Gap (GPS)

Cost of Goods Sold and Occupancy Expenses

Cost of goods sold and occupancy expenses include:

The classification of these expenses varies across the retail industry.

Cost of goods sold and occupancy expenses decreased $154 million in the first quarter of fiscal 2009 but increased 0.1 percentage points as a percentage of net sales compared with the prior year comparable period. Cost of goods sold decreased 1.0 percentage points as a percentage of net sales in the first quarter of fiscal 2009 compared with the prior year comparable period. Occupancy expenses increased 1.1 percentage points as a percentage of net sales in the first quarter of fiscal 2009 compared with the prior year comparable period.

As a general business practice, we review our inventory levels in order to identify slow-moving merchandise and broken assortments (items no longer in stock in a sufficient range of sizes) and use markdowns to clear the majority of this merchandise.

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Cost of Goods Sold and Occupancy Expenses

Cost of goods sold and occupancy expenses include:

22      GAP INC. FORM 10-K

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The classification of these expenses varies across the retail industry.

Cost of goods sold and occupancy expenses as a percentage of net sales decreased 1.4 percentage points in fiscal 2008 compared with fiscal 2007. Cost of goods sold decreased $1.1 billion, or 3.1 percentage points as a percentage of net sales, in fiscal 2008 compared with fiscal 2007. Occupancy expenses increased $60 million, or 1.7 percentage points as a percentage of net sales, in fiscal 2008 compared with fiscal 2007.

Cost of goods sold and occupancy expenses as a percentage of net sales decreased 0.6 percentage points in fiscal 2007 compared with fiscal 2006. Cost of goods sold decreased $307 million, or 1.4 percentage points as a percentage of net sales, in fiscal 2007 compared with fiscal 2006. Occupancy expenses increased $112 million, or 0.8 percentage points as a percentage of net sales, in fiscal 2007 compared with fiscal 2006.

As a general business practice, we review our inventory levels in order to identify slow-moving merchandise and broken assortments (items no longer in stock in a sufficient range of sizes) and use markdowns to clear the majority of this merchandise.

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Cost of Goods Sold and Occupancy Expenses

Cost of Goods Sold and Occupancy Expenses

Cost of goods sold and occupancy expenses include:

The classification of these expenses varies across the retail industry.

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Cost of goods sold and occupancy expenses as a percentage of net sales decreased 1.2 percentage points in the third quarter of fiscal 2008 and decreased 2.2 percentage points during the thirty-nine weeks ended November 1, 2008 compared with the prior year comparable periods.

Cost of goods sold decreased $234 million, or 2.7 percentage points as a percentage of net sales, in the third quarter of fiscal 2008 and decreased $706 million, or 3.8 percentage points as a percentage of net sales, during the thirty-nine weeks ended November 1, 2008 compared with the prior year comparable periods. The decrease was driven primarily by a higher margin for both regular price and marked down merchandise.

Occupancy expenses increased $10 million, or 1.5 percentage points as a percentage of net sales, in the third quarter of fiscal 2008 and increased $70 million, or 1.6 percentage points as a percentage of net sales, during the thirty-nine weeks ended November 1, 2008 compared with the prior year comparable periods. The increase was primarily driven by costs related to new and existing stores, partially offset by savings from store closures.

Cost of Goods Sold and Occupancy Expenses

Cost of goods sold and occupancy expenses include:

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The classification of these expenses varies across the retail industry.

Cost of goods sold and occupancy expenses as a percentage of net sales decreased 3.9 percentage points in the second quarter of fiscal 2008 and decreased 2.7 percentage points during the first half of fiscal 2008 compared with the prior year comparable periods. Cost of goods sold as a percentage of net sales decreased 5.6 percentage points, or $290 million, in the second quarter of fiscal 2008 and decreased 4.4 percentage points, or $472 million, during the first half of fiscal 2008 compared with the prior year comparable periods. The decrease was driven primarily by a higher margin for both regular price and marked down merchandise. As a percentage of sales, occupancy expenses increased 1.7 percentage points, or $30 million, in the second quarter of fiscal 2008 and increased 1.7 percentage points, or $60 million, during the first half of fiscal 2008 compared with the prior year comparable periods. The increase as a percentage of sales was driven primarily by lower sales related to comparable stores.

