S&P Reduces Gap to Junk

The Standard & Poor's credit rating for The Gap (San Francisco) was lowered to “junk” status yesterday (Thursday, Feb. 14, 2002).

S&P explained its evaluation by citing “increased competition, merchandising blunders and a glut of stores.” S&P said the owner of Gap, Old Navy and Banana Republic “faces significant challenges in turning around the performance of each of its brands.”

Gap's same-store sales have dropped for 21 consecutive months, and later this month it expects to report its first back-to-back quarterly losses in 25 years.

While Gap assured that it has received a commitment for a $1.3 billion credit line from banks, the lower S&P ratings will make it more expensive for the retailer to borrow money.