The ratings on San Francisco, Calif.-based The Gap Inc. reflect management's challenge to continue to improve the business position of the company's three core brands in an industry that is intensely competitive, as well as the inherent cyclicality and fashion risk of the industry. These factors are offset, in part, by the company's strong business position in casual apparel, its geographic diversity, and its strong cash flow. Management's initiatives to improve product quality and assortment, store execution, and inventory management, as well as the rationalization of the company's store base, have resulted in significantly improved operating performance. The Gap's operating margin rose to 22.7% in the trailing 12 months ended July 31, 2004, from 21.1% in the prior-year period and
