The Gap 2007 Annual Report Download - page 7

Dear฀Shareholder,
This฀year,฀our฀annual฀report฀looks฀different฀for฀฀
a฀reason.฀We฀are฀highlighting฀what฀will฀take฀฀
Gap฀Inc.฀to฀the฀next฀level:฀our฀people.
Gap฀began฀as฀a฀dream฀of฀Doris฀and฀Don฀Fisher,฀who฀wanted฀to฀make฀it฀easy฀to฀nd฀the฀right฀
pair฀of฀jeans.฀More฀than฀38฀years฀later,฀they฀are฀joined฀by฀approximately฀150,000฀dedicated฀
employees฀who฀believe฀in฀this฀company฀and฀what฀it฀stands฀for.฀
On฀the฀preceding฀pages,฀you฀read฀the฀stories฀of฀a฀handful฀of฀our฀employees.฀They฀are฀proudly฀
wearing฀clothes฀from฀our฀brands,฀showing฀their฀own฀style฀through฀the฀breadth฀of฀products฀
that฀our฀creative฀teams฀deliver฀every฀season.฀Joined฀by฀their฀colleagues฀around฀the฀world,฀
they฀represent฀the฀best฀of฀Gap฀Inc.฀
One฀of฀the฀primary฀reasons฀I฀accepted฀this฀job฀eight฀months฀ago฀was฀because฀of฀the฀energetic฀฀
culture฀that’s฀such฀a฀part฀of฀this฀company.฀Our฀leadership฀team฀and฀the฀passion฀of฀our฀
people฀give฀me฀the฀condence฀that฀we฀will฀deliver฀on฀our฀business฀plans฀and฀commitments.฀
The฀progress฀we฀made฀in฀2007฀is฀a฀testament฀to฀the฀strength฀of฀our฀brands฀and฀our฀฀
talented฀teams.฀
Early฀last฀year,฀Bob฀Fisher,฀who฀was฀then฀Chairman฀of฀the฀Board฀and฀who฀has฀more฀than฀฀
30฀years฀of฀experience฀with฀the฀company,฀took฀on฀the฀role฀of฀interim฀CEO.฀With฀a฀reassuring฀
hand,฀he฀guided฀the฀company฀through฀a฀time฀of฀practical฀and฀tough฀decisions,฀showing฀
employees฀the฀way฀forward.฀We฀all฀owe฀a฀debt฀of฀gratitude฀to฀Bob฀for฀his฀strong฀leadership฀
during฀this฀critical฀period.฀
Progress฀in฀2007฀included:
•฀ Evolving฀our฀business฀to฀a฀more฀brand-centric฀organization฀and฀giving฀our฀divisions฀฀
more฀autonomy;฀
•฀ Cutting฀bureaucracy฀to฀simplify฀the฀business;
•฀ Better฀managing฀inventories฀to฀drive฀healthier฀gross฀margins;
•฀ Achieving฀notable฀cost฀savings,฀and฀making฀the฀hard฀choices฀necessary฀along฀the฀way,฀
such฀as฀closing฀the฀Forth฀&฀Towne฀division;
•฀ Rening฀our฀target฀customers฀for฀each฀brand฀and฀executing฀against฀our฀demographics;
•฀ Strengthening฀our฀product฀teams,฀including฀hiring฀new฀heads฀of฀design฀for฀each฀brand,฀฀
so฀we฀can฀offer฀more฀compelling฀product;฀and
•฀ Reiterating฀our฀commitment฀to฀distribute฀excess฀cash฀to฀shareholders.฀Last฀year,฀we฀฀
returned฀nearly฀$2฀billion฀through฀dividends฀and฀share฀repurchases.
Over฀the฀last฀several฀months,฀I’ve฀referenced฀these฀results฀to฀underscore฀to฀our฀senior฀฀
management฀what฀this฀team฀has฀accomplished,฀even฀under฀challenging฀circumstances.฀฀
But฀we฀also฀realize฀we฀can฀and฀must฀do฀more.
