilities	1,414		1,276		1,283
Current portion of operating lease liabilities	746		831		823
Income taxes payable	33		34		41
Total current liabilities	3,823		3,884		4,431
Long-term liabilities:
Long-term debt	1,484		2,216		2,214
Long-term operating lease liabilities	4,163		4,617		4,899
Other long-term liabilities	523		438		458
Total long-term liabilities	6,170		7,271		7,571
Commitments and contingencies (see Note 9)
Stockholders’ equity:
Common stock $0.05 par value
Authorized 2,300 shares for all periods presented; Issued and Outstanding 374 shares for all periods presented	19		19		19
Additional paid-in capital	71		85		60
Retained earnings	2,681		2,501		2,268
Accumulated other comprehensive income	16		9		24
Total stockholders’ equity	2,787		2,614		2,371
Total liabilities and stockholders’ equity	$	12,780	$	13,769	$	14,373

See Accompanying Notes to Condensed Consolidated Financial Statements

THE GAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	13 Weeks Ended				39 Weeks Ended
($ and shares in millions except per share amounts)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Net sales	$	3,943	$	3,994	$	12,145	$	9,376
Cost of goods sold and occupancy expenses	2,282		2,374		7,031		6,339
Gross profit	1,661		1,620		5,114		3,037
Operating expenses	1,508		1,445		4,312		4,033
Operating income (loss)	153		175		802		(996)
Loss on extinguishment of debt	325		—		325		58
Interest expense	44		55		149		132
Interest income	(1)		(1)		(3)		(7)
Income (loss) before income taxes	(215)		121		331		(1,179)
Income taxes	(63)		26		59		(280)
Net income (loss)	$	(152)	$	95	$	272	$	(899)
Weighted-average number of shares - basic	376		374		377		373
Weighted-average number of shares - diluted	376		380		385		373
Earnings (loss) per share - basic	$	(0.40)	$	0.25	$	0.72	$	(2.41)
Earnings (loss) per share - diluted	$	(0.40)	$	0.25	$	0.71	$	(2.41)

See Accompanying Notes to Condensed Consolidated Financial Statements

THE GAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	13 Weeks Ended				39 Weeks Ended
($ in millions)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Net income (loss)	$	(152)	$	95	$	272	$	(899)
Other comprehensive income (loss), net of tax
Foreign currency translation	4		5		2		(14)
Change in fair value of derivative financial instruments, net of tax of $—, $—, $—, and $1	1		(2)		(6)		9
Reclassification adjustment for losses (gains) on derivative financial instruments, net of (tax) tax benefit of $2, $(1), $3, and $(2)	3		(1)		11		(11)
Other comprehensive income (loss), net of tax	8		2		7		(16)
Comprehensive income (loss)	$	(144)	$	97	$	279	$	(915)

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 July 31, 2021	376	$	19	$	114	$	2,879	$	8	$	3,020
Net loss for the thirteen weeks ended October 30, 2021						(152)				(152)
Other comprehensive income, 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 August 1, 2020	374	$	19	$	39	$	2,173	$	22	$	2,253

Net income for the thirteen weeks ended October 31, 2020						95				95
Other comprehensive income (loss), net of tax
Foreign currency translation								5		5
Change in fair value of derivative financial instruments								(2)		(2)
Amounts reclassified from accumulated other comprehensive income								(1)		(1)

Issuance of common stock related to stock options and employee stock purchase plans	—	—		4						4
Issuance of common stock and withholding tax payments related to vesting of stock units	—	—		—						—
Share-based compensation, net of forfeitures				17						17

Balance as of October 31, 2020	374	$	19	$	60	$	2,268	$	24	$	2,371

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 30, 2021	374	$	19	$	85	$	2,501	$	9	$	2,614
Net income for the thirty-nine 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

Balance as of February 1, 2020	371	$	19	$	—	$	3,257	$	40	$	3,316

Net loss for the thirty-nine weeks ended October 31, 2020						(899)				(899)
Other comprehensive income (loss), net of tax
Foreign currency translation								(14)		(14)
Change in fair value of derivative financial instruments								9		9
Amounts reclassified from accumulated other comprehensive income								(11)		(11)

