Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.Mandatory Credit: Photo by AP/REX/Shutterstock (8343763d)Hold for Swayne Hall Business Photo-This is the sign on a GAP store in the Shadyside shopping district of PittsburghConsumer Spending, Pittsburgh, USA - 10 Feb 2017

Gap Inc.’s stand-out strength in the first quarter is helping its credit profile. 

Moody’s Investor Service bumped its outlook on the casualwear company’s credit rating to stable from negative, citing its “prudent” financial policies, including efforts to reduce debt while maintaining “excellent” liquidity, despite a tough year in retail.

The change comes a week after Gap posted better-than-expected first-quarter results, including a 12.6 percent increase in net income to $143 million, primarily due to gains at Old Navy and Athleta.

“The company has outperformed its peers in an extremely challenging and volatile retail environment demonstrating comparable sales growth and margin expansion and we expect new management initiatives accompanied by store rationalization and improved inventory management to gradually improve operating performance,” said Moody’s vice president Mickey Chadha.

Moody’s noted the “relatively shorter” term of store leases in the Gap portfolio, which also includes Banana Republic, saying there is “additional flexibility to rationalize its store base if needed.”

Gap has closed about 600 stores since 2008, but a recent report from Wells Fargo said the company likely needs to shutter an additional 305 doors, or 13 percent of its current base, in order to have an appropriate balance between sales and costs.

Moody’s also sees “a number of credible opportunities for growth,” in the Gap family, including more omnichannel retailing and a possible expansion of Athleta.

As for Banana Republic, Moody’s singled the brand out as one that “continues to constrain growth in overall profitability.”

While discussing Gap’s results, chief executive officer Art Peck said the new president of Banana Republic, Mark Breitbard, “knows the brand, knows the company and is hitting the ground running.”

“I’m not going to promise when we will see the progress but there are tremendous opportunities to make quick progress,” he said.

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