Banana Republic 2005 Annual Report Download - page 4

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None of us is satisfi ed with our overall 2005
business performance—we know we can do better.
Building on our foundation of iconic brands, strong
balance sheet, solid operations and talented people,
we are aggressively taking actions to win back the
customers we’ve disappointed.
Despite disappointing top line results, we have
continued to focus on creating value for our share-
holders. In 2005, we generated nearly $1 billion in
free cash fl ow,* enabling us to complete a $2 billion
share repurchase program and double our dividend
to 18 cents per share. Refl ecting our ongoing con-
fi dence in generating strong cash fl ow, we plan to
continue our share repurchase program and increase
our dividend to 32 cents per share in 2006.
Building a strong platform for growth
Just fi ve years ago, Gap Inc. faced one of the most
challenging periods in its history. Over the past three
years, I’m proud that we have set the company on
a course for sustainable, long-term health.
We strengthened our balance sheet, eliminating
$2.9 billion in debt since 2002 and ending 2005 with
$3 billion in cash and investments. We improved
our operations by developing stronger relationships
with sourcing vendors; building a consumer insights
capability; optimizing our store fl eets; and incorporat-
ing more disciplined inventory management.
In 2005, we continued to build on these operational
improvements, reducing our sourcing vendor base
by 10 percent; creating a new customer experience
survey for all brands; closing more than 100 under-
performing Gap stores; and allocating Gap and Old
Navy’s product sizes based on each store’s unique
selling history.
Paul S. Pressler
President and
Chief Executive Offi cer
letter to shareholders
2 gap inc. 2005 annual report
*See the reconciliation of free cash fl ow, a non-GAAP fi nancial measure,
to a GAAP measure in the table on page 13.