By and  on March 4, 1994

NEW YORK -- Earnings at The Gap Inc. shot up 66 percent in the fourth quarter, boosted by improved margins at The Gap, GapKids and Banana Republic divisions.

In addition, the company is accelerating its expansion, planning about 200 new units this year, including the rollout of its Gap Warehouse concept under a new name -- Old Navy Clothing Company.

The first two Old Navy units are slated to open next Friday in two towns in the San Francisco area, Colma and Pittsburg. The plan is to have a fleet of 45 units operating this year. Old Navy Clothing Company represents a refinement of the 45 Warehouse stores already operating. The stores will be bigger than the Warehouses, with about 15,000 square feet of space for selling women's, men's, children's and infants' apparel at prices lower than those at traditional Gap stores.

In the quarter ended Jan. 29, earnings at the San Francisco-based retailer rose to $109.3 million, or 75 cents a share, from $65.7 million, or 46 cents. Sales climbed 14 percent, to $1.06 billion from $930.2 million, with same-store sales up 4 percent.

For the year, earnings rose 23 percent, to $258.4 million, or $1.78, from $210.7 million, or $1.47. Sales rose 11 percent, to $3.3 billion from $2.96 billion with same-store sales up 1 percent.

Donald G. Fisher, chairman and chief executive officer, said the earnings increase for the year was "especially gratifying" since profits dropped in the first half of 1993.

"Merchandise margins improved at all divisions, the result of an increased emphasis on fashion merchandise, better inventory management, and fewer markdowns. Additionally, GapKids and International turned in strong sales performances for the year," Fisher said.

The company told analysts Thursday that same-store sales at the Gap chain dipped slightly in the quarter, while Banana Republic was up modestly and GapKids rose sharply. All three divisions, however, posted strong margin improvement.

The Gap's earnings in the quarter -- 75 cents a share -- topped Wall Street estimates of 70 to 72 cents a share. Shares of The Gap climbed 1 1/8 to 46 1/8 Thursday on the New York Stock Exchange. "The Gap's numbers were just terrific," said Bruce M. Missett, at Morgan Stanley. "The bottom line is that they managed their business incredibly well, in product content and gross margins."

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