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2008฀Annual฀Report:฀Shareholder฀Letter
Gap฀Inc.฀today฀is฀about฀a฀lot฀
more฀than฀it฀was฀15,฀25฀or฀40฀
years฀ago.฀฀
Our฀long-term฀strategy฀is฀anchored฀on฀maximizing฀
the฀earnings฀potential฀of฀our฀brands฀and฀taking฀ad-
vantage฀of฀the฀many฀growth฀opportunities฀through฀
our฀Outlet,฀International฀and฀Online฀businesses.฀฀
At฀the฀same฀time,฀we’re฀getting฀better฀at฀applying฀
the฀knowledge฀we฀gain฀in฀one฀part฀of฀the฀world฀to฀
stand฀out฀in฀another.
Outlet
Our฀Outlet฀stores฀are฀especially฀well฀positioned฀given฀
the฀recent฀economic฀shifts.฀The฀company’s฀already฀
strong฀U.S.-based฀Outlet฀business฀became฀even฀more฀
successful฀in฀2008,฀and฀that฀has฀motivated฀us฀to฀
expand฀further,฀both฀in฀North฀America฀and฀abroad.฀
With฀more฀than฀300฀stores฀in฀the฀U.S.฀and฀Canada,฀
some฀Gap฀Outlet฀and฀Banana฀Republic฀Factory฀Stores฀
were฀among฀the฀most฀productive฀in฀our฀entire฀฀
fleet,฀offering฀customers฀the฀established฀products,฀
such฀as฀logo-wear฀items,฀they฀expect฀to฀find฀at฀
exceptional฀value.
International
Our฀brands฀also฀increased฀our฀total฀sales฀outside฀
North฀America฀in฀2008฀as฀we฀challenged฀ourselves฀
to฀have฀the฀flexibility฀to฀be฀a฀global฀company฀that฀
acts฀locally.฀฀
With฀more฀than฀300฀stores฀outside฀the฀U.S.,฀Gap฀is฀
well฀known,฀and฀still฀has฀plenty฀of฀room฀to฀grow.฀฀
We฀believe฀having฀our฀Gap฀team฀in฀New฀York฀set฀the฀
design฀aesthetic฀for฀the฀brand฀globally฀will฀enable฀us฀
to฀present฀the฀brand฀in฀a฀consistent฀way฀worldwide.
Banana฀Republic฀also฀has฀strong฀name฀recognition,฀
with฀an฀international฀presence฀that฀includes฀suc-
cessful฀Japan฀and฀U.K.฀stores.฀We฀see฀even฀more฀
opportunity฀in฀new฀markets฀where฀an฀expanding฀฀
middle฀class฀is฀creating฀additional฀potential฀for฀our฀
accessible฀luxury฀brand.
We’re฀expanding฀this฀international฀presence฀in฀2009฀
by฀adding฀about฀25฀Gap,฀Banana฀Republic฀and฀Outlet฀
stores฀that฀we฀will฀operate.฀
In฀addition,฀our฀franchise฀business฀continues฀to฀devel-฀
op฀quickly฀and฀impressively.฀To฀date,฀we฀have฀opened฀
more฀than฀120฀Gap฀and฀Banana฀Republic฀stores฀฀
in฀14฀countries.฀In฀2009,฀we฀plan฀to฀expand฀our฀
portfolio฀in฀four฀more฀countries,฀and฀add฀nearly฀60฀
additional฀stores.
Online
Our฀Online฀division฀improved฀its฀sales฀by฀14฀percent฀
last฀year,฀passing฀the฀$1฀billion฀revenue฀threshold.฀
This฀growth฀was฀largely฀due฀to฀investments฀made฀over฀
the฀past฀several฀years฀to฀create฀a฀new฀e-commerce฀
platform,฀including฀our฀2008฀launch฀of฀“universality,”฀
which฀allows฀customers฀to฀purchase฀from฀all฀our฀
brands฀in฀one฀shopping฀cart,฀with฀one฀shipping฀fee.
Piperlime,฀our฀online฀shoe฀and฀handbag฀shop,฀celebrat-
ed฀its฀second฀birthday฀and฀has฀been฀a฀hit.฀Piperlime’s฀
brand฀momentum฀will฀allow฀us฀to฀expand฀into฀new฀
products฀in฀the฀near฀future.฀
Our฀online฀platform฀is฀also฀one฀reason฀we฀made฀our฀
first฀acquisition฀in฀more฀than฀20฀years:฀Athleta,฀a฀
premiere฀women’s฀sports฀and฀active฀apparel฀company.฀
Athleta฀fits฀nicely฀in฀our฀portfolio฀and฀enjoys฀high฀
brand฀loyalty฀with฀its฀customers.฀We฀plan฀to฀have฀
the฀brand฀fully฀integrated฀into฀our฀online฀shopping฀
experience฀in฀early฀2009.
Looking฀ahead,฀we฀plan฀to฀extend฀our฀online฀business฀
into฀Canada฀and฀the฀U.K.฀in฀2010.
Doing฀What’s฀Right
Gap฀Inc.฀is฀full฀of฀passionate,฀talented฀people฀who฀have฀
the฀experience,฀tenacity฀and฀wherewithal฀to฀match฀
any฀challenge.฀We’ve฀had฀to฀be฀tough-minded฀this฀
past฀year,฀but฀we฀never฀wavered฀in฀our฀commitment฀
to฀run฀our฀business฀in฀an฀ethical฀manner.฀We฀know฀
that฀operating฀in฀a฀socially฀responsible฀way฀brings฀
sustained,฀collective฀value฀to฀our฀shareholders,฀our฀
employees,฀and฀our฀customers.฀Forty฀years฀ago,฀Doris฀
and฀Don฀instilled฀these฀beliefs฀into฀Gap,฀and฀that฀
spirit฀is฀still฀very฀much฀alive฀in฀our฀company฀today.
For฀instance,฀last฀year฀we฀provided฀in-kind฀contribu-฀
tions฀of฀more฀than฀$10฀million฀and฀invested฀$15฀฀
million฀in฀nonprofit฀organizations฀around฀the฀world.฀฀
This฀includes฀more฀than฀$4฀million฀generated฀through฀
our฀Give฀&฀Get฀events฀where฀we฀donated฀five฀percent฀
of฀sales฀to฀specific฀nonprofits.฀In฀addition,฀our฀em-
ployees฀invested฀nearly฀270,000฀hours฀through฀our฀
employee฀volunteer฀programs.