Mark Webb – Vice President of Investor Relations Sabrina L. Simmons – Executive Vice President and Chief Financial Officer Glenn K. Murphy – Chairman and Chief Executive Officer

Michelle Tan - Goldman Sachs Janet Kloppenburg - JJK Research Paul Lejuez - Credit Suisse John Morris - BMO Capital Markets Christine Shen – Needham and Co. Michelle Clark – Morgan Stanley Kimberly Greenberger – Citigroup Sam Panella – Raymond James Brian Tunick - J.P. Morgan Adrienne Tennant - Friedman, Billings, Ramsey & Co.

Welcome everyone to the Gap Inc. fourth quarter 2009 conference call. (Operator Instructions) I would now like to introduce your host, Mark Webb, Vice President of Investor Relations.

: For those of you participating in the webcast, please turn to Slides 2 and 3. I would like to remind you that the information made available on this webcast and conference call contains forward-looking statements including those identified in today’s earnings press release, which is available on gapinc.com, as well as other statements that express our expectations, anticipations, beliefs, estimates, intentions, plans and forecasts. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements. Information regarding factors that could cause results to differ can be found in our annual report on Form 10-K for the fiscal year ended January 31, 2009. Investors should also consult our quarterly report on Form 10-Q for the quarter ended October 31, 2009, and today’s press release. Future economic and industry trends that could potentially impact net sales and profitability are difficult to predict. These forward-looking statements are based on information as of February 25, 2010, and we assume no obligation to publicly update or revise our forward-looking statements, even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. This presentation includes the non generally accepted accounting principal measure, free cash flow, which under SEC Regulation G we are required to reconcile with GAAP. The reconciliation of this measure to the GAAP financial measure is included in today’s earnings press release which is available on gapinc.com. Joining us on the call today are Chairman and CEO, Glenn Murphy, and Executive Vice President and CFO, Sabrina Simmons. Now I would like to turn the call over to Glenn.

