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Executives

Evan Price - Vice President of Investor Relations

Gap, Inc. (GPS) December Sales Results Call January 10, 2008 8:30 AM ET

Operator

Thank you for calling Gap Inc.’s monthly sales recording for December sales. All recordings made on 800-GAP-NEWS have been recorded on behalf of Gap, Inc. and consist of copyrighted materials. They may not be rerecorded, reproduced, retransmitted or rebroadcast without Gap, Inc.’s express written permission. Your participation represents your consent to these terms and conditions which are governed under California law.

I would also like to remind you that the information made available on this sales recording contains certain forward-looking statements, including but not limited to, forecasts relating to inventory.

Forward-looking statements also include statements that express our expectations, anticipations, beliefs, estimates, plans and forecasts. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements.

Information regarding factors that could cause results to differ can be found in our annual report on Form 10-K for the fiscal year ended February 3, 2007. Investors should also consult our quarterly report on Form 10-Q for the fiscal quarter ended November 3, 2007.

Future economic and industry trends that could potentially impact net sales and profitability are difficult to predict. These forward-looking statements are based on information as of January 10, 2008 and we assume no obligation to publicly update or revise our forward-looking statements, even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

I would now like to introduce Evan Price, Vice President of Investor Relations.

Evan Price

Good morning. This is Evan Price with a report on monthly sales for December 2007. Total company net sales were $2.2 billion for the five-week period ended January 5, 2008, down 6% from last year’s sales of $2.34 billion for the five-week period ended December 30, 2006.

Due to the 53rd week in fiscal 2006, December 2007 comps are compared with the five-week period ended January 5, 2007. On this basis, total company comparable store sales decreased 6% compared to the decrease of 8% in December 2006.

Brand-specific comps for the month were as follows: Gap, negative 9 versus negative 9 last year; Banana Republic, negative 1 versus positive 2 last year; Old Navy, negative 8 versus negative 10 last year; International, negative 1 versus negative 8 last year.

Regarding December sales results, we were pleased that merchandise margins in December were significantly above last year, which reflects our strategy of delivering our earnings with healthy margins. However, given the challenging environment and traffic, we did not sell through as many units of inventory as we had anticipated in the month and will focus on clearing remaining holiday product in January.

Comps in December were strongest in week 4 and weakest in week 1. By region, comp performance was strongest in the West and weakest in the Northeast.

Turning to divisional results for the month. At Gap, traffic declined 14% in the month versus a 7% decline last month. Despite the traffic, we were pleased with the customer response to product. On a comp basis by division, baby performed better than kids and adults.

By department, comp performance in women’s was better than men’s. In women’s, knits, classic sweaters like the cable crew and bottoms performed well. And in men’s, bottoms, knits and holiday sweaters performed well.

At Banana Republic, comp performance was stronger in women’s than in men’s. Traffic was down 6% compared with a 1% decrease in November. In women’s, fashion knit tops, novelty sweaters and dresses performed well. In Men’s, woven and sweaters were key drivers.

At Old Navy traffic was down 8% for the month compared with a 4% decline last month. December results were driven by fashion items, several of which were featured in our holiday marketing campaign.

On a comp basis by division, baby performed better than kids and adults. By department, comp performance in men’s was better than women’s which continues to struggle with knits and bottoms. Cashmere sweaters, denim and active tops performed well in women’s and cashmere sweaters, outerwear and woven tops performed well in men’s.

At international, comp results in Japan were better than in Europe.

In terms of new product flows, Gap brand received its spring flow this week, about one week later than last year. Banana Republic, received the spring flow this week, similar to last year and Old Navy’s January flow will be fully set during the week of January 13th.

Regarding inventory per square foot, we still expect year-over-year percentage change in inventory per square foot at the end of the fourth quarter to be down in the mid single-digits.

Our January sales results will be announced on Thursday, February 7 prior to market opening. Thank you.

Question-and-Answer Session

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