Good business position in specialty apparel; Satisfactory cash flow generation; and Above average credit ratios for the rating. Participation in the competitive retail industry; Fashion risk and cyclicality inherent in the special apparel industry; and Difficulty in maintaining customer loyalty. The rating on San Francisco-based Gap Inc. (Gap) reflects Standard&Poor's Ratings Services' expectation that operating performance will remain relatively stable in 2011 and that credit measures will remain above average for the rating. However, we believe margins will be under pressure this year, as the negative effects of meaningfully higher cotton costs will more than offset improved fixed-cost leverage from modestly higher international and online sales. We also expect Gap to maintain a somewhat more aggressive, but still