Thank you Mark. Good afternoon everybody. In a few minutes I will hand it over to Sabrina but before that I thought I would spend a few minutes personally on 2009 which was a very good year for the business. We feel good about our accomplishments, our execution level and more importantly how we have positioned the business for 2010. I will spend a few minutes on 2010 because there is a bit of an evolution to how we are approaching the business. First, on 2009’s financials we were pleased with our financial performance. You have seen the press release. Again, you are going to hear from Sabrina. But on some of the key metrics that any good retail organization looks at we had a good year. We started to see the comp performance of the business move but as you have heard us talk about in 2009 we are beginning to work on traffic, starting to plant the seeds and now as our economic model is in place and the consumer looks to us to be a little more responsive in 2010 I think it was a good sign in the fourth quarter Gap, Inc. was able to achieve a plus 2 comp. Our free cash flow was $1.6 billion. We maintained our cost discipline. Granted we had some target investments that we made. We felt they were important but we maintained that discipline inside the business which is critical to me. We have worked so hard to take out the SG&A we have taken out in the last two years. Now the money only goes when there is a justifiable, strategic reason and we can quantify the return. With these results and the third year in a row of improving financial metrics you won’t hear anybody in this business talk about a turnaround plan. We have put our plans in place in 2007. We have executed it. We have been disciplined. We have been committed. In our opinion we can now evolve the business and start talking about how the business is going to grow, move forward and compete and win. We know the work going forward is still going to be challenging. We accept that challenge, but the business now is better positioned. It has a leaner, better economic model. The balance sheet is strong. The management team is secure. Now we look forward to the next set of challenges in 2010. Speaking of 2010, we are definitely going to keep these key financial metrics. They will be top of mind for us. We are going to continue to work hard to improve every single one of them and we will continue our commitment of redistributing cash to shareholders. We just authorized another $1 billion of share buyback program and we are increasing our dividend by 18% in 2010, up to $0.40 per share. That is a commitment we have had for greater than five years. We will continue to have that commitment going forward. As we have talked before at either industry conferences or on these quarterly conference calls, we look at our business in two different ways. We have our North American bricks and mortar business. We have our international and online business. So first of all in our North American bricks and mortar business we need and we will gain market share in 2010. Instead of taking you through brand by brand, I am sure there will be some questions later on brand specific, I may just take you through some common themes in how we are looking at our business. First and foremost stores. In 2009 we developed new prototypes, new store models for every one of our brands. Old Navy started with five. We finished the year with 60. We will now do 180 additional Old Navy remodels within the first half of 2010. There will be 20 additional stores which are relocations and repositioned but to bring the total Old Navy new project [ones] to 200 and by the end of the year of Tom’s 1,000 plus store fleet there will be over 250. That is a big commitment for us. We have put the team in place, the processes. We have the costs down per foot. We know the return. We know what it is worth to us and how customers respond to it. That is a commitment for us in Old Navy. Again, plan to grow market share. The Gap Store prototype was done in Dallas in September. Gap business is about consolidations and reduction in square footage. Any time we can get a consolidation or reduced store footage we will put our new store model in place. Banana Republic has a brand new store model that was done in three locations but most recently in Scottsdale. I was in checking that out with Jack and his team. Our outlook business also has brand new, innovative, current relevant look. Mostly the outlet business will be new locations but also we plan to do some remodels and some relocations. The second comment you are going to hear about is marketing. How do we make use of the money, make sure it is cost effective, make sure there is a return and make sure it actually has as you have heard us speak about before a call to action. We are just not going to arbitrarily put marketing out to our consumers if there is not a call to action. I think we really started the year off right in 2009 with the Super Modelquin campaign. It has been a very successful, creative platform for us. We are going to continue to evolve it and challenge it and make it invigorating. I think you will see that right now with the campaign that is going on today which is Super Modelquin search. That is a good marketing platform to express our strong value, be aggressive at Old Navy but have a way to do it in Old Navy’s language. The Gap relaunch on denim provided to us a very good marketing platform. You saw us come on in February to launch a Baby Gap denim of the same 1969 platform. We will be relaunching kid’s denim in the summer off that platform and we are just now finding a way to speak more about product at Gap and use the marketing as a means to communicate the unique products, the value behind it and the attributes that make those products special. Banana Republic’s new marketing platform you might have seen it in our stores. I think we feel good about that. The third theme is we spent a lot of time last year and continue to tighten this up in 2010 is what is the value proposition of our brands. This is again, value is not just about price. Value in a larger scheme is not overpaying for quality. Whether that is Banana Republic and some of the products in there and some of the quality and the detail the design and merchandising team puts in it is of incredible value. So these value propositions we are going to make sure are very well known, very well understood by our customers and we will continue to evolve them in 2010. Lastly you are going to see us take much more of a category focus. It has been my observation in the last year that we are not as clear particularly when you want to gain market share who has the market share, what categories are you going to go after in the competition, how are you going to differentiate, how are you going to beat them and how are you going to take a category approach to making sure you gain market share. More about that to come in the future but I think you saw that in denim at Gap. It is the right category. It is foundational. It is premium. Make it affordable and then go after it month after month after month. So these are but a few of the common themes that we are going to be taking on in 2010. Every single brand has their own set of priorities. The reason behind that is every single brand is at a different stage of its evolution and a different stage of what it wants to become. There are certain brands we have to continue to put a little more work and a little more emphasis and a little more focus from me in particular to make sure they can achieve what their plans are. So that is just the nature of this business. It is one of the advantages. We have multiple brands. You have seen in the last couple of years one brand may not be performing well but the corporation still delivers results. We get that. Obviously our goal is for every brand to move in a very positive direction. Every one of our channels to move in a very positive direction. But we know our focus needs to go onto the businesses that at this moment in time are still putting work together to get the business to the right position and to get it to gaining market share. I think about international and when I think about online there is only one theme there; growth. We need to make sure that beyond the gain in market share in North America we have growth initiatives in our business. Two new countries we are going to go into in 2010 happen to be two of the top five apparel markets in the world; China and Italy. In the last 12 months we were putting the pieces together. What is the right team? What is our strategy? How do we go into the market? How do we be sure we win and are successful? We have been working on that the last 12 months. Those pieces are in place. So we have a strong European team who are going to build off of their success particularly in London and Paris to go into Italy. That is going to happen in the fall of this year. Off of our Japan team, we have built a team now in China that is a very good team and very motivated and has been working the last 12 months strategically to open stores in the fall of 2010 in China. Our global outlet business is a big growth opportunity for us. Under-developed in Canada. We are starting to grow there. Under-developed in France and in Japan and will be part of the formula of us going into our new countries. Very pleased with that team. Great return on invested capital. Definitely a growth opportunity for us. Global online we will open up in Canada this summer. We are going to come out very strong in the Canadian market and we will open up with a business based in London but it is going to be a European site. It will serve ten countries in Europe. That is a big move for us. For us to have operated this many years without an online presence is to say the least disappointing. The investments are being made now. The teams are motivated. Athleta business that we acquired has been fully integrated. It has gone from mostly a catalog business to a full e-commerce business on our Universe Alley platform. Now we are in Athleta phase two. How do we take that brand to a whole new level? Again, more about that to come this fall but the work has been put into place led by Toby Lenk and his team. Lastly our franchise market which we currently operate in 19 countries was a little slow in 2009. A lot of markets pulled back. Russia in particular comes to mind where construction just stopped. But now having met with our team in the last six weeks we are seeing some confidence come back to those markets. We have seen real estate opportunities open up. There is new countries we are going to go into, new exciting countries with big opportunities. While we have a comprehensive set of international and online investments, our capital expenditures are only going to $575 million. So that is the strength of this business. We can take up our CapEx by close to $250 million, still generate a significant amount of free cash flow and return that free cash flow as we have in past years, excess free cash flow to our shareholders. So when I look at this, my view is the business has worked very aggressively in a very committed way with a lot of discipline to change its economic model in the last two years. The most important thing in our business is to make sure our North American brands stay strong, stay relevant, stay innovative, that they differentiate themselves and re-grow market share in North America. There is never a day that goes by that the brain trust of the organization, the nucleus of its management team isn’t entirely focused on its North American business. We like our opportunities outside of that and we do see our business now sort of evolving and changing. In 2007, 2008 and 2009 we generated incredibly strong cash. We took a lot of costs out of the business not only in SG&A but in product costs. That is always foundational to who we are which is being disciplined on the financial side and returning cash to shareholders but our growth was missing. I would say this is the most comprehensive, international, online activity we have had pretty much in the last decade. I am excited about this. But now we have to become more of a market share gaining organization and a mature North American market. We are prepared to do it. We have the team. We have the ideas of putting the stores together and everything else I talked about to gain that market share. Lastly we are opening the door now with this more robust international online program of ours to generate growth day one and earnings at the appropriate time. I am going to turn it over now to Sabrina who is going to give you the details on the financial performance of the business in the fourth quarter, give you some guidance about 2010 and then we are all happy to answer any questions you have at the end of her comments. Thank you very much.

