Banana Republic's Annual Report

SAN FRANCISCO – November 5, 2009 – Gap Inc. today reported net sales of $1.14 billion for the four-week period ended October 31, 2009, which is an increase of 5 percent as compared with net sales of $1.08 billion for the same period ended November 1, 2008. The company’s comparable store sales for October 2009 also increased 4 percent compared with a 16 percent decrease for October 2008.


• Banana Republic North America: positive 5 percent versus negative 17 percent last year
Financial Performance Highlights

* Second quarter diluted earnings per share increased to $0.33 from $0.32 last year.
* Second quarter gross margin increased by 150 basis points driven by improved merchandise margins.
* Operating expenses in the second quarter of fiscal year 2009 were down about $50 million compared with the second quarter last year. Since the beginning of fiscal year 2007, operating expenses are down about $650 million.
* Year to date, free cash flow was an inflow of $589 million, leaving the company with more than $2 billion in cash and cash equivalents.

Sales Results

Second quarter net sales were $3.25 billion, compared with $3.50 billion for the second quarter of last year. The company’s second quarter comparable store sales decreased 8 percent, compared with a decrease of 10 percent for the second quarter of last year. The company’s online sales for the second quarter of 2009, which includes Athleta, increased 17 percent to $224 million, compared with $191 million for the second quarter of last year.