Gap : Investor Meeting - Presentation

Gap Inc. Investor Meeting

O C T O B E R 2 2 , 2 0 2 0

Gap Inc. Investor Meeting 2020

F O R W A R D - L O O K I N G S T AT E M E N T S

This presentation 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 statements relating to future financial performance or potential future plans or strategies of the company and the benefits and timing of such financial performance, plans and strategies. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause the company's actual results to differ materially from those in the forward-looking statements. These factors include, without limitation: the overall global economic environment and risks associated with the COVID-19 pandemic; the risk that the company will be unsuccessful in gauging apparel trends and changing consumer preferences; the highly competitive nature of the company's business in the United States and internationally; the risk of changes in global economic conditions or consumer spending patterns; engaging in or seeking to engage in strategic transactions that are subject to various risks and uncertainties; the risk of failure to maintain, enhance and protect the company's brand image; the risk of failure to manage key executive succession and retention and to continue to attract qualified personnel; the risk that the company's investments may not deliver the results it anticipates; the risk if the company is unable to manage its inventory effectively; the risks associated with global sourcing and manufacturing; the risk that the company is subject to data or other security breaches or of a failure of the company's information technology systems; the risks to the company's efforts to expand internationally; the risk that the company will be unsuccessful in identifying, negotiating, and securing new store locations and renewing, modifying, or terminating leases for existing store locations effectively; the risks to the company's reputation or operations associated with importing merchandise from foreign countries; the risk that the company's franchisees' operation of franchise stores is not directly within the company's control; the risk that trade matters could increase the cost or reduce the supply of apparel available to the company; the risk of foreign currency exchange rate fluctuations; the risk that comparable sales and margins will experience fluctuations; the risk of changes in the company's credit profile; the risk of changes in the regulatory or administrative landscape; the risk of natural disasters, public health crises (similar to and including the ongoing COVID-19 pandemic), political crises, negative global climate patterns, or other catastrophic events, or those of the company's franchisees or vendors; the risk of reductions in income and cash flow from the company's credit card arrangement related to the company's private label and co-branded credit cards; the risk that the adoption of new accounting pronouncements will impact future results; the risk that the company does not repurchase some or all of the shares its anticipates purchasing pursuant to its repurchase program; and the risk that the company will not be successful in defending various proceedings, lawsuits, disputes, and claims. Additional information regarding factors that could cause results to differ can be found in The Gap, Inc.'s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 9, 2020, as well as the company's subsequent filings with the Securities and Exchange Commission. The company assumes no obligation to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

2

Sonia Syngal

C H I E F E X E C U T I V E O F F I C E R

We grow purpose-led,billion-dollar brands that shape people's way of life.

We have omni-strength in North America and are partnering to amplify our reach.

4

We Grow Purpose-Led,Billion-Dollar Lifestyle Brands

T H E P O W E R O F O U R B R A N D S

	Democracy	Modern American	Work for a	Power of She
	of Style	Optimism	Better Republic
FY19 Net Sales	$8B	$5B	$2B	$1B
FY19 E-Commerce	23%	25%	24%	44%
Penetration(1)
Known Active Customers(2)	45M	23M	11M	3M

(1)	E-commerce penetration is online net sales as a percentage of total net sales	5
(2)	R12 active global customer base as of February 2020

We have significant opportunity to leverage our strengths to gain share

1Economic Outlook

2Retail Disruption

3Shift in Discretionary Spend

6

Delivering What Matters Most

to Customers in a Disrupted Market

HOW CUSTOMERS ARE DRESSING		HOW CUSTOMERS ARE SHOPPING		HOW CUSTOMERS ARE FEELING
Shift to Hyper Casualization		Seamless Omni Service		Importance of Purpose & Values

8%	>60%	50%
CAGR growth in Active + Fleece	of consumers expect sustained	Growth among big, trusted brands
between 2017-2019(1)	increased usage of omni services (2)	during the pandemic (2)

(1)	The NPD Group / Consumer Tracking Service / U.S. Dollar Share, 12 Months ending January 2020	7
(2)	Source: McKinsey & Company COVID-19 US Consumer Pulse Survey 6/15-6/21/2020. 2,006 consumers surveyed, sampled and weighted to match the US general population 18+ years

Broad Customer Appeal Gives Us Room to Grow

in the $194 Billion US Apparel Market(1)

T H E P O W E R O F O U R P O R T F O L I O

OTHER 2%

ATHLETA 6%

BANANA REPUBLIC 15%

OLD NAVY 49%	$16B
	Multi-Branded
	Largest Apparel
	Retail Company in
	America(2)

GAP 28%

Customer-Centric

~170M

known customers globally(3)