Looking฀at฀2008,฀we฀put฀together฀strategies฀that฀we฀believe฀will฀present฀the฀highest฀
return฀for฀our฀shareholders.฀
Our฀success฀depends฀on฀serving฀our฀customers฀day฀in฀and฀day฀out,฀with฀the฀right฀product฀฀
in฀ideal฀store฀and฀online฀environments.฀This฀requires฀the฀discipline฀to฀deliver฀results฀while฀
fostering฀boundless฀creativity.฀That’s฀why฀we’re฀so฀focused฀on฀developing฀great฀leaders,฀฀
holding฀them฀accountable฀for฀what฀they฀are฀expected฀to฀achieve,฀and฀working฀hard฀to฀฀
retain฀the฀talent฀that฀is฀critical฀to฀a฀large,฀customer-facing฀company฀like฀Gap฀Inc.
Glenn฀Murphy
Chairman฀of฀the฀Board฀฀
and฀Chief฀Executive฀Ofcer
We฀recognize฀the฀important฀balance฀between฀generating฀sales฀and฀delivering฀earnings฀growth.฀Across฀our฀
seven฀operating฀divisions,฀our฀focus฀is฀to฀improve฀earnings฀results฀in฀the฀near-term,฀as฀we฀also฀position฀the฀
company฀for฀growth฀in฀the฀long-term.฀
We฀have฀placed฀a฀renewed฀focus฀on฀increasing฀return฀on฀invested฀capital,฀while฀we฀manage฀costs฀tightly฀and฀
further฀simplify฀our฀decision-making฀process.฀Given฀today’s฀volatile฀macroeconomic฀environment,฀we’re฀
being฀especially฀thoughtful฀in฀making฀the฀strategic฀investments฀in฀the฀foundational฀and฀transformational฀
initiatives฀intended฀to฀improve฀our฀business.฀
For฀example,฀we’re฀updating฀our฀inventory฀planning฀system฀to฀increase฀efciency฀and฀ensure฀an฀ideal฀
product฀assortment฀in฀stores;฀introducing฀a฀new฀labor฀management฀system฀that฀will฀boost฀productivity฀
while฀providing฀great฀service฀to฀our฀customers;฀and฀rening฀our฀capital฀spending฀to฀optimize฀our฀real฀estate฀
strategy฀and฀how฀we฀approach฀the฀company’s฀nearly฀40฀million฀square฀feet฀of฀leased฀space.
While฀we฀work฀to฀deliver฀on฀these฀priorities,฀as฀well฀as฀many฀others,฀we’re฀determined฀to฀lead฀in฀a฀way฀that฀
energizes฀our฀people,฀enables฀us฀to฀be฀nimble฀and฀creative,฀and฀reinforces฀our฀ability฀to฀innovate.
We฀believe฀successful฀execution฀of฀these฀objectives฀will฀help฀our฀brands฀improve฀performance฀and฀
regain฀market฀share฀in฀the฀long฀run.
