Gap (GPS)

FORTH & TOWNE STORE CONCEPT

SAN FRANCISCO – February 26, 2007 – Gap Inc. (NYSE:GPS) today announced that following a thorough assessment of its store concept, Forth & Towne, it has decided it will not move forward with a full roll-out. As a result, the company will close its Forth & Towne store concept after an 18-month pilot that began August 2005.

While the company was encouraged by the initial performance of Forth & Towne, a thorough analysis revealed the concept was not demonstrating enough potential to deliver an acceptable long-term return on investment. Instead, the company believes that future investments should be focused on turning around its Gap and Old Navy brands as well as supporting other growth initiatives that have greater potential of creating shareholder value.

“Forth & Towne was a great test of a promising concept and an illustration of the innovative risks you need to take in our business,” said Bob Fisher, Gap Inc.’s chairman of the board and interim president and CEO. “We made the tough decision to close the brand and focus our efforts on stabilizing the existing businesses.”

“I want to thank the talented Forth & Towne team for their hard work in bringing this brand to life,” said Gary Muto, President of Forth & Towne.

The company plans to close its 19 Forth & Towne stores located in 10 U.S. markets. Closures are expected to occur by the end of June 2007. The company anticipates the pre-tax expenses associated with the closure of Forth & Towne to be approximately $40 million which will be recognized primarily over the first and second quarters of fiscal year 2007.

The closure will impact about 550 employees. Gap Inc. is looking at ways to redeploy employees to positions in its Gap, Banana Republic and Old Navy brands, where feasible.