Gap Inc.

Horizontal Analysis Vertical Analys

Period ending 2007 2006 2005 2007 2006 2007
Net Sales 15943000 16023000 16267000 1.612685 1.620777 100%
COGS and occupancy ex 10294000 10154000 9886000 1.04127 1.027109 65%
Gross Profit 5649000 5869000 6381000 1.314944 0.593668 35%
OPEX 4475000 4124000 4296000 1.041667 0.417156 28%
Loss on early retirement 0 0 105000 0 0 0%
Interest Expense 41000 45000 167000 0.009544 0.004552 0%
Interest Income 131000 93000 59000 0.030493 0.009407 1%
Earnings before income 1264000 1793000 1872000 0.294227 0.181368 8%
Current Income Taxes 564000 765000 776000 0.131285 0.077382 4%
Deferred income taxes -78000 -85000 -54000 -0.018156 -0.008598 0%
Net Earnings 778000 1113000 1150000 0.181099 0.112583 5%
Vertical Analysis
2006 2005
100% 100%
63% 61%
37% 39%
26% 26%
0% 1%
0% 1%
1% 0%
11% 12%
5% 5%
-1% 0%
7% 7%
 Horizontal Analysis
Fiscal Year Ended 2010 2009 2008 2010
ASSETS
Current Assets
CCE 2,074,000.00 2,090,000.00 3,260,000.00 0.636196
STInv 570,000.00 952,000.00 817,000.00 0.697674
Receivable 156,000.00 - - #DIV/0!
Inventory 1,796,000.00 1,696,000.00 1,814,000.00 0.990077
OCA 433,000.00 501,000.00 413,000.00 1.048426
Total Current Assets 5,029,000.00 5,239,000.00 6,304,000.00 0.797747
PPE 3,197,000.00 3,246,000.00 3,376,000.00 0.946979
OA 131,000.00 336,000.00 368,000.00 0.355978
DEFERRED LTA 187,000.00 - - #DIV/0!
TOTAL ASSETS 8,544,000.00 8,821,000.00 10,048,000.00 0.850318

LIABILITIES AND EQUITY

Current Liabilities
AP 1,947,000.00 1,942,000.00 2,242,000.00 0.868421
S/C LTD 325,000.00 - - #DIV/0!
TCL 2,272,000.00 1,942,000.00 2,242,000.00 1.013381
LTD 188,000.00 513,000.00 1,886,000.00 0.099682
OL 910,000.00 941,000.00 984,000.00 0.924797
TOTAL LIABILITIES 3,370,000.00 3,396,000.00 5,112,000.00 0.659233

SHE
COMMON 55,000.00 54,000.00 49,000.00 1.122449
RE 8,646,000.00 8,133,000.00 7,181,000.00 1.204011
T/S (6,235,000.00) (5,210,000.00) (3,238,000.00) 1.925571
CSURPLUS 2,631,000.00 2,402,000.00 904,000.00 2.910398
OSHE 77,000.00 46,000.00 40,000.00 1.925
TOTAL EQUITY 5,174,000.00 5,425,000.00 4,936,000.00 1.048217

TOTAL LE 8,544,000.00 8,821,000.00 10,048,000.00 0.850318

Horizontal Analysis Vertical Analysis
2009 2010 2009 2008

0.641104 24% 24% 32%

1.165239 7% 11% 8%
#DIV/0! 2% 0% 0%
0.93495 21% 19% 18%
1.213075 5% 6% 4%
0.83106 59% 59% 63%
0.961493 37% 37% 34%
0.913043 2% 4% 4%
#DIV/0! 2% 0% 0%
0.877886 100% 100% 100%

0.866191 23% 22% 22%

#DIV/0! 4% 0% 0%
0.866191 27% 22% 22%
0.272004 2% 6% 19%
0.956301 11% 11% 10%
0.664319 39% 38% 51%

1.102041 1% 1% 0%
1.132572 101% 92% 71%
1.609018 -73% -59% -32%
2.65708 31% 27% 9%
1.15 1% 1% 0%
1.099068 61% 62% 49%

0.877886 100% 100% 100%

 GAP
Year
Liquidity Ratios Industry Median
2007 2006 2005
Current Ratio 2.21 2.70 2.81
2.47