Thank you Glenn. Good afternoon everyone. I will begin today with review of our fourth quarter and full-year results and then provide an overview of our outlook for 2010. In retrospect, 2009 was a year of two very different halves. The first six months of the year we played primarily defense to manage through the deep recession we all faced. Our focus was on leveraging our strong economic model to deliver healthy merchandise margins while continuing to manage expenses tightly. The back half marked an important shift with greater focus on improving our top line. Please turn to slide four as I take you through how we performed against our financial goals for the full-year. First and most importantly we improved our cost store sales trend. We had a flat comp in Q3 and a positive two comp in Q4 and we are very pleased that our largest division, Old Navy, delivered a positive three comp for the full year. Second, we delivered healthy merchandise margins. Full-year merchandise margins were up 290 basis points. Third, we maintained our discipline around cost. Full-year expenses were about flat despite a $78 million increase in marketing. While we are pleased we maintained this discipline we are very proud that our earnings growth for the year was driven entirely by higher gross profit. Fourth, we generated strong free cash flow of $1.6 billion. Finally, we meaningfully improved return on invested capital. Here are some additional highlights pertaining to the fourth quarter. We improved our operating margin by 410 basis points to13.9%. We grew EPS by 50% over last year and by 46% over 2007. We returned nearly $500 million to shareholders through dividends and share repurchases. Please turn to slide five for earnings results. Q4 earnings were up 45% to $352 million. Full-year earnings were up 14% to $1.1 billion. Full-year EPS grew by 18% to $1.58 and full-year weighted average diluted shares were 699 million. Turning to slide six, sales performance. Fourth quarter total sales were $4.24 billion, up 4% versus last year. Full-year total sales were down 2% to $14.2 billion. Please refer to the press release located on Gapinc.com for total sales and comps by division. Turning to slide seven, gross profit. For the quarter gross margin was 39.5%, up 550 basis points with merchandise margins up 500 basis points and occupancy leverage of 50 basis points. Gross profit was up $284 million or 20% to $1.7 billion. For the year, gross margin was 40.3%. Gross margin improvement was driven by merchandise margins up 290 basis points offset by occupancy de-leverage of 10 basis points. Gross profit was up 5% to $5.7 billion for the year. Please turn to slide eight for operating expenses. Fourth quarter operating expenses were $1.1 billion, up $95 million to the prior year driven by $44 million more of marketing. Total marketing expenses in the quarter were $182 million. Full-year operating expenses were $3.9 billion about flat to the prior year despite the increase of $78 million in marketing to a total marketing spend of $513 million. Turning to inventory on slide nine, we ended the fourth quarter with $1.5 billion in inventory, down 2% versus the prior year. Inventory per square foot at the end of the quarter was down 1% compared to 2008. Please turn to slide ten for capital expenditures and store counts. Full-year capital expenditures were $334 million. We opened 47 new stores and closed 101 and ended the year with 3,095 stores. Total square footage was down about 2% to last year. Regarding cash flow on slide 11, full-year free cash flow defined as cash from operations less capital expenditures was an inflow of $1.6 billion. Over the course of the year our business improved and the broader economic climate stabilized we increased our share repurchase activity. For the full-year we repurchased 24 million shares for $510 million of which 19 million shares were bought in the fourth quarter. Now I would like to share with you our outlook for 2010. Please turn to slide 12. Our economic model is strong as evidenced by three years of double digit EPS growth even through the deep recession. Our specific financial goals for 2010 are as follows; First, grow top line while we continue to deliver earnings growth. Second, make prudent investments for our future growth. Third, maintain discipline on costs and expand ROIC. Fourth, return excess cash to shareholders. Let me expand on each of these priorities beginning with the fourth, returning excess cash to shareholders. As evidence of our commitment to distribute cash since 2004 we have returned about $8 billion through share repurchases and dividends. We certainly plan to continue returning excess cash to shareholders in 2010. We are increasing our annual dividend by 18% to $0.40 per share. This represents a payout of about 25% of our 2009 earnings and a yield of about 2%. We also just announced a $1 billion share repurchase authorization. Now I would like to return to our first three priorities starting with growing top line. One of the ways we will grow top line is to sell more units. To support this we will be making targeted investments in inventory. As a result we expect inventory per square foot at the end of Q1 to be up in the mid single digits compared to last year. For context, this compares to inventory per square foot down 12% at the end of Q1 last year. We also believe we still have opportunity for gross margin expansion. This opportunity comes from continued average unit cost savings and occupancy costs which should leverage on higher sales. Our second goal, invest in growth. We will strike a balance between delivering short-term results and making investments that drive shareholder value over the long-term. We are investing now for initiatives scheduled to launch in the back half of 2010. Namely our online business in Canada and Europe and our first stores in two new countries, China and Italy. We are also excited to continue the rollout of the new Old Navy store design to nearly 200 more stores, almost all of which will be completed in the first half. We expect all of the investments we have outlined to drive healthy returns over time but they will be dilutive in 2010. Our third goal is maintaining discipline on costs. While we expect variable expense dollars to increase as sales grow it is our expectation that total operating expenses in our base business will leverage at the rate of sales. However, given the growth initiatives we have just outlined there may be some de-leverage in total operating expenses especially in the first half. Given our strong economic model and the 2010 priorities I have just outlined we expect earnings per share to be in a range of $1.70 to $1.75. To be clear, this guidance includes the dilutive impact of our growth initiatives. Please turn to slide 13 for a list of our 2010 guidance metrics. We expect operating margin to grow to about 13%. Driven by our investments in growth we expect capital expenditures to increase to about $575 million. We expect depreciation and amortization of about $550 million. With regard to stores and square footage we plan to open about 65 stores weighted to international and outlet. We intend to close about 110 stores weighted to Gap brand and we expect full-year net square footage to decrease by about 3%. We expect our full-year effective tax rate to be about 39%. Turning to the last slide, in conclusion we are proud that this management team has consistently demonstrated our commitment to driving shareholder value by delivering on all of our stated goals over the last three years. We intend to do the same in 2010. Thank you and now I would like to turn it over to Mark.

