Banana Republic 2005 Annual Report Download - page 5

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LETTER TO SHAREHOLDERS
Most notably, this past year we built completely
new online systems, resulting in what The New York
Times reported are among the best e-commerce
sites in retail. And we continue to receive feedback
from customers that these changes have signifi cantly
improved their online shopping experience.
These operational improvements have built a strong
foundation for our long-term growth strategies.
And in 2005, we made great progress on key growth
initiatives.
First, Gap Inc.’s square footage increased 3 percent
in 2005, driven by store growth at Old Navy. We will
continue to open new Old Navy stores in 2006.
Second, we expanded our brands internationally,
opening an additional 13 Gap stores and introducing
Banana Republic in Japan. To help us become more
relevant to customers in each market, we built local
merchandising and marketing teams, as well as a
dedicated international design team. We also
developed an international franchising capability,
allowing our brands to enter smaller, more fragmented
markets. Our fi rst agreements include planned expan-
sion to Singapore and Malaysia beginning in 2006.
Finally, we successfully launched our fourth brand,
Forth & Towne, in Chicago and New York, fi lling a
need in the marketplace to better serve boomer
women. We’ve received consistent feedback from
customers thanking us for the exceptional service,
dependable fi ts and great style. We look forward to
bringing Forth & Towne to four to fi ve additional U.S.
markets in 2006.
While we are proud of these accomplishments, we
were disappointed with our 2 percent decline in net
sales and 5 percent decline in comparable store sales
in 2005. Refl ecting on the past several quarters, as
we made necessary shifts to ensure the company’s
long-term success, at times this created short-term
distractions for our teams. Today our teams under-
stand that, most importantly, we must offer inspiring
product.
Reconnecting with our customers
Our iconic brands continue to be our greatest assets.
Women’s Wear Daily named Old Navy and Gap the
most recognizable brands in sportswear in 2005.
We’ve built a tremendous loyalty with our customers,
which has helped us weather the ups and downs
inherent in the fashion industry. To win back the
customers we’ve disappointed, we will deliver
great product, supported by effective marketing and
compelling store experiences.
Gap is focused on re-establishing the brand’s iconic
positioning. Our product design is true to Gap’s
heritage and will help us regain our authority in key
categories. We developed a new store design to
improve the customer experience, and began rolling
it out across the fl eet.
gap inc. 2005 annual report
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