Inclusive, by Design

Target and halo customers segments represent

~80%

of the U.S. apparel market

Note: Percentages in chart are based on FY19 net sales
(1)	Source: The NPD Group / Consumer Tracking Service / U.S. Dollar Share, 12 Months Ending July 2020
(2)	Source: FactSet. Based on FY 2019 net sales for public companies headquartered in North America within the apparel and accessories retailer category	8
(3)	As of February 2020

Leading Omni Platform and Scaled Operations Allow Us to Win in a Changing Marketplace

T H E P O W E R O F O U R P L A T F O R M

OUTLET CENTER 1%

STREET 8%

Scaled, Advantaged Fulfillment + Supply Chain

			• Substantial unit volumes deliver product and
			logistics cost advantage
	Leading		• Use of automation and technology for
		efficiency, speed and flexibility
	Omni Platform		• Engineering expertise to optimize operation
STRIP 35%(3)
Gap Inc. is ranked #2 in	MALL 32%
	U.S. apparel	1B+ Units
	e-commerce sales.(1)
	Supported by ~3000
	global store fleet that		produced annually(2)
	offers omni capabilities

		ONLINE 24%
Note: Percentages in chart are based on FY19 net sales
(1)	Source: The NPD Group / Consumer Tracking Service / U.S. Dollar Share, all apparel, excluding accessories, 12 Months Ending December 2019. Based on an aggregated parent company view of brand level NPD data for Gap
Inc. (Old Navy, Gap, Banana Republic and Athleta) and all other apparel brands	9
(2)	As of September 2020

(3) Includes both Strip and Lifestyle Centers

Gap Inc. has the Power to Deliver

O U R S T R A T E G Y

BRAND POWER		ENDURING		OMNI-EXPERIENCE		PRODUCT LOVE		LEAN & ADVANTAGED		TEAM & VALUES
	CUSTOMER
				OPERATIONS
		RELATIONSHIPS

10

Gap Inc. has the Power to Deliver

O U R S T R A T E G Y

• Grow Old Navy to $10B
• Transform Gap
• Double Athleta
• Reposition Banana Republic

BRAND POWER		ENDURING		OMNI-		PRODUCT LOVE		LEAN &		TEAM & VALUES
	CUSTOMER				ADVANTAGED
		EXPERIENCE
		RELATIONSHIPS					OPERATIONS

11

Gap Inc. has the Power to Deliver

O U R S T R A T E G Y

• Develop best-in-class loyalty program
• Scale personalization, serving content and experiences across touchpoints

OMNI-

LEAN &

BRAND POWER ENDURING CUSTOMER RELATIONSHIPSPRODUCT LOVE ADVANTAGED TEAM & VALUES EXPERIENCE

OPERATIONS

12

Gap Inc. has the Power to Deliver

O U R S T R A T E G Y

• Frictionless, unique, and mobile-enabled experience
• Double digital penetration to ~50%

BRAND POWER		ENDURING		OMNI-EXPERIENCE		PRODUCT LOVE		LEAN &		TEAM & VALUES
	CUSTOMER				ADVANTAGED
		RELATIONSHIPS						OPERATIONS

13

Gap Inc. has the Power to Deliver

O U R S T R A T E G Y

• Grow share in right-to-win categories
• Expand into new categories
  (e.g. Plus size, Gap Teen, Intimates, Personal Care)

BRAND POWER		ENDURING		OMNI-		PRODUCT LOVE		LEAN &		TEAM & VALUES
	CUSTOMER				ADVANTAGED
		EXPERIENCE
		RELATIONSHIPS					OPERATIONS

14

Gap Inc. has the Power to Deliver

ENDURING

O U R S T R A T E G Y

• Cost Transformation through re-engineered capabilities, real estate restructure and scaled strategic partnerships

OMNI-

BRAND POWER CUSTOMERPRODUCT LOVE LEAN & ADVANTAGED OPERATIONS TEAM & VALUES EXPERIENCE

RELATIONSHIPS

15

Gap Inc. has the Power to Deliver

O U R S T R A T E G Y

• Performance culture anchored in creative excellence

• Industry-leading impact across People, Planet and Community

BRAND POWER		ENDURING		OMNI-		PRODUCT LOVE		LEAN &		TEAM & VALUES
	CUSTOMER				ADVANTAGED
		EXPERIENCE
		RELATIONSHIPS					OPERATIONS

16

Power Plan 2023

Power of our Brands

Grow four purpose-driven,billion-dollar lifestyle brands

Power of our Portfolio

Extend our customer reach across every age, body and occasion through our collective power

Power of our Platform

Leverage our omni capabilities and scaled operations and extend our engineered approach to cost and growth

17

Today's Agenda

Power of our Brands

Nancy Green - Head of Old Navy

Mark Breitbard - Head of Gap / Representing Banana Republic Mary Beth Laughton - Head of Athleta

- BREAK -

Power of our Platform

John Strain - Head of Digital + Technology

Shawn Curran - Head of Operations

Creating Shareholder Value

Katrina O'Connell - Chief Financial Officer

Bobby Martin - Executive Chairman

- BREAK -

Q&A

18

Nancy Green

P R E S I D E N T & C E O , O L D N A V Y

We believe in the democracy of style.

