SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended August 1, 1998 or
[ ] 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 of Incorporation) (I.R.S. Employer
Identification No.)
One Harrison
San Francisco, California 94105
(Address of principal executive offices)
Registrant's telephone number, including area code: (415) 952-4400
_______________________
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.05 par value New York Stock Exchange, Inc.
(Title of class) Pacific Stock Exchange, Inc.
(Name of each exchange where registered)
Securities registered pursuant to Section 12(g) of the Act: None
_______________________
Indicate by check mark whether 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 X No
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date.
Common Stock, $0.05 par value, 386,317,796 shares as of August 28, 1998
<TABLE>
<CAPTION>
GAP INC.
PART 1 CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except par value) August 1, January 31, August 2,
1998 1998 1997
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and equivalents $ 515,207 $ 913,169 $ 220,148
Short-term investments 29,532 - 37,454
Merchandise inventory 1,102,693 733,174 791,925
Prepaid expenses and other current asset 186,589 184,604 151,562
Total Current Assets 1,834,021 1,830,947 1,201,089
Property and equipment, net 1,576,440 1,365,246 1,234,384
Long-term investments - - 5,465
Lease rights and other assets 172,688 141,309 135,811
Total Assets $ 3,583,149 $ 3,337,502 $ 2,576,749
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 93,006 $ 84,794 $ 90,245
Accounts payable 530,275 416,976 384,464
Accrued expenses 585,159 389,412 264,499
Income taxes payable 43,955 83,597 31,402
Deferred lease credits and 12,585 16,769 11,905
and other current liabilities
Total Current Liabilities 1,264,980 991,548 782,515
Long-term Liabilities:
Long-term debt 496,250 496,044 -
Deferred lease credits and 292,620 265,924 234,273
other liabilities
Total Long-Term Liabilities 788,870 761,968 234,273
Shareholders' Equity:
Common stock $.05 par value
Authorized 1,500,000 shares
Issued 441,701, 439,923
and 477,842 shares
Outstanding 388,270, 393,133
and 402,068 shares 22,085 21,996 23,892
Additional paid-in capital 406,656 317,674 469,089
Retained earnings 2,626,800 2,392,750 2,051,955
Foreign currency translation adjustment (16,980) (15,230) (6,490)
Deferred compensation (34,365) (38,167) (38,068)
Treasury stock, at cost (1,474,897) (1,095,037) (940,417)
Total Shareholders' Equity 1,529,299 1,583,986 1,559,961
Total Liabilities and $ 3,583,149 $ 3,337,502 $ 2,576,749
Shareholders' Equity
See accompanying notes to condensed consolidated financial statements.
</TABLE>
GAP INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Unaudited Thirteen Weeks Ended Twenty-six Weeks Ended
($000 except per share amounts)
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
Net sales $1,904,970 $ 1,345,221 $ 3,624,682 $ 2,576,407
Costs and expenses
Cost of goods sold and 1,135,165 883,086 2,166,169 1,672,212
occupancy expenses
Operating expenses 550,128 352,462 1,022,272 664,373
Net interest (income)/expense 678 (1,459) (463) (6,197)
Earnings before income taxes 218,999 111,132 436,704 246,019
Income taxes 82,125 41,674 163,764 92,257
Net earnings $ 136,874 $ 69,458 $ 272,940 $ 153,762
Weighted average number of 388,632,895 398,414,470 388,641,885 400,613,268
shares - basic
Weighted average number of 406,472,605 410,092,007 405,811,066 411,872,378
shares - diluted
Earnings per share - basic $ 0.35 $ 0.17 $ 0.70 $ 0.38
Earnings per share - diluted $ 0.34 $ 0.17 $ 0.67 $ 0.37
Cash dividends per share $ 0.05 $ 0.05 $ 0.10 $ 0.10
See accompanying notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
GAP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited ($000) Twenty-six Weeks Ended
August 1, 1998 August 2, 1997
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 272,940 $ 153,762
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization (a) 152,524 126,540
Tax benefit from exercise of stock options by
employees and from vesting of restricted stock 56,012 12,707