Thank you Sabrina. Operator that concludes our prepared remarks. We will now open the line for questions. In the interest of time we would like to remind everybody please keep your questions to one each.

(Operator Instructions) The first question comes from the line of Michelle Tan - Goldman Sachs. Michelle Tan - Goldman Sachs: I was wondering if you could give us a little extra clarity on your thought on SG&A dollars for 2010. Also, how you think about the marketing plans for the year as you work to gain market share?

I will start with the SG&A dollars. As I mentioned with the goal of increasing unit sales and increasing top line we certainly would expect nominal dollars of SG&A to increase. As you know about 50% of our total expense high is related to stores and a large piece of that is variable. That is why we are going to expect nominal dollars to increase as we meet our goals. That said, it is important to emphasize we are expecting our base businesses to leverage total expenses at a rate of sale but again especially in the first half we are going to get some offsetting pressure from those initiatives we are investing in. So dollars will rise. With regard to marketing I will turn it over to Glenn.

On the marketing front I think I mentioned in my opening comments that is one of the key areas we are going to focus on. Not only the financial component making sure we make good, targeted investments and get a return but I think that we are spending a lot of time on Old Navy, what is the evolution of the modelquin campaign which has been a great creative platform for us. You will see a little bit of that on the airwaves right now but I know there is a lot of good ideas to stay impressive at Old Navy, continue to drive its value message by using modelquins as a voice and I think you are going to see that evolve. I feel good about it. At Gap I think we are going to build on the 1969 campaign that we have had in August of last year. You saw some movement of that in Baby Gap campaign that is out now. It will be followed by the denim on denim campaign which starts this weekend and build into a kid’s 1969 campaign. So a big foundational push on the marketing rooted in denim but there are other marketing components that you will be seeing complementing the denim marketing. Banana Republic I think our marketing has actually improved quite a bit in the last number of months. We have new leadership in marketing. I think it is appropriate. I think when I go to the stores the fully integrated campaign through the magazines, billboards, social media into the store I actually think Banana’s marketing is really resonating and I think it has been a part of the reason we have seen an improving performance in their business the last couple of months. So we are committed to managing our brands and to getting the message out right. We know we have to stay current. We have to stay relevant and the marketing teams from what they are showing me right now they are showing me a nice path over the next 12 months.