…and we aspire to be

America's Most Loved Brand.

20

Value

Accessible pricing

Uniquely advantaged

at the intersection of Value, Curated, and Fast sectors

Curated	Fast
Big fashion ideas with an	Increasingly responsive
edited point of view	supply chain

21

Old Navy

by the Numbers

#2	45M
Apparel Brand Market Share,	Known Active
#6 Apparel Retailer in the US (1)	Customers(2)
4th	75%
Largest Apparel	Strip, Outlet and Lifestyle
E-Comm Site (3)	Locations; Highly Profitable
	Store Base

(1) Source: The NPD Group / Consumer Tracking Service / U.S. Dollar Share, 12 Months Ending July 2020

(2) R12 active global customer base as of February 202022

(3) Source: The NPD Group / Consumer Tracking Service / U.S. Dollar Share, 12 Months Ending December 2019

$8B brand today with

a clear path to reach $10B by 2023

+5.7% $10

Net Sales CAGR

+5.6%

+2.6%

$8.0 (1)

$6.3

$B

$6.8

• Six straight years of sales growth with acceleration since 2016
• Sustain CAGR
  2019-2023 to reach $10B

2013 2016 2019 2023E

(1) Net sales beginning in fiscal 2018 and beyond reflect the adoption of the new revenue recognition standard, which resulted in an increase of $280 million in net sales in the year of adoption (FY'18)

23

Delivering the Democracy of Style

Win With Product

Acquire and Engage Customers

Enhance Omni-channel Experiences +

Double E-commerce

New Store Growth

24

We are the #2 Apparel Brand and #6 Apparel Retailer

AT 2.9% MARKET SHARE WE HAVE SIGNIFICANT SHARE OPPORTUNITY

#2		#6
APPAREL BRAND		APPAREL RETAILER
MARKET SHARE IN THE U.S.(1)		MARKET SHARE IN THE U.S.(1)

(1) Source: The NPD Group / Consumer Tracking Service / U.S. Dollar Share, 12 Months Ending July 2020

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Win with Product

Accelerate Active, Kids & Baby, and new category growth

MAINTAIN BRAND SHARE

~$70 Billion Addressable Market (1)

#1 #1 #1

Knit/Woven Tops

Pants

Shorts

(non-active)(non-active)(non-active)

#1 #2

Sweaters

Dresses + Skirts

DISTORT SHARE GROWTH

~$100 Billion Addressable Market (1)

#5 #2

Active

Kids + Baby

#3

Denim

GROW ADJACENT CATEGORIES

~$116 Billion Addressable Market (2)(3)

Plus

NEAR

TERM

Intimates Personal

and Loungewear

Care

LONG

TERM

(1) Source: The NPD Group / Consumer Tracking Service / U.S. Dollar Share, 12 Months Ending July 2020. Rankings based on U.S. market share by brand. Active also includes Fleece

(2) Source for Plus, Intimates & Loungewear addressable market: The NPD Group / Consumer Tracking Service / U.S. Dollar Share, 12 Months Ending June 202026

(3) Source for Personal Care addressable market: Statista; Revenue in the U.S. Beauty & Personal Care market amounts to $78B in 2020 as of October

Acquire and Engage Customers Through Loyalty

Global Known Active Customer File

in millions

Value Pyramid

(Yearly Spend/Customer)

45

42

36

28

and Engagement

+Card

Loyalty	+Multi-channel

• Emailable/Multi-

Tender Loyalty

5.0X

Yearly

3.2X

Spend

(2) 1.2X

FY End

2016

2017

2018

2019

Single-Channel customer

1.0X

Known

Match Rate(1)

56% 71% 77% 80%

(1)	Match rate defined as net sales of known customers over total net sales	27
(2)	Old Navy U.S. - Rolling 12 months until August 2020. Each level of the pyramid includes the types of engagement included in the lower levels

Enhance Omni-channel Experiences + Double E-commerce

Leverage scale of stores, e-commerce, and customer file to create differentiated omni-channel experiences

Digital Capabilities

Create a faster, easier, more connected digital experience

Mobile app connects all aspects of omni customer experience; Mobile- first site improvements

Convenience		Personalized Experiences
Increase convenience through
		Personalize experience across
omni-channel services			digital + physical touchpoints
Stores as omni hubs; Easy returns		Personalized experience at scale
and checkout; Enhanced Curbside		through enhanced capabilities in
and BOPIS; Ship-from-Store		product and marketing content,
			loyalty, & fulfillment

