Executive Summary

• Gap reported 3Q16 revenues of $3.80 billion, down 1.5% year over year and slightly below the consensus estimate of $3.86 billion. Reported adjusted EPS was $0.60, in line with the consensus estimate but down 5% from the year-ago period.
• The overall merchandise margin improved by 220 basis points year over year, driven by Old Navy.
• The company expects full-year adjusted EPS of $1.87–$1.92, consistent with the prior guidance. The company expects total inventory to be down in the low single digits year over year for 2016.