The next question comes from the line of Janet Kloppenburg - JJK Research. Janet Kloppenburg - JJK Research: I wonder if you could spend a few minutes and talk about the Gap brand. It has been a point of controversy on the stock that business has not evolved and improved at the rate that perhaps you thought it might. If you could touch a bit on how you see the product assortments evolving through the year, what steps you are taking there to drive market share gains and to be innovative and to be a leader in the business with some of the criteria you have placed on all the brands. Perhaps you could talk about those touch points for the Gap brand and also if we should look forward to TV advertising for this brand in the spring season and maybe if you could talk a little bit about the spring season marketing program and the fall?

You said a key word there. The Gap business has not been improving at a rate that I think people in the analyst and maybe shareholder community had expected. To get grounded, it has improved. I think it was fairly noticeable improvement in December with a positive comp. Fairly noticeable improvement in January with a positive comp. Old Navy started out their journey back in March of 2009 with some positive comps. Actually did not gain market share in June and July. But we said with Old Navy it might be a little choppy because it had been a number of years since a return to a positive comp environment we had to make the adjustments internally and it had to continue to press forward. I think we mentioned on the last conference call that the Gap journey might be and this is not technical language, it might be a little lumpy which means it is going to go through its own version. I think with the marketing we put forward in December and continuing focus in January and we will see what February brings. We will be giving those sales out next week. I think that it is starting to at least improve its position and give us a foundation from which we can springboard from. So I think look it is going to be maybe a bit of a longer journey as I explained earlier with Gap but I am encouraged in what we saw in December and January. There are no plans for television advertising this spring and that is not because we didn’t feel it was a worthwhile investment in December. Spring television is not normally a time that we have invested in the past anyway. There is a marketing investment being made. I was saying earlier to Michelle’s question I think we came out with a better message in January which was patch and repair. We came out with a baby denim launch, 1969 in February. Right now we have probably the biggest of our campaigns so far which is the denim on denim campaign which actually officially starts in our stores today. So there is a continuation of that kind of real rhythm, cadence and a drumbeat of making sure the denim message stays front and center. That is where the product innovation, that is the pressure on Mark and Patrick and the team to make sure there is news in our most important categories. So I am actually thinking there is other marketing which I can’t give out today that is going to come and complement because we don’t want to end up a one dimensional business and relying only on denim and the marketing associated with it. I think it is critical to getting The Gap back to the trend and the trajectory that needs to go on and you will be seeing more about how we are going to treat marketing and the voice we are going to use, probably in the next few months, which will complement this ongoing rhythm we are going to have on denim. Janet Kloppenburg - JJK Research: So you feel pretty good that Gap is making progress, maybe not at the pace we all had expected but from the inside of the company where you look at you feel like the brand is evolving and improving?

I do think there is some evolving and improving components of the Gap brand. Where you and I come apart a little bit is the pace maybe you are expecting versus me. Where we are both aligned I would say to me it is still not as much as I hoped it was going to be. Again, I think there are signs which is good but to be completely honest and transparent I expected more. I do expect more. Mark and the team know that. We have made some slight structural changes recently to align ourselves because I think we that we will take the performance the last few months. But we are not in this game for 2-3 months worth of performance. We are in this for the long-term. There is higher expectations from them going forward. I think on that front I agree with the statement but I think your expectations might have been slightly higher than what I put forward to them.

The next question comes from the line of Paul Lejuez - Credit Suisse. Paul Lejuez - Credit Suisse: Just wondering what level of share repurchase does your 2010 EPS guidance assume? Also wondering how many of the 110 stores closing are actually losing money and are those closings coming at the end of leases or are you paying anything to get out of them?

I will start with the share repurchase. We don’t actually guide to an amount because we have always approached our share repurchases opportunistically. In that guidance range of $1.70 to $1.75 there are certainly lots of scenarios there. Historically most recently in our history we have tended to load our share repurchases in the back half because that is kind of the seasonality of our cash flow. We are entering with a healthy level of cash. So we will see how it goes and we will report out every quarter on how much share repurchase we have achieved. With regard to the stores, there is very, very few stores that are closing that are actually four wall cash negative because there are very few stores in our entire fleet that are four wall cash negative. It is going to be less than a handful of those closures but they are bottom performers. So we always do want to crop them out and look to reposition to improve the overall returns on our fleet. But very few cash flow negative stores. Paul Lejuez - Credit Suisse: You are buying out of leases there?

No. We don’t do that. Because they are not cash flow negative and it really doesn’t make sense to pay money to get out of our leases. We generally will do them on a natural option or expiration.

The next question comes from the line of John Morris - BMO Capital Markets. John Morris - BMO Capital Markets: You have done a great job managing product costs down and the initiatives you have highlighted for us through the course of the year. As you look and you commented a little bit about that in your prepared remarks but I am specifically thinking as we head into the back half do you still see some benefit on out into Q3 and especially into Q4 as you are putting your buys in place now? We are hearing there is a little bit of pressure potentially and specifically if you could talk about the areas of labor, fabric and particularly as it relates to cotton. Your thoughts there?