28

New Store Growth

Focused On Underserved Small Markets and Omni Capabilities

• ~1,200 stores with further long- term potential
• Acquire highly valuable omni customers through new stores in Small Markets (pop <200K)
• Target 30-40 new stores/yr. with minimal cannibalization and incrementality to online

29

Old Navy:

Powering the Future

$10B by 2023 via 6% Net Sales CAGR

Growth through Online, New Stores and

Key Product Categories

Loyalty and Omni Capabilities to Drive

Customer Lifetime Value

30

Mark Breitbard

P R E S I D E N T & C E O , G A P B R A N D

American Brand with Strong Customer Awareness

$4.6B	23M
FY19 Net Sales	Known Active
	Customers(1)

80%	42
(2)Countries(3)
Brand Awareness

(1) R12 active global customer base as of February 2020

(2) Source: Gap Brand Equity Study by Ipsos, Gap Specialty, Women's, Spring 202032

(3) As of Q2 2020

Modern

American

Optimism

We are champions of American style that bridges the gaps between individuals, generations and cultures.

33

Transforming our Business Model to Improve Profitability

• Restructure our Fleet
• Shift to Digital
• Grow Market Share: Right Product, Right Time
• Partner to Amplify

34

A Profitable Fleet for the Future

• Complete the closure of ~175 North America Stores by end of 2021
  Reduce North America Store Fleet by ~35% by end of 2023 (~220 stores)
• ~80% of fleet in Off-Mall Locations by 2023
• Strategic review of Europe

STORE COUNT

2019 YE 2021E 2023E

200

100

-

Strip (1)

Mall

Outlet Center

Street

(1) Includes both Strip and Lifestyle Centers

35

Digitally Led

Continue to increase e-commerce penetration

GAP GLOBAL E-COMMERCE

PENETRATION %(1)~40%(2)

				~
25%		4
	0
23%				%

2018

2019

2020E

2023E

(1)	E-commerce penetration is online net sales as a percentage of total net sales	36
(2)	Impact from COVID-19 pandemic contributed to the e-commerce penetration in the first half of FY20

Grow Market Share:

Right Product, Right Time

Grow Share in Key Categories ~$100B Addressable Market (1)

#7 KIDS & BABY

#8 DENIM

#13 ACTIVE & FLEECE

Grow adjacent categories ~$15B addressable market (1)

TEEN (8-13 year old)

(1) Source: The NPD Group / Consumer Tracking Service / U.S. Dollar Share, 12 Months Ending July 2020. Rankings based on	37
U.S. market share by brand

Partner to Amplify

Licensing

Launch new categories

• 10 licensing agreements: babyGap Gear, GapHome beginning in second half of 2021

(1) Count includes shop in shops

	Franchise & Wholesale		Partnerships
Leverage Franchise for		Drive relevance and
international reach		attract new customers
•	400+ Stores in 35 Countries		• YZY GAP launch 2021
•	14 E-commerce platforms

Expand Wholesale

• 50+ US Military stores(1) opening in second half of 2021

38

Position Gap to Win

Profitable Fleet of the Future

Shift to Digital

Right Product, Right Time

Partner to Amplify

39

Mary Beth Laughton

P R E S I D E N T & C E O , A T H L E T A

Athleta is a purpose- driven brand with a powerful mission

Ignite a COMMUNITY of active, healthy, confident WOMEN AND GIRLS who EMPOWER each other to realize their limitless potential

The power of the collective, POWER OF SHE

42

We are Well-Positioned in an Attractive Category

Growth in U.S. Women's active apparel is outpacing total Women's apparel

by +14ppts(1)

Health & Wellness

Versatile products that support her full life, from working out to working from home

Female Empowerment

Only major active brand that is for women, by women

Sustainability

B-Corp certified with 70% of products made from sustainable materials

Inclusivity

Comprehensive product offering for all sizes and ages

(1) Source: The NPD Group / Consumer Tracking Service / U.S. Dollar Share, 12 Months Ending August 2020

43

$1B Brand Today with

a Clear Path to Reach $2B by 2023

BRAND		GROWING OMNI		UNDERPENETRATED REAL		SIGNIFICANT DIGITAL
AWARENESS		SHOPPERS		ESTATE FOOTPRINT		PRESENCE
53% among		Spend 3.5 times more	~200 highly	>50% penetration
U.S. Active Women(1)		than single-channel	profitable store fleet	and double-digit
		shoppers			growth

(1) Gap Inc. Brand Equity Tracker by Ipsos; May 2020; Active Woman defined as one who exercises at least once a week, has purchased activewear in past 12 months and in age range of 18-70

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Product is a Key Driver of our Growth

Hero Assortment Strategy

• Key Product Franchises expected to drive 70% of volume
• Drive customer loyalty
• Maintain reg price model

