Good business position in specialty apparel; Strong cash flow; and Excellent liquidity. Participation in the competitive retail industry; Fashion risk and cyclicality inherent in the special apparel industry; Difficulty in maintaining customer loyalty; and History of declining same-store sales. The ratings on San Francisco-based The Gap Inc. reflect management's challenge in improving the business fundamentals of its three brands in an intensely competitive industry, while trying to maintain satisfactory credit-protection measures. The company's good market position in casual apparel, geographic diversity, and strong cash flow partially offset these factors. Sales have remained under pressure for the past few years. However, tight inventory management and cost control have led to improved operating margins of 23.4% in the 12 months ended Oct.