Issuance of common stock related to stock options and employee stock purchase plans	1	—		16						16
Issuance of common stock and withholding tax payments related to vesting of stock units	2	—		(8)						(8)
Share-based compensation, net of forfeitures				52						52
Common stock dividends ($0.2425 per share) (1)						(90)				(90)
Balance as of October 31, 2020	374	$	19	$	60	$	2,268	$	24	$	2,371

__________

(1) On March 4, 2020, the Company declared a first quarter fiscal year 2020 dividend of $0.2425 per share. The dividend payable amount was estimated based upon the shareholders of record as of October 31, 2020. The dividend was paid on April 28, 2021 to shareholders of record at the close of business on April 7, 2021.

See Accompanying Notes to Condensed Consolidated Financial Statements

THE GAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	39 Weeks Ended
($ in millions)	October 30, 2021		October 31, 2020
Cash flows from operating activities:
Net income (loss)	$	272	$	(899)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	372		381

Share-based compensation	97		55
Impairment of operating lease assets	6		361
Impairment of store assets	1		127

Loss on extinguishment of debt	325		58
Amortization of debt issuance costs	11		8
Non-cash and other items	21		—
Loss on divestiture activity	59		—

Deferred income taxes	(28)		(74)
Changes in operating assets and liabilities:
Merchandise inventory	(288)		(590)
Other current assets and other long-term assets	(168)		37

Accounts payable	(119)		1,120
Accrued expenses and other current liabilities	239		98
Income taxes payable, net of receivables and other tax-related items	(94)		(206)
Other long-term liabilities	49		54
Operating lease assets and liabilities, net	(73)		(131)
Net cash provided by operating activities	682		399
Cash flows from investing activities:
Purchases of property and equipment	(486)		(288)




Purchases of short-term investments	(634)		(237)
Proceeds from sales and maturities of short-term investments	768		348
Payments for acquisition activity, net of cash acquired	(135)		—
Net cash paid for divestiture activity	(21)		—
Other	—		2
Net cash used for investing activities	(508)		(175)
Cash flows from financing activities:


Proceeds from revolving credit facility	—		500
Payments for revolving credit facility	—		(500)
Proceeds from issuance of long-term debt	1,500		2,250
Payments to extinguish debt	(2,546)		(1,307)
Payments for debt issuance costs	(16)		(61)
Proceeds from issuances under share-based compensation plans	48		16
Withholding tax payments related to vesting of stock units	(34)		(8)
Repurchases of common stock	(128)		—

Cash dividends paid	(182)		—

Net cash provided by (used for) financing activities	(1,358)		890
Effect of foreign exchange rate fluctuations on cash, cash equivalents, and restricted cash	(3)		4
Net increase (decrease) in cash, cash equivalents, and restricted cash	(1,187)		1,118
Cash, cash equivalents, and restricted cash at beginning of period	2,016		1,381
Cash, cash equivalents, and restricted cash at end of period	$	829	$	2,499



Supplemental disclosure of cash flow information:
Cash paid for interest during the period	$	178	$	41
Cash paid for income taxes during the period, net of refunds	$	181	$	8

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), stockholders' equity, and cash flows as of October 30, 2021 and October 31, 2020 and for all periods presented. The Condensed Consolidated Balance Sheet as of January 30, 2021 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 30, 2021.

The results of operations for the thirteen and thirty-nine weeks ended October 30, 2021 are not necessarily indicative of the operating results that may be expected for the 52-week period ending January 29, 2022.

COVID-19

In March 2020, the World Health Organization declared the coronavirus disease ("COVID-19") a global pandemic and recommended containment and mitigation measures worldwide. Fiscal 2020 results were significantly impacted as we temporarily closed a large number of our stores globally.