Exciting growth categories

• Masks
• Athleta Girl
• 1x - 3x Inclusive Sizing

45

Digital Ecosystem Centered Around the Customer

Seamless and personalized

journey across touchpoints

Browses	Shops
on Instagram	online

Clienteling	Downloads
app
in store

Key focus areas:

Customer Data & CRM

Omni Loyalty Program

Mobile App

Personalized	Shops
online again
follow-up email

46

Opportunity to Invest in New Touchpoints

Real Estate Footprint		Strategic Wholesale
	Form selective partnerships
Open approx. 100 stores in U.S.;
	to increase awareness and
20-30 per year
	customer acquisition

International Expansion		Distributed Commerce
Expand beyond current U.S. market		Explore social shopping partnerships

47

Significant potential for growth ahead

"Don't wait for the perfect time to go after your dreams. Dream big and be relentless in your pursuit."

A L L Y S O N F E L I X , T E A M A T H L E T A

M O S T D E C O R A T E D T R A C K & F I E L D A T H L E T E

Purpose-driven brand with permission to expand in multiple directions

Well-positioned to meet customer needs in the high-growth Active category

Reach $2B in net sales by 2023

Healthy regular priced business with relevant product

48

John Strain

C H I E F D I G I TA L & T E C H N O L O G Y O F F I C E R

We're leveraging the power of our platform to win in a changing marketplace.

• Scale: Ranked #2 in U.S. apparel e-commerce sales.(1)
• Passion: Strong brand recognition and love
• Platform: Strength of omni capabilities, technology at scale and loyalty program

(1) Source: The NPD Group / Consumer Tracking Service / U.S. Dollar Share, all apparel, excluding accessories, 12 Months Ending December 2019. Based on an aggregated parent company view of brand level NPD data	50
for Gap Inc. (Old Navy, Gap, Banana Republic and Athleta) and all other apparel brands

Our Customers Love Our Brands

1 4 % I N C R E A S E I N R E T A I L N E T P R O M O T E R S C O R E S Y o Y (1)

69		70
digital		retail
post-purchase(1)		post-purchase(1)

(1) Q2 2020 Gap Inc. NPS Results provided by Medallia - includes Old Navy, Athleta, Gap, and Banana Republic

51

Healthy Customer File, Well-Positioned for Growth

A great start …..

Customer Reach

~595M

customer touchpoints in Q2

T H E P O W E R O F T H E P O R T F O L I O

With growth opportunities in…

Loyalty PilotOmni

9.7M		+50% YoY
total multi tender		overall BOPIS
loyalty members as of Q2		volume increase in Q2 (3)

~170M		11M		30%
total customer file		Credit card		of multi-channel shoppers were
	members (2)		previously single channel
60M		MTL + card =		3.5M
	~50% of sales in
		newonline customers
active customers (1)		pilot markets		(165% growth YOY!) (3)

1. Includes NA Specialty + Factory/Outlet + Intl; R12 active customer base as of February 2020

(2)	Includes a portion of multi tender loyalty members that are also credit card members	52
(3)	Impact from COVID-19 pandemic contributed to growth in Q2 2020

Value Accelerators:

Multi-Brand and Multi-Tier Customers

Cross-Brand Customer		9X	Customer Loyalty
Value Equation		Value Tiering
			7X
									.0X
									5
		5X						.1X
								2
							.6X
	SALES			MULTI-			1
				SALES
GROWTH
NET				VISIT	NET
				+	GROWTH
			MULTI-	MULTI-
			CHANNEL
			VISIT	+
			+			MULTI-
			MULTI-				CREDIT
	ONE	MULTI-	MULTI-		NON-	TENDER	CREDIT
	& DONE	VISIT	CHANNEL	BRAND	LOYALTY	LOYALTY	CARD	CARD TIER
Note: Data for matched customers in US market for 12 months ending August 2020

53

Leveraging Data Science to

Target Product and Communication

T A R G E T + H A L O S E G M E N T S R E P R E S E N T ~ 8 0 % O F

T H E $ 1 9 4 B A D D R E S S A B L E M A R K E T ( 1 )

Example Customer Segments

12 2-3

Customer	Target
Segments
Segments
Per Brand

Customized Communications
Focused Product Development		Carpool		Active		Trend
Optimized Interactions		Parents		Achievers		Seekers

(1) Source: The NPD Group / Consumer Tracking Service / U.S. Dollar Share, 12 Months Ending July 2020

54

Personalization:

Creating Enduring Customer Relationships

CURRENT PERSONALIZATION COVERAGE

Current coverage is strong, sophistication and coordination is our next opportunity

74%	80%	80%
of website visits	of emails contain	of users experience
see personalized	personalized	personalized product
marketing content	marketing content	presentation
Ma rketing Content	Email Content	Product Recommendations

55

Ranked #2 in U.S. Apparel E-Commerce Sales

U.S. APPAREL E-COMMERCE MARKET SHARE 2019 (1)

