Fitch Upgrades Gap Debt

The Fitch upgrade raises the rating on The Gap Inc.'s $1.9 billion of senior unsecured notes to 'BBB-' from 'BB+ and reflects "Gap's success at improving its merchandising and store efficiencies," the ratings service said. It also cited "increased operating profits and cash flow generation, as well as a strengthened balance sheet," pointing out that Gap's management team since 2003 has focused on improving store merchandise, its supply chain, and store efficiencies. "Gap has utilized its substantial cash flow to significantly reduce debt," Fitch said, echoing comments from the company and from analysts in recent months. In November, for example, GlobeSt.com reported that progress on the financial front, including debt reduction, drew congratulatory remarks from analysts participating in Gap's quarterly conference call. In its upgrade Wednesday, Fitch noted that Gap has reduced debt by $1.5 billion to $1.9 billion. Nonetheless, the rating agency pointed out that Gap's recent same store sales trends "remain a concern as overall same store sales have been negative in six of the past seven months."

Gap's own announcement Wednesday, the expansion of its GapBody chain, listed 11 additional store locations for the sub-brand, which was launched in 1998. GapBody carries a mix of lingerie, personal care products, lounge fashions and active wear, swimwear and a new fragrance line called Gap Scent Editions that is slated to appear in stores this March.

The new GapBody locations, due to open Jan. 24, will be at the Arboretum in Charlotte, NC; the Mayfair Shopping Center in Commack, NY; the South Coast at Crystal Court in Costa Mesa, CA; the Shops at Sommerset in Glastonbury, CT; Friendly Shopping Center in Greensboro, NC; Girard Avenue in La Jolla, CA; Downtown Naperville in Naperville, IL; the Ridgewood in Ridgewood, NJ; Village of Rochester Mall in Rochester, MI; Southbury Green in Southbury, CT; and Utica Square in Tulsa, OK.