Change in operating assets and liabilities:
Merchandise inventory (371,397) (213,821)
Prepaid expenses and other (5,858) (25,251)
Accounts payable 115,212 36,366
Accrued expenses 196,461 (17,525)
Income taxes payable (39,708) (60,321)
Deferred lease credits and other
long-term liabilities 18,248 36,310
Net cash provided by operating activities 394,434 48,767
Cash Flows from Investing Activities:
Net (purchase)/proceeds from maturity of (29,532) 137,263
short-term investments
Net purchase of long-term investments - (8,378)
Net purchase of property and equipment (349,025) (211,383)
Acquisition of lease rights and other assets (31,420) (10,681)
Net cash used for investing activities (409,977) (93,179)
Cash Flows from Financing Activities:
Net increase in notes payable 10,761 50,279
Issuance of common stock 26,766 20,782
Net purchase of treasury stock (379,860) (251,616)
Cash dividends paid (38,890) (40,160)
Net cash used for financing activities (381,223) (220,715)
Effect of exchange rate changes on cash (1,196) (369)
Net decrease in cash and equivalents (397,962) (265,496)
Cash and equivalents at beginning of year 913,169 485,644
Cash and equivalents at end of quarter $ 515,207 $ 220,148
See accompanying notes to condensed consolidated financial statements.
(a) Includes amortization of restricted stock, discounted stock options
and discount on long-term debt.
</TABLE>
GAP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The condensed consolidated balance sheets as of August 1, 1998 and
August 2, 1997 and the interim condensed consolidated statements of
earnings for the thirteen and twenty-six weeks ended August 1, 1998 and
August 2, 1997 and cash flows for the twenty-six week periods ended August
1, 1998 and August 2, 1997 have been prepared by the Company, without
audit. In the opinion of management, such statements include all
adjustments (which include only normal recurring adjustments) considered
necessary to present fairly the financial position, results of operations
and cash flows of the Company at August 1, 1998 and August 2, 1997, and for
all periods presented.
Certain information and footnote disclosures normally included in the
annual financial statements prepared in accordance with generally accepted
accounting principles have been omitted from these interim financial
statements. It is suggested that these condensed consolidated financial
statements be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Annual Report on
Form 10-K for the year ended January 31, 1998.
The condensed consolidated balance sheet as of January 31, 1998 was
derived from the Company's January 31, 1998 balance sheet included in the
1997 Annual Report.
The results of operations for the twenty-six weeks ended August 1,
1998 are not necessarily indicative of the operating results that may be
expected for the year ending January 30, 1999.
2. COMPREHENSIVE EARNINGS
During the first quarter of fiscal 1998, the Company adopted Statement
of Financial Accounting Standards No. 130, Reporting Comprehensive Income.
This Statement requires that all components of comprehensive earnings be
reported prominently in the financial statements. For the Company, other
comprehensive earnings includes only foreign currency translation
adjustments. Total comprehensive earnings for the thirteen and twenty-six
weeks ended August 1, 1998 and August 2, 1997 were as follows (in
thousands):
Thirteen Thirteen Twenty-six Twenty-six
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
Net earnings $136,874 $69,458 $272,940 $153,762
Foreign currency
translation adjustments (4,258) 826 (1,750) (1,303)
Total comprehensive
earnings $132,616 $70,284 $271,190 $152,459
3. FINANCIAL INSTRUMENTS
The Company enters into foreign exchange contracts to reduce exposure
to foreign currency exchange risk. These contracts are primarily
designated and effective as hedges of commitments to purchase
merchandise. The market value gains and losses on these contracts
are deferred and recognized as part of the underlying cost to
purchase the merchandise.