During the third quarter of fiscal 2021, global supply chain disruption caused significant product delays resulting in brands being unable to fully meet customer demand. Increased port congestion and COVID-related factory closures, most notably in Vietnam where we source a significant amount of product, impacted our results of operations for the thirteen and thirty-nine weeks ended October 30, 2021. We will continue to consider the impact of the supply chain disruptions and COVID-19 on the assumptions and estimates used when preparing these quarterly financial statements. If the 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 30, 2021, 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)	October 30, 2021		January 30, 2021		October 31, 2020
Cash and cash equivalents, per Condensed Consolidated Balance Sheets	$	801	$	1,988	$	2,471
Restricted cash included in other current assets	3		4		4
Restricted cash included in other long-term assets	25		24		24
Total cash, cash equivalents, and restricted cash, per Condensed Consolidated Statements of Cash Flows	$	829	$	2,016	$	2,499

Accounting Pronouncements Recently Adopted

In April 2020, the Financial Accounting Standards Board ("FASB") provided guidance on accounting for rent concessions resulting from the COVID-19 pandemic. We considered the FASB's guidance regarding lease modifications as a result of the effects of COVID-19 and elected to apply the temporary practical expedient to account for lease changes as variable rent unless an amendment results in a substantial change in the Company's lease obligations. The impact of applying the temporary practical expedient was not material to our Condensed Consolidated Financial Statements for the thirteen and thirty-nine weeks ended October 30, 2021 or October 31, 2020.

ASU No. 2019-12, Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued accounting standards update ("ASU") No. 2019-12, Simplifying the Accounting for Income Taxes. The ASU is intended to enhance and simplify aspects of the income tax accounting guidance in Accounting Standards Codification Topic 740 as part of the FASB's simplification initiative. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2020 with early adoption permitted. The Company adopted this ASU on January 31, 2021 on a prospective basis and the adoption of this standard did not have a material impact on our Condensed Consolidated Financial Statements.

Accounting Pronouncements Not Yet Adopted

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.

Note 2. Revenue

Disaggregation of Net Sales

We disaggregate our net sales between stores and online 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 are as follows:


	13 Weeks Ended				39 Weeks Ended
($ in millions)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020

Store sales (1)	$	2,456	$	2,379	$	7,668	$	5,129
Online sales (2)	1,487		1,615		4,477		4,247
Total net sales	$	3,943	$	3,994	$	12,145	$	9,376

__________

(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.

Net sales disaggregated by brand and region are as follows:


($ in millions)	Old Navy Global		Gap Global		Banana Republic Global		Athleta (2)		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 (2)		Other (3)		Total
13 Weeks Ended October 31, 2020
U.S. (1)	$	2,034	$	611	$	323	$	292	$	78	$	3,338
Canada	193		86		39		—		3		321
Europe	—		115		3		—		—		118
Asia	1		169		18		—		—		188
Other regions	14		12		3		—		—		29
Total	$	2,242	$	993	$	386	$	292	$	81	$	3,994


($ in millions)	Old Navy Global		Gap Global		Banana Republic Global		Athleta (2)		Other (3)		Total
39 Weeks Ended October 30, 2021
U.S. (1)	$	6,175	$	1,847	$	1,171	$	1,004	$	100	$	10,297
Canada	535		249		124		3		—		911
Europe	1		274		6		1		—		282
Asia	1		439		49		—		—		489
Other regions	63		90		13		—		—		166
Total	$	6,775	$	2,899	$	1,363	$	1,008	$	100	$	12,145


($ in millions)	Old Navy Global		Gap Global		Banana Republic Global		Athleta (2)		Other (3)		Total
39 Weeks Ended October 31, 2020
U.S. (1)	$	4,709	$	1,395	$	804	$	764	$	190	$	7,862
Canada	415		183		90		—		3		691
Europe	—		239		8		—		—		247
Asia	4		435		44		—		—		483
Other regions	33		48		12		—		—		93
Total	$	5,161	$	2,300	$	958	$	764	$	193	$	9,376

__________

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

(2)Previously, net sales for the Athleta brand were grouped within the "Other" column. Beginning in fiscal 2021, we have made a change for all periods presented to break out Athleta net sales into its own column.