Quick Ratio 1.23 1.57 1.82

0.5681
Year
Stability Ratios
2007 2006 2005
Debt Ratio 0.39 0.38 0.51
0.405

Equity Ratio 0.61 0.62 0.49

0.595

Debt-to-Equity Ratio 0.65 0.63 1.04

0.681
Year
Profitability Ratios
2007 2006 2005
Return on Sales
Gross Profit Margin 0.35 0.37 0.39 42%
Net Profit Margin 0.05 0.07 0.07 5.05%
Return on Investment

Return on Assets (ROA) 0.09 0.12

6.90%

Return on Equity (ROE) 0.15 0.21

10.80%
Year
Activity Ratios
2007 2006 2005
Inventory turnover 5.90 5.79
3.80

Days of sales
61.91 63.09
outstanding (DSO)
96
 Score Ave

/ 5

0.66 5 5

/ 6

/ 6

/ 6 6

/ 4
7 5.5

/ 7

/ 7 7

/
0.264706

0.166667
0.229508
 FP

AGGRESSIVE
CONSERVATIVE
- Backward, forward, horizontal integration
- Market Penetration
- Market Penetration
- Market Development
- Market Development
- Product Development
- Product Development
- Related Diversification
- Diversification (Related or Unrelated)

(2,1)

CP

DEFENSIVE COMPETITIVE
- Retrenchment - Integration Strategies
- Divestiture - Market Penetration
- Liquidation - Market Development
- Product Development

SP
RESSIVE
d, horizontal integration
n
ent
ent
lated or Unrelated)

IP

TITIVE
Strategies
etration
elopment
velopment
 Internal Strategic Position External Strategic Po

Financial Position (FP) Rating Rationale Stability Position (SP)

ROA and ROE are above the

industry medians however
they are decreasing in
Return on Investment +5 movement. Technological Changes

Gross profit is generally

decreasing - due to sales
decreasing while cost of
Gross Profit Margin +4 sales are increasing. Rate of Inflation

There are ample amount

Liquidity +4 idle assets yet to be utilized. Demand Variability

Gap is able to sell its

inventory shorter than the
Inventory Turnover +6 industry median. Risk Involved in the business
Earnings per share +4 EPS are declining. Competitive Pressure
AVERAGE 4.6 AVERAGE

+7 = best, +1
Industry Position (IP) Rationale Competitive Position (CP)
= worst

Growth Potential +5 Technological Know-how

It has means and

opportunities to globally
expand or expand its
products. Growth however
is still dependent on the
proactiveness of Gap to the
varying customs and
preferences of markets Control over
Profit Potential +4 targeted to be explored. suppliers/distributors
 The firm has good stability
Financial Stability +6 ratio results. International Markets

The firm's quick ratio being

above the industry median
Resource Utilization +4 by 0.66 entails idle assets. Product Quality

The firm's debt-to-equity

ratio suggests a good capital
Extent Leveraged +6 structure. Market share
AVERAGE 5 AVERAGE
External Strategic Position

Rating Rationale RESULTING

COORDINATE

Gap has already

developed credit card
programs and
continously improving its
-2 interactive online stores.

Input costs will increase

due to projected increase
in the rate of inflation,
which means its COS will
increase further -
entailing a need to
increase sales price,
which is not good since
consumers are resorting
to discount stores and
-5 the like.

Consumer preferences
and tastes plus the
occassional needs are
inherent to the apparel
-4 industry.

Apparel industry is a
stable industry, however
vulnerable to negative
economic forces like
inflation rates and the
-3 like.
 Gap owns three of the
strongest apparel brands
and its sales rank second-
highest among its
competitors. However,
low costs and stores
using promotional pricing
add pressure to Gap's
competitive
-4 environment. Y-AXIS
-3.6 1

-1 = best, -7
Rationale
= worst

Gap has already

developed credit card
programs and
continously improving its
-2 interactive online stores.

Since Gap is still

considering point-of-sale
technologies that'll
improve better tracking
and communication
flows in terms of its
inventories, it suggests it
hasn't fully attained
control over its
distributors. Likewise,
since it doesn't have
control on its cost of
sales which must be
directly related to sales,
Gap has no control over
-4 its suppliers.
 As compared to its
competitors, it is the
most expanded apparel
firm - having to expand
to all 50 states of US,
Canada, France, UK and
-2 Japan.

Product Quality has

always been its
paramount priority.
However, in its marketing
information, it delineated
that it had to win back
disappointed customers.
This is however
compensated by the fact
that it is starting to
introduce a collection of
high-quality products as
-3 per its Old Navy brand.

Gap was able to regain a

high investment grade
from Standard & Poor's
and Moody's. However,
this is compensated by
the declining profits of
-4 the firm. X-AXIS
-3 2