At the end of the second quarter, the Company held various put option
contracts to repurchase up to 1,800,000 shares of Gap stock. The
contracts have exercise prices ranging from $38.37 to $60.00, with
expiration dates ranging from August 1998 through December 1998.
4. EARNINGS PER SHARE
Under SFAS No. 128, the Company provides dual presentation of EPS on a
basic and diluted basis. The Company's granting of certain stock
options and restricted stock resulted in potential dilution of basic
EPS. The following summarizes the effects of the assumed issuance of
dilutive securities on weighted-average shares for basic EPS.
Thirteen Thirteen Twenty-six Twenty-six
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
Weighted-average number
of shares - basic 388,632,895 398,414,470 388,641,885 400,613,268
Incremental shares from
assumed issuance of:
Stock options 15,765,710 7,771,360 14,411,689 6,933,917
Restricted stock 2,074,000 3,906,177 2,757,492 4,325,193
Weighted-average number
of shares - diluted 406,472,605 410,092,007 405,811,066 411,872,378
The number of incremental shares from the assumed issuance of stock
options and restricted stock is calculated applying the treasury
stock method.
Excluded from the above computation of weighted-average shares for
diluted EPS were options to purchase 752,396 and 1,337,356 shares of
common stock during the thirteen and twenty-six weeks ended August 1,
1998 respectively, and 7,912 and 89,995 shares during the thirteen
and twenty-six weeks ended August 2, 1997, respectively. Issuance of
these securities would have resulted in an antidilutive effect on
EPS.
Deloitte &
Touche
Deloitte & Touche LLP Telephone: (415)247-4000
50 Fremont Street Facsimile: (415)247-4329
San Francisco, California 94105-2230
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders of
The Gap, Inc.:
We have reviewed the accompanying condensed consolidated balance sheets of
The Gap, Inc. and subsidiaries as of August 1, 1998 and August 2, 1997 and
the related condensed consolidated statements of earnings for the thirteen
and twenty-six week periods ended August 1, 1998 and August 2, 1997 and
condensed consolidated statements of cash flows for the twenty-six week
periods ended August 1, 1998 and August 2, 1997. These financial
statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and of making inquiries of persons
responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the expression of
an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of The Gap, Inc. and
subsidiaries as of January 31, 1998, and the related consolidated
statements of earnings, stockholders' equity and cash flows for the year
then ended (not presented herein); and in our report dated February 27,
1998, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of January 31, 1998 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from
which it was derived.
/s/ Deloitte & Touche LLP
August 11, 1998
GAP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The information below contains certain forward-looking statements which
reflect the current view of Gap Inc. (the "Company") with respect to
future events and financial performance. Wherever used, the words
"expect," "plan," "anticipate," "believe," and similar expressions
identify forward-looking statements.
Any such forward-looking statements are subject to risks and uncertainties
that could cause the Company's actual results of operations to differ
materially from historical results or current expectations. Some of these
risks include, without limitation, ongoing competitive pressures in the
apparel industry, risks associated with challenging international retail
environments, changes in the level of consumer spending or preferences in
apparel, trade restrictions and political or financial instability in
countries where the Company's goods are manufactured and/or disruption to
operations from Year 2000 issues, and other factors that may be described
in the Company's Annual Report on Form 10-K and/or other filings with the
Securities and Exchange Commission. Future economic and industry trends
that could potentially impact revenues and profitability remain difficult
to predict.
It is suggested that this document be read in conjunction with the
Management's Discussion and Analysis included in the Company's 1997 Annual
Report on Form 10-K and in subsequent Forms 10-Q.
The Company does not undertake 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.