I think this is one of the strengths of our company being larger. We have been positioning our average unit costs for the full-year for some time. I have talked about with you all for the first half we are highly confident because most of that is bought. We achieved some nice savings. We talked about earlier the whole 2010 savings would moderate. We are on our third year of average unit cost savings. Now that there is more demand coming into the system and as you know there is a little bit more pressure on commodities. So you have seen versus prior years fuel move up a little bit but that is volatile. Cotton is up a little bit. Wool moved up some. So there is more pressure and that is the very reason it is moderating. However, with the size of our company and with our negotiation tools we have talked about over time we still feel confident we are going to achieve average unit cost savings for the full year, albeit at a more modest rate.

Every year we have a plan and a strategy when it comes to our global production people about not only delivering on time and giving us flexibility with vendors, making sure the quality standards we expect but also how do we make sure we get the cost of goods that is appropriate given the size of the business. Three things for 2010 we are going to spend a little bit more time on the number of fabrics we use in the business. So say the least we have multiple fabric choices the company uses. I think through narrowing that while maintaining our quality standards across all of our brands. That is going to give us some additional leverage. That is a positive. I think we are much more willing these days to make longer term commitments. I think in the past while we narrowed our base and while I think we were better partners with our vendor partners, there is some work going on now where you have seen us going out a little longer in terms of commitments with vendors and giving them the understanding of the kind of volume they can get from us beyond a 6-12 month understanding we have today. That I think is going to bring us some benefit. Thirdly this will be the first year since I have been here we are going to be operating in an environment where we are buying more units than the year before. As Sabrina said the last 3 years we have done I think a pretty admirable job from the global production team in terms of getting us the cost of goods we have enjoyed but in a declining unit environment with improving units in 2010 I think that gives that team a little more leverage to try and make sure they protect the cost base of the organization.

The next question comes from the line of Christine Shen – Needham and Co. Christine Shen – Needham and Co.: I was wondering with respect to Banana Republic and a new prototype I know it is still early but have you seen increased productivity in those locations?

I was just there at store number two. Store number one was in Las Vegas. I was just in Scottsdale with Jack and his team for our third trip to make sure we actually agree on the prototype going forward and get to the right cost, get to the right layout. Our third store was in Soho. What I can tell you is the response from consumers has been very strong. Noticeable traffic changes inside the business and other metrics I would say are positive. Soho is a tougher read because we decided to open up before the holiday even though the construction was not 100% completed. We had some issues with the city in terms of getting some walls down and other factors which now have been rectified. All three from how we judge them, what our expectations were and what is the return going to be and how are customers going to respond because it is quite a bit of a different model. It stands out to me when I walk the malls. I would say it has been quite positive. There will be more in 2010. But as you know of all our stores and all our brands Banana Republic is the one that actually has the freshest fleet. We measure it on a number of different fronts but it is the one that is the least in need of capital investment to keep it up to our standards. With that said I think Jack and the team have done a very unique, Banana Republic appropriate store design so we look forward to putting more into North America in the next 12 months. Christine Shen – Needham and Co.: Did you say how many are going to be remodeled in 2010? If you did I apologize I missed it.

We are still working on the exact number. It will be a handful for sure. It will be more than the three that we tested in 2009. Because again the fleet is in decent shape it won’t be 15 or 20.

The next question comes from the line of Michelle Clark – Morgan Stanley. Michelle Clark – Morgan Stanley: We have heard a lot of retailers over the past week or so talk about looking to gain market share in 2010. Two questions for you on the core Gap brand. One, where do you expect to take the market share from? Secondly, how much merchandise margin are you willing to give up in order to go after that share?

I wouldn’t have much respect to any retailer who is not talking about gaining market share. I can’t believe anybody gets into this to lose. You know we have been appointed in the last number of years as the business at different times by different brands have been willing to give up market share and have not defended our position. With that said all of us I think come into a fresh year trying to get market share particularly in an environment where growth in the United States for sure will be limited. So at Gap brands as you asked specifically about them, the first thing I want to say before I get to the Gap brand is just to mention we have had success in doing this at Old Navy. We have had success doing this in our online business. We have had success doing this over the last 12 months with our international business. We have had success gaining market share in our outlet business. Now within Gap when you look at it we don’t target the total business in its entirety against another competitor. As we spend more time looking at our business category by category what we have been doing is saying okay what categories do we believe we can differentiate ourselves on, have a reputation like denim, can go out and win and take market share. Then I sort of put this into two buckets. The first bucket is once you identify the category who do we admire? Who do we follow? Who is doing a really good job? That bucket is probably different than who do you actually want to take share from because we may admire somebody and there are people out there obviously we admire in key categories but their share could be so small even if we were to cut their share in half it is going to mean nothing to us given our size. So we have spent a lot of time the last 6-9 months taking more of a strategic approach to our business, looking at the categories we want to win on, let’s say there are five key categories at Gap. Who do we want to make sure we learn from? Then as we get into the year and see some of that happen in Q1 but I think we get a little more aggressive in Q2 on who are we actually going to target and go after their share. That is proprietary, competitive information and we are not going to give it out on the phone but just to let you know we have been working on this for a number of months. We have the process. It is done by brand. So Gap no different than BR, Old Navy, Outlet or international businesses. They all have these plans that are written and they have milestones. We expect Mark and our team to go and execute on them.

