Gap Restatement Boosts Profit

Final net earnings for the 2004 fourth quarter rose to $378 million from the previously reported $370 million as a result of the change, while the earnings per share remained at 40 cents. For the full year, earnings rose to $1.2 billion from the previously state $1.1 billion, with per-share profit climbing to $1.21 from the previously reported $1.20. The restatements increased earnings by $600,000 in 2003 and by $300,000 in 2002.

In addition to focusing on the earnings restatement and other financial matters, Gap's conference call regarding the lease accounting issue also touched on some of the company's marketing and expansion plans. In answer to questions from financial analysts, for example, the company said that it now operates 23 of its new Banana Petites locations and is "considering potential roll-outs for the future" because the new brand has done well. The Old Navy Maternity brand is now in more than 200 stores, the company reported, Gap Maternity is in about 63 and Old Navy Plus in about 65 locations.

Also in answer to analysts' questions, company officials said that expansion and realignment for fiscal 2004 would remain the same as were detailed in its third-quarter earnings report. That report projected that it would end the 2004 fiscal year with 125 new store openings and 160 closings, but the company's net square footage was expected to remain about the same. Final results are expected in its annual report, which the company plans to issue within the month.

The changes in lease accounting Gap cited, which are basically the same changes other retailers are looking at, have to do with whether the companies recognize lease expenses at the time of store openings or at the time they begin construction of stores, along with other details about how and over what period of time the rent and construction costs are accounted for.Gap Inc. operates 3,001 stores in the United States, the United Kingdom, Canada, France and Japan.