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. 31, 2009, from 21.3 one year ago. 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