Just a word on margins, we feel confident that there is an opportunity to maintain and even expand our margins as we do this. I will tell you the reasons why. A: We are lapping a lot of promos we did last year. We actually learned a lot. We know now which promos are more effective. We plan for those. We bought into them. As I just mentioned we do have average unit cost savings so that gives us flexibility to really still pursue market share gains and screen value to our customers while still delivering very healthy merchandise margins. Second, I think it is important to point out that our merchandise margins over the last two years have been working really hard. They have actually expanded 600 basis points since 2007. At the same time because our sales have come down our rent and occupancy has de-leveraged about 200 basis points. So again when we are successful bringing in unit sales and increasing our top line we have a nice opportunity to leverage rent and occupancy so between our merchandise margin not being out of gas yet and then the rent and occupancy opportunity to leverage that is when we see the real opportunity on our gross margins as we gain market share. Michelle Clark – Morgan Stanley: Any commentary on February sales?

No, we will get there in a couple of weeks. Before that.

The next question comes from the line of Kimberly Greenberger – Citigroup. Kimberly Greenberger – Citigroup: You talked about a number of strategic, long-term growth investments you are going to start making this year. You are expecting them to generate growth it sounds like in sales sooner and maybe dilutive near-term to EPS. I am wondering if you can just go through your various initiatives and talk to us in general terms about when you would expect those initiatives to start contributing profit growth for you? Maybe outlets are sooner and then maybe from the earliest contributions to more longer-term contributions just so we can think about that as we are looking at our models.

That is a good question that likely should have a very long answer. Why don’t I say this. We have been very thoughtful I believe about what are the right investments we need to make outside of our gaining market share in North American business in order to position our company for the future. Where do we feel we can be successful. What kind of channel or what kind of brand and what country do we think we can go into. We have been spending a lot of time analyzing it to get to the point where we can make some announcements about it today. I would say that economically to the dilution question we have struck a very good balance. Again the decisions from my perspective were made on what strategically is right. But then working with Sabrina as my partner she has been able to say how do we balance it to make sure we can manage the dilution that comes with it? So you are absolutely correct. The one side of the dilution scale you have Old Navy stores we are doing and a global push on global outlet. Those will be pretty quick in order for us to be able to manage the near-term investment, get a return on them and get them on a path to profitability. On the other side of the scale you have China which is a big country. Again we have done our homework. We want to go in there and compete. We don’t want to skim in China. We actually want to have a meaningful business over time and to do that in some of the markets particularly a market like Hong Kong it is going to take awhile in order for me to put the investment in place that actually will return not the ultimate return on capital but get immediate return on four wall contribution. So I think we have lined them up. We have tried to do it again. Number one, [inaudible] was what was strategically right. How do we become successful and how does it hit the long-term five year plan we have. Two, working with Sabrina to make sure that there is a nice balance in the investments so when she looks at it when something comes off from dilution it contributes enough in its second year and in its third year to afford the decisions we are going to make in 2011, 2012 and 2013. This is not a one-year plan. So we have other plans we would like to put in place and grow. So she is the one who has to find that balance and from the work I have done with Sabrina it is no question I think we have struck a very nice balance in 2010.

The next question comes from the line of Sam Panella – Raymond James. Sam Panella – Raymond James: Can you talk about the opportunity to keep the momentum going at Old Navy as you start to see some more difficult comparisons since you are a sales leader this year?

The encouraging component for Tom and his team and I support them entirely is Old Navy has been down in terms of its total sales for the better part of four years. While it had a nice return in 2009 and it was well executed, I think from a store investment the 60 stores we did, the new product that is position and the categories they have been more aggressive on I would say also is a move to a more of an offensive minded approach that Tom and the team have taken versus being a defensive retailer as we were in many years between 2003 and 2007. I think that there is a lot of room still for them to at a minimum get back to where we were in terms of sales. I can’t give you a timeline on that. But they are now you have another 180 remodels coming plus 20 relocations and new stores. So that is 200 stores incrementally in 2010. That is a significant amount of the fleet. As I mentioned earlier I believe the messaging and the marketing and the aggressiveness is going to be there plus a little bit more in 2010 as we go after the competitors we have identified to answer a question earlier from Janet and what categories we are going to take share from and who are we going to target. I think there is a lot of room on product in key categories. We have been testing a lot of categories in the last six months. In 10 stores we have tested this category and in another 10 stores we have tested another category. We have marked some of those and are going to rollout fleet wide between now and the fall which also will give us a lot of total top line opportunity but it also will be good for customer management to be able to take that customer and fulfill her total needs as opposed to just the selected needs we fulfill today. So there is a lot of opportunity at Old Navy still. I think we feel good about it. Time will tell. You will judge us on a quarter by quarter basis. We didn’t get into this to have a one year turn of a brand as important as Old Navy. There is multiple years of opportunity at Old Navy.

