Gap (GPS)

Q1 EPS of $0.25, Excluding Loss Associated with Forth & Towne

SAN FRANCISCO – May 24, 2007 – Gap Inc. (NYSE: GPS) today reported net earnings for the first quarter, which ended May 5, 2007, of $178 million, or $0.22 per share on a diluted basis, compared with $242 million, or $0.28 per share, for the first quarter of last year. For the first quarter of 2007, diluted earnings per share were $0.25, excluding the loss associated with Forth & Towne of $45 million, or $0.03 per share. Please see the reconciliation of diluted earnings per share excluding Forth & Towne’s net loss, a non-GAAP financial measure, to a GAAP financial measure in the table at the end of this release.

First quarter net sales were $3.56 billion, compared with $3.44 billion for the first quarter of last year. Due to the 53^rd week in fiscal year 2006, first quarter 2007 comparable store sales are compared with the thirteen-week period ended May 6, 2006. On this basis, comparable store sales decreased 4 percent, compared with a decrease of 9 percent as reported for the first quarter of 2006. The company’s online sales for the first quarter were $195 million, compared with $159 million for the first quarter of last year.

“We are actively working to fix our core business, retain and recruit talent, and streamline operations so that our organization can be more nimble and efficient,” said Bob Fisher, interim president and chief executive officer at Gap Inc. “We took important steps in the first quarter by strengthening leadership teams and refining strategies at Gap and Old Navy. While we are making progress, there is more work to be done.”