GAP INC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended August 3, 2024

or

For the transition period from to

Commission File Number 1-7562

THEGAP, INC.

(Exact name of registrant as specified in its charter)

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:

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.

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 August 23, 2024 was 376,316,912.

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 credit card program agreement;

•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;

•meeting the closing conditions to transfer the Gap Taiwan operations;

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

•maintaining and building upon financial and operational rigor, through an optimized cost structure and disciplined inventory management;

•reinvigorating our brands to drive relevance and an engaging omni-channel experience;

•strengthening and evolving our operating platform with a digital-first mindset to drive scale and efficiency;

•energizing our culture by attracting and retaining strong talent;

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

•the expected impact of the Pillar Two rules on our fiscal 2024 effective tax rate and ongoing monitoring of related legislative action;

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

•the impact of the seasonality of our operations on certain cash inflows and outflows;

•the ability of our cash flows from our operations, current balances of cash, cash equivalents, and short-term investments, 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 Part 1, Item 2 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 risks, any of which could have an adverse effect on our business, financial condition, results of operations, or reputation:

•the overall global economic and geopolitical environment, including the ongoing Russia-Ukraine and Israel-Hamas conflicts and upcoming elections in the United States, and impacts on consumer spending patterns;

•social and political unrest in our sourcing countries, including Bangladesh, and disruptions to global trade and shipping capacity, including in the Red Sea;

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

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

•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 our inventory effectively and the resulting impact on our gross margins and sales;

•the risk of loss or theft of assets, including inventory shortage;

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

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

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

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

•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;

•evolving regulations and expectations with respect to ESG matters, including climate reporting;

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

•the risk that changes in our business strategy or restructuring our operations may not generate the intended benefits or projected cost savings;

•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;

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

•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;

•the risk of foreign currency exchange rate fluctuations;

•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;

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

•natural disasters, public health crises (such as pandemics and epidemics), political crises (such as the ongoing Russia-Ukraine and Israel-Hamas conflicts), negative global climate patterns, or other catastrophic events;

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

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

•the risk that our estimates and assumptions used when preparing the Condensed Consolidated Financial Statements are inaccurate or may change;

•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, or that we may be required to pay amounts in excess of established tax liabilities;

•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; and

•the risk that the adoption of new accounting pronouncements will impact future 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 February 3, 2024 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 August 30, 2024. 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 February 3, 2024.

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