RESULTS OF OPERATIONS
Net Sales
Thirteen Weeks Ended Twenty-six Weeks Ended
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
Net sales ($000) 1,904,970 1,345,221 3,624,682 2,576,407
Total net sales
growth percentage 42 20 41 15
Comparable store sales
growth percentage 19 4 18 0
Net sales per average
square foot ($) 116 99 225 194
Square footage of gross store
space at period end (000) 16,799 13,750 N/A N/A
Fifty-two Fifty-two
Weeks Ended Weeks Ended
August 1, 1998 August 2, 1997
Number of
New stores 304 254
Expanded stores 135 56
Closed stores 16 27
The increases in net sales for the second quarter and the first half of
1998 over the same periods last year were primarily attributable to the
increase in retail selling space, both through the opening of new stores
(net of stores closed) and the expansion of existing stores, as well as to
the increase in comparable store sales.
The increases in net sales per average square foot were primarily
attributable to the increases in comparable store sales.
Cost of Goods Sold and Occupancy Expenses
Cost of goods sold and occupancy expenses as a percentage of net sales
decreased 6.0 and 5.1 percentage points in the second quarter and first
half of 1998, respectively, from the same periods in 1997. The decreases
were driven by increased merchandise margins and decreased occupancy
expenses as a percentage of sales. Merchandise margins improved due to
increased regular price selling and greater margins achieved on marked down
goods.
For both the second quarter and first half of 1998, the decreases in
occupancy expenses as a percentage of net sales were primarily driven by
leverage achieved through the growth in comparable store sales and total
sales growth.
As a general business practice, the Company reviews its inventory levels in
order to identify slow-moving merchandise and broken assortments (items no
longer in stock in a sufficient range of sizes) and uses markdowns to clear
merchandise. Such markdowns may have an adverse impact on earnings
depending upon the extent of the markdowns and amount of inventory
affected.
Operating Expenses
Operating expenses as a percentage of net sales increased 2.7 and 2.4
percentage points for the second quarter and the first half of 1998,
respectively, from the comparable periods in 1997. The increases were
driven by significantly higher advertising/marketing costs as part of the
Company's brand development efforts. These were partially offset by
leverage from comparable store sales growth and total sales growth.
Net Interest Income/Expense
Net interest expense increased in the second quarter from the same period
last year, and net interest income decreased in the first half of 1998 from
the same period last year, primarily due to the interest expense related to
the long-term debt securities issued in the third quarter of fiscal 1997.
The interest expense was offset partially by greater interest income
resulting from an increase in both average investments and the average
investment interest rate.
Income Taxes
The effective tax rate was 37.5 percent for the first half of 1998 and
1997.
LIQUIDITY AND CAPITAL RESOURCES
The following sets forth certain measures of the Company's liquidity:
Twenty-six Weeks Ended
August 1, 1998 August 2, 1997
Cash provided by operating
activities ($000) 394,434 48,767
Working capital ($000) 569,041 418,574
Current ratio 1.45:1 1.53:1
For the twenty-six weeks ended August 1, 1998, the increase in cash flows
provided by operating activities was primarily attributable to the timing
of certain payables and an increase in net earnings, partially offset by
purchases of merchandise inventory.
The Company funds inventory expenditures during normal and peak periods
through a combination of cash flows provided by operations and normal trade
credit arrangements. The Company's business follows a seasonal pattern,
peaking over a total of about ten to twelve weeks during the Back-to-School
and Holiday periods.
The Company has committed credit facilities totaling $950 million,
consisting of an $800 million, 364-day revolving credit facility, and a
$150 million, 5-year revolving credit facility through June 30, 2002.
These credit facilities provide for the issuance of up to $450 million in
letters of credit. The Company has additional uncommitted credit
facilities of $400 million for the issuance of letters of credit. At
August 1, 1998, the Company had outstanding letters of credit of
approximately $764 million.
To provide financial flexibility, the Company issued $500 million of 6.9
percent, 10-year debt securities in fiscal 1997. The proceeds from this
issuance are being used for general corporate purposes, including store
expansion, brand investment, development of additional distribution
channels and repurchases of the Company's common stock pursuant to its
ongoing repurchase program.
