Press Release

01/10/2008

GAP INC. REPORTS DECEMBER SALES DOWN 6 PERCENT; COMPARABLE STORE SALES DOWN 6 PERCENT


SAN FRANCISCO – January 10, 2008 – Gap Inc. (NYSE: GPS) today reported net sales of $2.20 billion for the five-week period ended January 5, 2008, which represents a 6 percent decrease compared with net sales of $2.34 billion for the five-week period ended December 30, 2006. Due to the 53rd week in fiscal year 2006, December 2007 comparable store sales are compared with the five-week period ended January 6, 2007. On this basis, the company’s comparable store sales for December 2007 decreased 6 percent compared with an 8 percent decrease in December 2006.

Comparable store sales by division for December 2007 were as follows:

• Gap North America: negative 9 percent versus negative 9 percent last year

• Banana Republic North America: negative 1 percent versus positive 2 percent last year

• Old Navy North America: negative 8 percent versus negative 10 percent last year

• International: negative 1 percent versus negative 8 percent last year

“We were pleased that merchandise margins in December were significantly above last year, which is consistent with our strategy of delivering earnings with healthy margins,” said Sabrina Simmons, executive vice president of finance and acting chief financial officer of Gap Inc. “However, we did not sell through as much inventory as we anticipated, and we’ll focus on clearing through remaining holiday product in January.”

Year-to-date net sales of $14.83 billion for the 48 weeks ended January 5, 2008, increased 1 percent compared with net sales of $14.74 billion for the 48 weeks ended December 30, 2006. Due to the 53rd week in fiscal year 2006, fiscal year 2007 year-to-date comparable store sales are compared with the 48 week period ended January 6, 2007. On this basis, the company’s year-to-date comparable store sales decreased 5 percent, compared with a 7 percent decrease in the prior year.

For more detailed information, please call 1-800-GAP-NEWS to listen to Gap Inc.’s monthly sales recording. International callers may call 706-634-4421.

January Sales
The company will report January sales on February 7, 2008.

Forward-Looking Statements
This press release and related recording contain forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than those that are purely historical are forward-looking statements. Words such as “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan,” and similar expressions also identify forward-looking statements. Forward-looking statements include statements regarding year-over-year change in inventory per square foot at the end of the fourth quarter of fiscal 2007 and product clearance in January 2008.

Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause the company’s actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, the following: the risk that subsequent events may occur that require adjustments to the company’s unaudited financial statements; the risk that the adoption of new accounting pronouncements will impact future results; the risk that the company will be unsuccessful in gauging fashion trends and changing consumer preferences; the highly competitive nature of the company’s business in the U.S. and internationally and its dependence on consumer spending patterns, which are influenced by numerous other factors; the risk that the company will be unsuccessful in identifying and negotiating new store locations effectively; the risk that comparable store sales and margins will experience fluctuations; the risk that the company will be unsuccessful in implementing its strategic, operating and people initiatives; the risk that adverse changes in the company’s credit ratings may have a negative impact on its financing costs and structure in future periods; the risk that trade matters, events causing disruptions in product shipments from China and other foreign countries, or IT systems changes may disrupt the company’s supply chain or operations; the risk that acts or omissions by the company’s third party vendors could have a negative impact on the company’s reputation or operations; the risk that the company will not be successful in defending various proceedings, lawsuits, disputes, claims, and audits; any of which could impact net sales, costs and expenses, and/or planned strategies. Additional information regarding factors that could cause results to differ can be found in the company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2007. Readers should also consult the company’s quarterly report on Form 10-Q for the fiscal quarter ended November 3, 2007.

These forward-looking statements are based on information as of January 10, 2008, and the company assumes no obligation to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

Gap Inc. Copyright Information
All recordings made on 800-GAP-NEWS have been recorded on behalf of Gap Inc. and consist of copyrighted material. They may not be re-recorded, 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.

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