(3)The "Other" column primarily consists of net sales for the Intermix and Janie and Jack brands, as well as sales from the business-to-business program. The divestiture of Janie and Jack was completed on April 8, 2021. The divestiture of Intermix was completed on May 21, 2021. Net sales for the thirteen and thirty-nine weeks ended October 31, 2020 also included net sales for the Hill City brand, which was closed in January 2021.

Deferred Revenue

We defer revenue when cash payments are received in advance of performance for unsatisfied obligations related to our gift cards, credit vouchers, licensing agreements, outstanding loyalty points, and reimbursements of loyalty program discounts associated with our credit card agreement. For the thirteen 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 thirty-nine 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 deferred revenue balance as of October 30, 2021 and the revenue recognition during the thirteen weeks ended October 30, 2021 is primarily due to the issuance of additional loyalty points with the launch of our new integrated loyalty program across the U.S. and Puerto Rico.

We expect that the majority of our revenue deferrals as of the quarter ended October 30, 2021, will be recognized as revenue in the next twelve months as our performance obligations are satisfied.

For the thirteen weeks ended October 31, 2020, the opening balance of deferred revenue for these obligations was $189 million, of which $68 million was recognized as revenue during the period. For the thirty-nine weeks ended October 31, 2020, the opening balance of deferred revenue for these obligations was $226 million, of which $140 million was recognized as revenue during the period. The closing balance of deferred revenue for these obligations was $191 million as of October 31, 2020.

During the thirty-nine weeks ended October 30, 2021, the Company entered into agreements with Barclays and Mastercard relating to a new long-term credit card program that is expected to begin in the second quarter of fiscal 2022. Accordingly, our private label credit card program with Synchrony Financial will be discontinued upon the launch of the new long-term credit card program. During the thirty-nine weeks ended October 30, 2021, the Company received $50 million relating to the new agreements, which was primarily recorded in other long-term liabilities on our Condensed Consolidated Balance Sheet as of October 30, 2021.

Note 3. Debt and Credit Facilities

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”) at par in a private placement to qualified institutional buyers. The Senior Notes are guaranteed on a senior unsecured basis, jointly and severally, by each of the Company’s existing wholly owned domestic subsidiaries that is a borrower or guarantor under the Company’s senior secured asset-based revolving credit agreement. We recorded $16 million of debt issuance costs related to the issuance of the Senior Notes within long-term debt on the Condensed Consolidated Balance Sheet, which will be amortized through interest expense over the life of the instrument. The Company used the net proceeds from the offering of the Senior Notes, together with cash on hand, to complete tender offers and purchase an aggregate principal amount of $1.9 billion of the Company’s senior secured notes due 2023 (“2023 Notes"), 2025 (“2025 Notes"), and 2027 (“2027 Notes") (the 2023 Notes, the 2025 Notes, and the 2027 Notes collectively, the “Secured Notes”). On October 27, 2021, the Company redeemed the remaining outstanding Secured Notes that were not tendered in the tender offers and paid the related make-whole premiums. Our obligations under the Secured Notes were discharged following their redemption.

In conjunction with these transactions, we incurred a loss on extinguishment of debt of $325 million, which was recorded in the Condensed Consolidated Statement of Operations and primarily consisted of tender premiums of $253 million, make-whole premiums of $40 million, and unamortized debt issuance costs relating to the Secured Notes of $28 million.

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


($ in millions)	October 30, 2021		January 30, 2021		October 31, 2020

2023 Notes	$	—	$	500	$	500
2025 Notes	—		750		750
2027 Notes	—		1,000		1,000
2029 Notes	750		—		—
2031 Notes	750		—		—
Less: Unamortized debt issuance costs	(16)		(34)		(36)
Total long-term debt	$	1,484	$	2,216	$	2,214

The scheduled maturity of the Senior Notes is as follows:

Scheduled Maturity ($ in millions)

Principal

Interest Rate

Interest Payments

Senior Notes

October 1, 2029 (1)

750

3.625

Semi-Annual

October 1, 2031 (2)

750