For the twenty-six weeks ended August 1, 1998, capital expenditures, net of
construction allowances and dispositions, totaled approximately $343
million. These expenditures resulted in a net increase in store space of
approximately 1.5 million square feet or 10 percent due to the addition of
147 new stores, the expansion of 73 stores, and the remodeling of certain
stores.
For 1998, the Company expects capital expenditures to exceed $700 million,
net of construction allowances. This represents the addition of 300 to 350
new stores, the expansion of approximately 100 stores, the remodeling of
certain stores, as well as amounts for headquarters facilities,
distribution centers, equipment, and a catalog facility for the Banana
Republic division. The Company expects to fund these capital expenditures
with cash flow from operations and other sources of financing. New stores
are generally expected to be leased.
To further support its growth, the Company acquired land in San Francisco
and additional land in San Bruno on which to construct additional
headquarter facilities.
During 1997 the Company commenced construction on a distribution center for
an estimated cost at completion of $60 million. The majority of the
expenditures for this facility will be incurred this fiscal year and is
thus included in the projected capital expenditures above. The facility is
expected to begin operations in early 1999.
Under the Company's 45 million share repurchase program, the Company
acquired 7 million shares for approximately $391 million during the first
half of 1998. To date under this program, 35.2 million shares have been
repurchased for approximately $1.1 billion.
During the first half of 1998, the Company entered into various put option
contracts in connection with the share repurchase program to hedge against
stock price fluctuations. The Company also continued to enter into foreign
exchange forward contracts to reduce exposure to foreign currency exchange
risk involved in its commitments to purchase merchandise for foreign
operations. Additional information on these contracts and agreements is
presented in the Notes to Condensed Consolidated Financial Statements (Note
3).
YEAR 2000 ISSUE
The Year 2000 issue is primarily the result of computer programs using a
two-digit format, as opposed to four digits, to indicate the year. Such
computer systems will be unable to interpret dates beyond the year 1999,
which could cause a system failure or other computer errors, leading to a
disruption in the operation of such systems. In 1996, the Company
established a project team to coordinate existing Year 2000 activities and
address remaining Year 2000 issues. The team has focused its efforts on
three areas: (1) information systems software and hardware; (2) facilities
and distribution equipment; and (3) third-party relationships.
The Program. The Company has adopted a five-phase Year 2000 program
consisting of: Phase I -- identification and ranking of the components of
the Company's systems, equipment and suppliers that may be vulnerable to
Year 2000 problems; Phase II -- assessment of items identified in Phase I;
Phase III -- remediation or replacement of non-compliant systems and
components and determination of solutions for non-compliant suppliers;
Phase IV -- testing of systems and components following remediation; and
Phase V -- developing contingency plans to address the most reasonably likely
worst case Year 2000 scenarios. The Company has completed Phase I, has
made substantial progress on Phases II, III and IV, and is beginning Phase
V.
Information Systems Software and Hardware. The Company has completed Phase
II and has made substantial progress in Phase III. Phase IV testing is
being conducted concurrently with Phase III activities. The Company is on
track to complete remediation, testing and implementation of its individual
information systems by mid-1999.
Facilities and Distribution Equipment. The Company has made substantial
progress on Phase II scheduled for completion by the end of 1998.
Third-Party Relationships. The Company has substantially completed Phase
II and is actively working on Phase III.
Risks / Contingency Plans. Based on the assessment efforts to date, the
Company does not believe that the Year 2000 issue will have a material
adverse effect on its financial condition or results of operations. The
Company operates a large number of geographically dispersed stores and has
a large supplier base and believes that this will mitigate any adverse
impact. The Company's beliefs and expectations, however, are based on
certain assumptions and expectations that ultimately may prove to be
inaccurate. The Company believes that by the end of 1998, it will be able
to fully determine its most reasonably likely worst case scenarios.
Potential sources of risk include (a) the inability of principal suppliers
to be Year 2000 ready, which could result in delays in product deliveries
from such suppliers, and (b) disruption of the distribution channel,
including ports, transportation vendors, and the Company's own distribution
centers as a result of a general failure of systems and necessary
infrastructure such as electricity supply. Phase V contingency plan
development is in process.
