The ratings on San Francisco-based Gap Inc. reflect management's challenge in improving the business fundamentals of its three brands in an intensely competitive industry over the past several years, while maintaining satisfactory credit-protection measures. The company's good market position in casual apparel, geographic diversity, and strong cash flow partially offset these factors. After several years of weak sales trends, Gap Inc.'s top line improved over the past three quarters. Same-store sales were flat in the third quarter ended Oct. 31, 2009, up 2% in the fourth quarter ended Jan. 30, 2010, and up 4% in the first quarter ended May 1, 2010; all North American divisions had positive same-store sales in the first quarter. While Standard&Poor's Ratings Services