Cost of Goods Sold and Occupancy Expenses

Cost of goods sold and occupancy expenses include:

The classification of these expenses varies across the retail industry.

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Cost of goods sold and occupancy expenses as a percentage of net sales decreased 1.5 percentage points in the first quarter of fiscal 2008 compared with the prior year comparable period. Cost of goods sold as a percentage of net sales decreased 3.1 percentage points, or $182 million, in the first quarter of fiscal 2008 compared with the prior year comparable period. The decrease was driven primarily by a higher margin for both regular price and marked down merchandise. As a percentage of sales, occupancy expenses increased 1.6 percentage points in the first quarter of 2008 compared with the prior year comparable period. The increase was driven primarily by costs related to comparable stores.

We review our inventory levels in order to identify slow-moving merchandise and broken assortments (items no longer in stock in a sufficient range of sizes) and use markdowns to clear the majority of this merchandise.

Cost of Goods Sold and Occupancy Expenses

Cost of goods sold and occupancy expenses include:

The classification of these expenses varies across the retail industry.

Cost of goods sold and occupancy expenses as a percentage of net sales decreased 0.6 percentage points in fiscal 2007 compared with fiscal 2006. Cost of goods sold as a percentage of net sales decreased 1.4 percentage points, or $307 million, in fiscal 2007 compared with fiscal 2006. The decrease was driven primarily by an increase in selling at regular price and a higher margin achieved for marked down merchandise. As a percentage of sales, occupancy expenses increased 0.8 percentage points in fiscal 2007 compared with fiscal 2006.

Cost of goods sold and occupancy expenses as a percentage of net sales increased 1.2 percentage points in fiscal 2006 compared with fiscal 2005. Cost of goods sold as a percentage of net sales increased 1.3 percentage points, or $156 million, in fiscal 2006 compared with fiscal 2005, as product acceptance challenges drove additional promotions and markdowns. As a percentage of sales, occupancy expenses decreased 0.1 percentage points compared with fiscal 2005. The decrease was primarily due to a net decrease in occupancy expenses of $31 million related to the fiscal 2005 amortization of key money paid to acquire the rights of tenancy in France ($50 million) net of a lease accounting adjustment to true-up amounts which were estimated in our fiscal 2004 financial statements ($19 million).

As a general business practice, we review our inventory levels in order to identify slow-moving merchandise and broken assortments (items no longer in stock in a sufficient range of sizes) and use markdowns to clear the majority of this merchandise.

Gap Inc. Form 10-K  21

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Cost of Goods Sold and Occupancy Expenses

Cost of goods sold and occupancy expenses include:

Cost of goods sold and occupancy expenses as a percentage of net sales decreased 0.1 percentage points during the third quarter of fiscal year 2007 and increased 0.1 percentage points during the thirty-nine weeks ended November 3, 2007 compared with the prior year comparable periods. Our merchandise margin, calculated as net sales less cost of goods sold, increased 1.0 percentage point during the third quarter of fiscal year 2007 and increased 0.4 percentage points during the thirty-nine weeks ended November 3, 2007 compared with the prior year comparable periods. The increases were driven primarily by a higher margin for marked down merchandise and an increase in selling at regular price. We review our inventory levels in order to identify slow-moving merchandise and broken assortments (items no longer in stock in a sufficient range of sizes) and use markdowns to clear the majority of this merchandise. As a percentage of net sales, occupancy expenses increased 0.9 percentage points for the third quarter of fiscal year 2007 and increased 0.5 percentage points for the thirty-nine weeks ended November 3, 2007 over the prior year comparable periods.