Gap (GPS)

Update on Gap Inc.’s Cost Reduction Initiatives

As part of the company’s efforts to streamline operations, the company eliminated about 1,200 positions, excluding Forth & Towne, in the second quarter of fiscal year 2007 and, as a result, recognized approximately $20 million of expenses on a pre-tax basis, the majority of which are related to severance payments.

For the first half of 2007, Gap Inc. eliminated about 1,600 positions, excluding Forth & Towne. These cost reduction initiatives resulted in approximately $25 million of expenses on a pre-tax basis during this time period, the majority of which are related to severance benefits to employees at the company’s headquarters.

In total, the company has eliminated about 2,200 positions during the first half of 2007, of which about one-third were open positions. At this point, the majority of the company’s currently planned headcount eliminations are complete. Based on the actions taken in the first half of fiscal year 2007, the total annualized cost savings from the filled positions eliminated is expected to be about $100 million on a pre-tax basis.

Update on Gap Inc.’s Cost Reduction Initiatives

As part of the company’s efforts to streamline operations, about 1,100 positions were eliminated in the second quarter of fiscal year 2007, excluding Forth & Towne. In the second quarter of fiscal year 2007, the company recognized approximately $20 million of expenses on a pre-tax basis as a result of the cost reduction initiatives, primarily related to severance payments. For the year-to-date, about 1,500 positions were eliminated, excluding Forth & Towne, and approximately $25 million of expenses on a pre-tax basis have been recognized as a result of the cost reduction initiatives.

Regarding Forth & Towne, year-to-date the company has eliminated about 550 positions. The pre-tax loss related to the discontinued operation of Forth & Towne for the second quarter of fiscal 2007 was approximately $9 million and for the year-to-date was approximately $54 million.

In total, the company has eliminated about 2,000 positions in fiscal year 2007.