Largest online retailers

Additional competitors

16.1%

Apparel			5.6%		5.5%	4.9%	4.8%	4.3%
E-comm Mkt.
Share										2.3%	2.1%
										2.0%	1.9%	1.5%	1.3%	1.3%	1.2%	0.8%
			Gap Inc.
Online
		25%(2)
Penetration	(1)	100%	100%	30%	24%	37%	13%	100%	26%	10%	32%	41%	24%	4%	18%
Market: 28%

Note: Competitors, listed alphabetically, include:, Amazon, American Eagle, eBay, Kohl's, Levi's, Lululemon, Macy's, Nike, Nordstrom, QVC, Target, Urban Outfitters, Victoria's Secret, Walmart
(1)	Source: The NPD Group / Consumer Tracking Service / U.S. Dollar Share, all apparel, excluding accessories, 12 Months Ending December 2019. Based on an aggregated parent company view of brand level NPD data for Gap	56
Inc. (Old Navy, Gap, Banana Republic and Athleta) and all other apparel brands
(2)	Based on net sales data for FY 2019

Modern Cloud-Based Platform, Advantaged at Scale

U N I Q U E U N I V E R S A L I T Y C A P A B I L I T I E S

57

Every Sale is an Omni-Sale

Stores: Local

BOPIS Ship-from-Store

Market Presence

Curbside Pickup		Virtual Stylist		Clienteling

58

Doubling Down Our Efforts in Mobile

L E V E R A G I N G T H E S U C C E S S O F O U R 4 . 9 S T A R R A T I N G

59

Doubling Down Our Efforts in Mobile

L E V E R A G I N G T H E S U C C E S S O F O U R 4 . 9 S T A R R A T I N G

60

~170M Customer File

LOYALTY	STRONG NPS

x	OMNI	PERSONALIZATION
1B Interactions/Year	SCALED PLATFORM
		+ DATA SCIENCE

Attract New Customers

& Create Enduring Relationships

61

Shawn Curran

C H I E F O P E R AT I N G O F F I C E R

Winning through Speed, Flexibility, and Efficiency at Scale

Power of the Platform:

• Scaled responsive Supply Chain
• Leading automated distribution capability to meet digital and omni growth
• Reducing operations cost by extending engineering capability

63

The Power of the Platform

L E V E R A G E D , S C A L E D , A N D A G I L E O P E R A T I O N S

~30

Sourcing

Countries(1)

650M

Yards of Fabric(1)

330 620

Mills(2) Factories(2)

14 400K

Distribution Store

Centers(1) Deliveries(1)

1B+		100M+
Units		Pairs of
Produced(2)		Denim(1)

100M+ 129K

Parcels Global

Delivered(3) Employees(1)

(1) As of FY 2019 (2) As of September 2020 (3) Expected for FY 2020

64

Scaled Responsive Supply Chain

Optimize inventory		Engineer fit
and margin		through adoption of
through flexibility and speed		technology
	Speed + Flexibility
Continued digitalization	Driving Profitability	Optimize local
to reduce cost and increase		assortment
speed with vendor base		with advanced AI

65

Leading Automated Distribution Capability

to Meet Digital and Omni Growth

S C A L E D C A P A B I L I T E S T O I N C R E A S E S P E E D A N D R E D U C E C O S T

Scaled automation	Leveraging ~3000	Top tier partnership	Omni fulfillment
competitive	store network	with UPS	meeting customer
advantage with	for local delivery	enabling cost-effective,	demand and
e-commerce shift	and pickup	competitive shipping	optimizing inventory
		promise

66

Driving Lower Cost through Engineered Operations

Restructure Fleet	Re-engineering stores for	Reducing overhead
and improve Real	an elevated customer	through automation
Estate economics	experience and efficiency

67

Our Engineered Approach in Action

~$225M+(1) IN MASKS ANDCOUNTING:

Digitalized Product Development

Digitally designed and developed leveraging vendor partnerships

Customer-Centric Responsive Supply Chain

Product-to-Market in 5 weeks; weekly demand reads and ongoing innovation to provide new features, prints and fits

Engineered Operations

Engineered cost through design and deliveryfor competitive offering

(1) As of October 2, 2020

68

Katrina O'Connell

C H I E F F I N A N C I A L O F F I C E R

Power Plan 2023:

Creating Shareholder Value

Drive value through:

• Power of the Brands
• Power of the Portfolio
• Power of the Platform

Leverage powerful economic model to drive strong cash flow

Disciplined use of cash to drive top tier Shareholder Return

70

Leveraging Our Strengths To Build a Stronger Future

Largest branded apparel retailer in the U.S. at $ 1 6 B in revenue ( 1)

Strong and consistent

annual operating cash flow; $ 1 . 5 B five-year average

Returned $ 3 . 8 B ( 2) in cash

to shareholders over past five years through dividend and share repurchases

OUR PATH FORWARD:

Consistent sales growth

Operating margin expansion

More resilient & flexible business

Improved capital allocation

(1)	Based on FY 2019 net sales for public companies headquartered in North America within the apparel and accessories retailer category	71
(2)	Reflects dividends paid and share repurchases through FY19

Multi-Year Plan

Base	Covid-19	Return to	Economic
year	Impact	profitable	Model
		growth
2019	2020	2021	2022+

72

Economic Model

F Y 2 0 2 2 & B E Y O N D

Sales Growth	+	EBIT Margin	=	Operating	+	Return Cash to	=	Top Tier
Low to Mid	Expansion	Cash Flow	TSR
Single Digit		10%+ EBIT Margin		~10% of Sales		Shareholders

Annually	by 2023

73

Drive Consistent Low to Mid Single Digit Sales Growth

T H R O U G H O U R P O W E R P L A N 2 0 2 3

BRAND POWER		ENDURING		OMNI-EXPERIENCE		PRODUCT LOVE		LEAN & ADVANTAGED		TEAM & VALUES
	CUSTOMER
				OPERATIONS
		RELATIONSHIPS

Grow Old Navy to $10B	Marketing	Double Online	Advantaged Categories
Double Athleta to $2B	Loyalty		(Active, Denim, Kids + Baby)
Partner to Amplify Gap	Personalization		New Categories
Reposition			(Plus, Teen, Personal Care)
Banana Republic

74

By 2023, ~70% Of Revenue From Old Navy and Athleta

S H I F T T O W A R D S H I G H E R G R O W T H ,	H I G H E R P R O F I T B R A N D S ,
W H I L E R E B U I L D I N G G A P	P R O F I T A B L I T Y

2019		2023E
	OTHER		OTHER
	BANANA REPUBLIC		BANANA REPUBLIC
OLD NAVY		OLD NAVY
	Old Navy		Old Navy
	and Athleta		and Athleta
~55%	~70%
	GAP		GAP

ATHLETA

ATHLETA

75

Significant GM% Improvement

R O D S A V I N G A N D P R O D U C T M A R G I N G R O W T H O F F S E T R I S I N G F U L F I L L M E N T C O S T S

	GROSS
	MARGIN COMPONENTS		ACTIONS
	ROD leverage		• North America closure strategy
		•	Franchise partnerships
			Drive traffic and reduce discounting through:
	Higher product margins		•	Responsive inventory
		•	Marketing
			•	Personalization and loyalty
	Higher fulfillment costs		• Shift to online increases shipping costs
		• Efficient DC and last mile capabilities partially mitigate headwinds

76

Close ~350 Gap and Banana Republic

Stores in North America

• Close ~30% of Gap and Banana Republic stores by end of FY23
• ~75% of North America closures complete by end of FY21
• ~80% of revenue in 2023 from online & off-mall locations

(1) Includes both Strip and Lifestyle Centers

1,200		1216
800						~870			Banana Republic
400									Gap
-	2019			2023
400											2019
300
										2023
200
100
-	Strip (1)	Mall	Outlet Center			Street

77

Gap Inc. North America Fleet Transformation

North America Fleet Closures result in:

• Cash buyout impact expected at ~$210M with moderately positive P&L impact
• Estimated annualized EBITDA benefit of ~$100M
• Additional benefits from rent negotiations ~$45M annually

78

Leverage Successful Franchise Model

P A R T N E R S H I P M O D E L T O G R O W O U T S I D E N O R T H A M E R I C A

Explore Strategic alternatives for Europe:

Explore Partial Shift from Company

Owned to Partner Model by 2021

• ~120 company operated stores(1)
• E-commerceSite

Leverage and Grow Strong

Franchise Model

• Reduces capital needs
• Reduces exposure to volatility
• Improves profitability

(1) As of October 2020

79

More Variable Cost Structure

Enables Demand Generation

M E A N I N G F U L L E V E R A G E I N S G & A

Reduce Fixed Costs				Demand Generation Investments
Headcount Reductions				Marketing
Lower Store Expenses:
			Loyalty
Store Closure + Europe		REALLOCATE
Franchise
			Technology
Engineered Store Labor
			Fulfillment
Future of Work

80

Path to 2023 EBIT Margin

L E V E R A G E A C R O S S B O T H G R O S S M A R G I N A N D S G & A

10%+ EBIT Margin achieved by 2023:

• Growth in higher margin Brands - Old Navy and Athleta become ~70% of total sales
• NA store closures and International market transitions to partner model
• Higher product margins largely offset by online fulfillment costs
• Productivity in fixed operating costs fueling profitable growth in sales

+

_

+

_

10%+

Product

Online

Fixed Cost

Investments

Margin/ Yield

+

Channel Shift

Productivity

for Growth

6%

(1)

+

NA Store

Brand Mix

Closures,

Franchise

Markets

FY 2019	FY 2023
Adjusted

(1) Reported fiscal 2019 EBIT margin was 3.5% and adjusted EBIT margin was 6.4%. Adjustments represent the impacts of separation-related costs, specialty fleet restructuring costs, flagship impairment charges, and a gain on	81
sale of building.

