Gap (GPS)

Company Expects to Report Second Quarter Earnings Per Share of $0.13 to $0.15

SAN FRANCISCO – August 3, 2006 – Gap Inc. (NYSE: GPS) today reported net sales of $1.05 billion for the four-week period ended July 29, 2006, which represents a 1 percent increase compared with net sales of $1.04 billion for the same period ended July 30, 2005. The company’s comparable store sales for July 2006 decreased 4 percent compared with a 4 percent decrease in July 2005.

Comparable store sales by division for July 2006 were as follows:

Gap North America: negative 13 percent versus negative 8 percent last year

Banana Republic North America: flat sales versus positive 7 percent last year

Old Navy North America: flat sales versus negative 5 percent last year

International: negative 6 percent versus positive 4 percent last year

“We put a strategic plan in place this year to improve product, refresh stores, and support our brands to achieve better results in the second half of the year and beyond,” said Sabrina Simmons, senior vice president, treasury and investor relations. “As part of this plan, Gap and Old Navy decided to take aggressive markdowns in July to clear product and enable a clean presentation of fall assortments, which arrived late in the month. This resulted in July merchandise margins significantly below last year.”