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Gap, Inc. (NYSE:GPS)

May 2008 Sales Call

June 5, 2008 8:00 am ET

Executives

Evan Price - Investor Relations

Evan Price

Good morning. This is Evan Price, Vice President of Investor Relations with a report on monthly sales for fiscal May 2008.

Total company net sales were $1.09 billion for the four-week period ended May 31, 2008, down 8% from last year’s sales of $1.19 billion for the four-week period ended June 2, 2007. Total company comparable store sales decreased 14% compared to a 3% decrease for May 2007.

Brand-specific comps for the month were as follows: Gap negative 7% versus negative 7% last year; Banana Republic, negative 5% versus positive 3% last year; Old Navy, negative 25% versus negative 3% last year; International, flat versus flat last year.

Regarding May sales results, we were pleased that total company merchandise margins were significantly above last year. However, sales results were mixed across divisions with Old Navy continuing to present the biggest challenge. Comps in May were strongest in week 3 and weakest in week 1. By region, comp performance was strongest in the South and weakest in the Northeast.

Turning to divisional results for the month, at Gap, traffic was down 12% in the month compared to negative 10% last month. On a comp basis by division, kids and baby performed better than adults, with women’s performing better than men’s. Fashion and basic Ts, fashion skirts and cardigans continued to perform well in women’s and denim, T-shirts and colored woven tops were strong in men’s.

At Banana Republic, traffic was down 7% compared to a 4% decrease in April. Comp performance was better in women’s than men’s. In women’s, knits, dresses and wovens performed well and in men’s, long-sleeve knits, sweaters and outerwear performed well.

At Old Navy, performance was especially challenging, particularly in women’s. As we have said, we believe an important part of the issue is that we have put too much emphasis on fashion in our women’s assortment and we need to better balance the fashion product with the seasonal basic and basic product that customers expect from us. We are working to rebalance, but do not anticipate a material impact on the assortment until late fall.

Traffic was down 12% for the month compared to a 3% decline last month. By department, kids and baby performed better than adults, and men’s performed better than women’s. In women’s, sweaters, denim and dresses performed better and in men’s, short-sleeved knits and denim were key drivers of the business.

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

In terms of new product flows, Gap brands will receive a small women’s summer flow the week of June 8th, Banana Republic will receive a third women’s summer flow the week of June 8th, one week earlier than last year; Old Navy’s June flow will be fully set in stores the week of June 8th.

As a reminder, June sales will be announced on Thursday, July 10th prior to market opening. Thank you.

Question-and-Answer Session

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Source: Gap, Inc. May 2008 Sales Call Transcript
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