To฀ensure฀we฀have฀strong,฀dynamic฀teams฀in฀place,฀our฀business฀leaders฀are฀working฀closely฀with฀our฀global฀
Human฀Resources฀team,฀led฀by฀Eva฀Sage-Gavin,฀to฀retain฀and฀develop฀our฀talent.฀While฀we฀recognize฀the฀
need,฀at฀times,฀to฀ll฀key฀roles฀with฀exceptional฀people฀from฀outside฀the฀company,฀our฀rst฀priority฀is฀to฀฀
provide฀opportunities฀for฀those฀within฀our฀organization฀ready฀to฀take฀on฀more.฀For฀example,฀I฀was฀thrilled฀
to฀name฀Sabrina฀Simmons฀as฀our฀Chief฀Financial฀Ofcer,฀based฀upon฀her฀record฀and฀experience฀with฀the฀
company฀and฀beyond.฀
And฀whether฀they’re฀veterans฀or฀recent฀arrivals,฀it฀is฀obvious฀to฀me฀that฀everyone฀across฀our฀divisions฀is฀
working฀extremely฀hard฀to฀deliver฀for฀our฀customers฀and฀our฀shareholders.฀Here฀are฀some฀brief฀summaries฀
of฀the฀work฀underway:
Gap
Developing฀great฀product฀is฀the฀hallmark฀of฀every฀strong฀brand.฀This฀is฀especially฀true฀for฀Gap,฀which฀will฀
enter฀its฀40th฀year฀of฀business฀in฀2009.฀With฀a฀strengthened฀team฀of฀design฀leaders,฀Gap฀is฀introducing฀
new฀product฀that฀stays฀true฀to฀Gap’s฀heritage฀of฀clean,฀classic,฀American฀design,฀yet฀relevant฀to฀today’s฀฀
consumer.฀Brand฀president฀Marka฀Hansen,฀with฀her฀20฀years฀at฀the฀company,฀brings฀a฀renewed฀sense฀of฀
purpose฀and฀clarity฀across฀her฀organization.฀She’s฀also฀instilling฀a฀culture฀that฀balances฀creativity฀with฀
executing฀on฀key฀priorities.฀Under฀the฀guidance฀of฀its฀leadership฀team,฀Gap฀has฀worked฀to฀further฀clarify฀
its฀brand฀promise฀for฀Adult,฀GapKids,฀babyGap฀and฀gapbody.฀And,฀with฀new-found฀condence฀and฀pride,฀
Gap’s฀store฀employees฀act฀as฀brand฀ambassadors,฀working฀to฀present฀an฀exciting฀store฀experience฀for฀our฀
customers.
Old฀Navy
With฀new฀leadership฀in฀place,฀Old฀Navy฀continues฀to฀rene฀its฀brand฀strategy฀to฀build฀on฀its฀2007฀progress.฀
We฀now฀communicate฀with฀customers฀through฀a฀more฀integrated฀marketing฀approach,฀featuring฀channels฀
such฀as฀online฀and฀direct฀mail,฀as฀well฀as฀enhanced฀in-store฀visuals.฀This฀has฀helped฀improve฀perceptions฀of฀
Old฀Navy฀as฀a฀destination฀for฀on-trend฀product.฀We฀also฀introduced฀a฀signicantly฀faster฀product฀development฀
process฀that฀is฀helping฀us฀increase฀our฀competitiveness฀and฀respond฀more฀quickly฀to฀ever-evolving฀trends.฀
Now,฀under฀acting฀brand฀president฀Tom฀Wyatt,฀who฀successfully฀led฀our฀Outlet฀division฀this฀past฀year,฀the฀
team฀is฀focused฀on฀a฀more฀disciplined฀approach฀to฀managing฀expenses฀and฀inventory฀levels฀while฀returning฀
Old฀Navy฀to฀its฀leadership฀position฀as฀our฀customers’฀rst฀choice฀for฀style฀and฀quality฀at฀value฀prices.฀
Banana฀Republic
At฀its฀core,฀a฀great฀brand฀knows฀itself.฀This฀is฀true฀for฀Banana฀Republic,฀which฀celebrates฀its฀30th฀anniversary฀
this฀year.฀Having฀distinguished฀itself฀as฀a฀leader฀in฀accessible฀luxury,฀everything฀about฀Banana฀Republic฀
conveys฀this฀positioning—from฀our฀employees,฀store฀environment,฀and฀beautiful฀product฀collections,฀as฀
well฀as฀through฀our฀incredibly฀loyal฀customer฀following.฀Brand฀president฀Jack฀Calhoun฀and฀his฀team฀know฀
the฀potential฀of฀a฀strong฀brand฀and฀how฀to฀leverage฀it.฀New฀product฀categories,฀such฀as฀personal฀care฀฀
and฀eyewear฀that฀launched฀last฀year,฀are฀natural฀additions฀to฀Banana฀Republic’s฀rich฀heritage฀as฀a฀lifestyle฀
brand.฀Looking฀forward,฀we฀remain฀focused฀on฀delivering฀elevated฀essentials฀and฀seasonal฀collections฀while฀
expanding฀through฀licensing฀and฀partnership฀agreements.฀
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