The ratings on San Francisco-based The Gap Inc. reflect the challenge to management to improve the business fundamentals of its three brands in an intensely competitive industry and 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 22.1% in fiscal year ended January 2009, from 18.9% at year-end February 2008. Although profitability has improved, Standard&Poor's Ratings Services remains concerned about The Gap's ability to revive sales. Management's revised merchandise and marketing initiatives have not resonated with consumers and same-store sales
