On Aug. 17, Gap (NYSE:GPS) released Q2 2006 earnings for the period ended July 29.

  • Overall revenues were flat, with same-store sales trending down 5% from the prior-year quarter.
  • Profits were cut in half from the prior year.
  • Working capital management and other adjustments created healthier free cash flow of $300 million.

(Figures in millions)

Income Statement Highlights

Avg. Est.

Q2 2006

Q2 2005

Change

Sales

$3,690

$3,716

$3,716

0%

Net Profit

--

$128

$272

(52.9%)

EPS

$0.14

$0.15

$0.30

(50%)

Diluted Shares

--

8,419

9,052

(7%)



Get back to basics with a look at the income statement.

Margin Checkup

Q2 2006

Q2 2005

Change*

Gross Margin

32.91%

37.27%

(4.36)

Operating Margin

4.95%

11.52%

(6.57)

Net Margin

3.44%

7.32%

(3.88)

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets

Q2 2006

Q2 2005

Change

Cash + ST Invest.

$2,789

$2,536

10%

Other Current Assets

$623

$537

16%

Inventory

$2,017

$2,077

(2.9%)



Liabilities

Q2 2006

Q2 2005

Change

Accounts Payable

$1,417

$1,225

15.7%

Long-Term Debt

$513

$513

0%



Learn the ways of the balance sheet.

Cash Flow Highlights

YTD 2006

YTD 2005

Change

Cash From Ops.

$533

$296

80.1%

Capital Expenditures

$233

$275

(15.3%)

Free Cash Flow

$300

$21

1328.6%



Find out why Fools always follow the money.

Related companies:

  • Abercrombie & Fitch (NYSE:ANF)
  • Aeropostale (NYSE:ARO)
  • Ann Taylor (NYSE:ANN)
  • Urban Outfitters (NASDAQ:URBN)
  • American Eagle Outfitters (NASDAQ:AEOS)

Gap is a recommendation ofMotley Fool Inside Value. A free trial will let you see why our Foolish cheap-stock guru thinks the wait for a turnaround is warranted.

Related Foolishness:

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so checkFool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Seth Jayson had shares of American Eagle Outfitters, but no positions in any other company mentioned. Gap and American Eagle Outfitters are recommendations ofMotley Fool Stock Advisor. Fool rules are here.