The Company does not expect the costs associated with its Year 2000 efforts
to be substantial. Less than $30 million has been allocated to address the
Year 2000 issue, of which $8.5 million has been incurred through August 1,
1998. The Company's aggregate cost estimate does not include time and
costs that may be incurred by the Company as a result of the failure of any
third parties, including suppliers, to become Year 2000 ready or costs to
implement any contingency plans.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The market risk of the Company's financial instruments as of August 1,
1998 has not significantly changed since January 31, 1998. The market
risk profile on January 31, 1998 is disclosed in the Company's 1997 Annual
Report.
PART II
OTHER INFORMATION
Item 5. Other Information
In accordance with Rule 14a-4(c)(1) promulgated by the Securities and
Exchange Commission, management proxies intend to use their discretionary
voting authority with respect to any shareholder proposal raised at the
Company's annual meeting as to which the proponent fails to notify the
Company on or before February 20, 1999 (45 days prior to the date on which
the proxy statement for the Company's prior year's annual meeting was
mailed to shareholders).
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(15) Letter re: Unaudited Interim Financial Information
(27) Financial Data Schedule
b) The Company did not file any reports on Form 8-K during the three
months ended August 1, 1998.
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: September 4, 1998 By /s/ Warren R. Hashagen
Warren R. Hashagen
Chief Financial Officer
(Principal financial officer of the registrant)
Date: September 4, 1998 By /s/ Millard S. Drexler
Millard S. Drexler
President and Chief Executive Officer
EXHIBIT INDEX
(15) Letter re: Unaudited Interim Financial Information
(27) Financial Data Schedule
Deloitte &
Touche
Deloitte & Touche LLP Telephone: (415)247-4000
50 Fremont Street Facsimile: (415)247-4329
San Francisco, California 94105-2230
To the Board of Directors and Stockholders of
The Gap, Inc.:
We have made reviews, in accordance with standards established by the
American Institute of Certified Public Accountants, of the unaudited
interim condensed consolidated financial statements of The Gap, Inc. and
subsidiaries for the twenty-six week periods ended August 1, 1998 and
August 2, 1997, as indicated in our report dated August 11, 1998; because
we did not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended August 1, 1998, is
incorporated by reference in Post Effective Amendment No. 1 to
Registration Statement No. 2-72586, Registration Statement No. 2-60029,
Registration Statement No. 33-39089, Registration Statement No. 33-40505,
Registration Statement No. 33-54686, Registration Statement No. 33-54688,
Registration Statement No. 33-54690, Registration Statement No. 33-56021,
Registration Statement No. 333-00417, Registration Statement
No. 333-12337, and Registration Statement No. 333-36265.
We also are aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act of 1933, is not considered a part of the
Registration Statements prepared or certified by an accountant or a report
prepared or certified by an accountant within the meaning of Sections 7
and 11 of that Act.
/s/ Deloitte & Touche LLP
September 8, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-END> AUG-01-1998
<CASH> 515,207
<SECURITIES> 29,532
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,102,693
<CURRENT-ASSETS> 1,834,021
<PP&E> 2,633,159
<DEPRECIATION> 1,056,719
<TOTAL-ASSETS> 3,583,149
<CURRENT-LIABILITIES> 1,264,980
<BONDS> 0
0
0
<COMMON> 22,085
<OTHER-SE> 1,507,214
<TOTAL-LIABILITY-AND-EQUITY> 3,583,149
<SALES> 3,624,682
<TOTAL-REVENUES> 3,624,682
<CGS> 2,166,169
<TOTAL-COSTS> 1,022,272
<OTHER-EXPENSES> (463)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 436,704
<INCOME-TAX> 163,764
<INCOME-CONTINUING> 272,940
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 272,940
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.67
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