Power Plan 2023:

Reducing Volatility and Creating Resilience

• A portfolio of four multi-billion-dollar brands
• Digitally led with doubled e-commerce business
• More variable cost structure:
• • Lower Mall-Based Specialty Store Exposure
  • Engineered fixed operating costs
  • Fueling investments in demand generation
• Enhanced customer capabilities
• Franchised International Model
• Speed, scale and flexibility to drive profit, reduce cost and deliver consistency

82

Strong Cash Flow Discipline

H I S T O R I C A L V I E W

($B)

($M)

Operating Cash Flow

1.6	1.7
1.4	1.4	1.4

2015 2016 2017 2018 2019

Cap Ex

CapEx %Net Sales

4.6%	4.6%	4.3%	4.3%
	3.4%
726	731	705	702
	524

	Dividend Yield
		5.6%
3.7%	4.1%	3.9%
	2.9%

2015 2016 2017 2018 2019

($M)	1,392			Share Repurchases
			Cash Dividends
		676	771
					564
		367

2015

2016

2017

2018

2019 (1)

2015

2016

2017

2018

2019

(1) Excludes purchase of building in Q1 FY2019

83

Priorities for Cash

T A R G E T O P E R A T I N G C A S H F L O W A T ~ 1 0 % O F S A L E S

CapEx with ROIC Focus

Invest in profitable growth: brands and customer facing capabilities

Restructure Fixed Cost Base

Aggressive store closure plan and strategic review of Europe

Return to Efficient Capital Structure

Reduce debt leverage over time

Return Cash to Shareholders

Through dividend and share repurchases

84

Capital Investments Focused on Improving ROIC

E X P E C T A V E R A G E A N N U A L C A P I T A L E X P E N D I T U R E S A T ~ 4 - 5 % O F N E T S A L E S

FROM

Low returning

investments

(store assets and

international markets)

at 50% of CapEx

Capital Expenditures	TO
	High growth, high
100%	ROIC customer-facing
initiatives

50%

	0%
FY15-19		FY21-23
Stores/International		Customer, Digital, Fulfillment, Tech

85

Economic Model

F Y 2 0 2 2 & B E Y O N D

Sales Growth	+	EBIT Margin	=	Operating	+	Return Cash to	=	Top Tier
Low to Mid	Expansion	Cash Flow	TSR
Single Digit		10%+ EBIT Margin		~10% of Sales		Shareholders

Annually	by 2023

86

Long term Investment Case

Drive Value Through:

• • Power of the Brands
  • Power of the Portfolio
  • Power of the Platform
• Leverage powerful economic model to drive strong cash flow
• Disciplined Use of Cash to Drive Top Tier Shareholder Return

87

Business as a

Force for Good

• Regenerating the environment through sustainable and circular practices
• Advancing our employees and communities
• Creating and maintaining stakeholder value through effective governance and risk oversight
• Tracking progress using GRI and SASB standards

88

Commitment to Environmental, Social

& Governance Performance

ENVIRONMENTAL

11.2B

liters of water

saved in manufacturing since 2017

65%

diversion rate of plastic waste

across stores and distribution centers

90MW

wind project online

by late 2020

SOCIAL

Ranked 100%

in HRC's Corporate

Equality Index

for the 14th year in a row

92%

of suppliers using digital wage payments

support financial inclusion in the garment industry

>500k

Women & Girls reached through P.A.C.E. program

GOVERNANCE

5 of 12

Directors are women

Annual

Global

Sustainability

Report

with SASB disclosure since 2018

Regular Board

& Committee

Oversight

including Governance and Sustainability Committee

89

Our Goals

CREATE FOR ALL, WITH ALL

Close the gap between our employees today

and the diversity of our customers

Double representation of Black + Latinx employees

at all levels in our U.S. HQ offices by 2025

Increase representation of Black employees

in Store Leader roles by 50% by 2025

COMMUNITY

5% of new store hires from This Way Ahead by 2025

Educate 1M Women through signature

P.A.C.E. program by 2022

WASTE	CLIMATE + WATER
Eliminate single use plastics by 2030	Carbon neutral by 2050
	Net water positive by 2050

90

Power Plan 2023

Power of our Brands

Grow four purpose-driven,billion-dollar lifestyle brands

Power of our Portfolio

Amplify our superior customer reach and addressable market

Power of our Platform

Leverage our omni capabilities and scaled operations and extend our engineered approach to cost and growth

91