On Nov. 17, 2006, Standard & Poor's Ratings Services lowered its corporate credit and senior unsecured ratings on San Francisco-based The Gap Inc. to 'BB+' from 'BBB-'. The outlook is stable. The downgrade reflects Standard & Poor's view that the company's business no longer possesses investment-grade characteristics. The Gap has a protracted record of disappointing sales, and profits have fallen for the past two years. Its poor operating performance has caused cash flow protection measures to weaken. Credit measures dropped sharply in the third quarter of 2006, indicating that ratios for the full year will not meet our previous expectations. As management faces significant challenges in turning around the performance of each of The Gap's brands, Standard & Poor's does