The next question comes from the line of Brian Tunick - J.P. Morgan. Brian Tunick - J.P. Morgan: When you look at the improvement in traffic at the Gap division over the last three months, how much of that do you think came directly from the TV campaign and is there any reason to think that traffic shouldn’t remain here at improved levels around flattish? Maybe Sabrina can you give us a better sense in any way on the basis points or earnings impact from these new investments in your full-year guidance?

First on traffic at Gap in no order of importance but it would be inappropriate for me not to mention part of it is we are lapping easier comparisons to last year. So at some point we do believe that traffic trajectory will turn. I think that is one component. The other one is we did ride some momentum coming off the launch of denim and 1969 denim in August. I think the continuing willingness to commit to what we put in the store, the space we gave it, the marketing that went behind it, the buzz and social media marketing we did I think that did contribute to more people coming in and looking for that category. Every retailer fights so hard to turn their business from wants to needs and I think we were able in a small way to get people who needed denim to come in to Gap. So I think that was helpful. The holiday TV while it had a return and it probably hit the lower end of my threshold but it had a return I would say was responsible but not in any large part responsible. Definitely the kids and baby component of that campaign was very successful. I think that did bring in traffic. That did bring in mothers and young women who were attracted to some of the marketing and messaging and the direct product messages that were in there. There are a bunch of other components that could be contributing to traffic. I think we were more offensive minded. We protected our business where necessary. We did the right thing in the big high holiday seasons. I think those four in combination helped. We have to maintain it. We made it clear in the conference call here and so we are clear we are not going to measure success by every single month having to have a positive traffic comp. We are saying we are going to gain market share over an extended period of time. There are going to be months where it may not look as positive as the previous month. But when you average it all out this brand and the other brand are going to have the traffic that is necessary to drive market share performance.

With regard to the growth initiatives we sort of made this choice to provide you guidance that on the high level bottom line. So again in our guidance of $1.70 to $1.75 which is about an 8-11% growth rate on EPS for the year we have included that dilution. So what we are focused on is despite the investment we realize that it is our responsibility to still deliver healthy earnings growth to our shareholders and that is kind of the focus. I will tell you though as Glenn mentioned we are very careful to strike a healthy balance between driving short-term results and making these investments for a long-term future value. The investments are not insignificant but they are not bet the farm either.

The next question comes from the line of Adrienne Tennant - Friedman, Billings, Ramsey & Co. Adrienne Tennant - Friedman, Billings, Ramsey & Co.: My first question is really quick. On the Old Navy remodels what type of sales lift are you seeing on those? Then can you talk a little bit more about getting back to the Gap product, Patrick has been there for I think going on three years now. What type of progress do you think the design team is making? Is that up to your standards? The leadership changes is there anything we should read into that in terms of how that design team plays into the Gap product?

I will start with the Old Navy remodels. The way we think about that is any capital investment we make in our fleet anywhere but especially with the Old Navy remodels we want to get a return on. The return is going to come in the form of incremental sales and margins when compared to a control group. Let’s call that for simplicity the rest of the fleet. So our internal hurdle rates are quite high. They are much higher than our long-term weighted average cost of capital. What we are confident about based on the 55-60 store test that we have had going with Old Navy in 2009 we have seen impressive returns based on the hurdle rates that we are looking for. So we are seeing against the fleet the stores that have been remodeled have a very nice meaningful incremental lift on both sales and margin and that makes us confident about the remaining 200.

On the Gap design team, I have full confidence in Patrick. He has done a remarkable job when he first came in under what I would say very difficult circumstances. It took him the better part of a year just to put his team together. He had to make some changes. We were still evolving the brand and the positioning we wanted the Gap brand to have in the marketplace so I think that there is a lot of work in the first year which was clean up, repositioning, getting ourselves clear on what we had to get done. From my perspective even if I was disappointed in Patrick which for me to have a conversation about this on a conference call because I have full respect for him and I believe he is going to get the job done, he is his harshest critic. That is what I love about him. I think that he really knows the brand, knows it instinctively, spends time with the customers, spends time in our stores and he personally wants to make sure the brand is successful. He is self motivated. I know he wants to see the brand have a better year in 2010. He knows I feel the same. I believe he has been given the tools and the opportunity to get that done. I think moving Pam [Wollock] from kids and baby over to adult to work with Patrick and to partner with him I think is nothing but a positive from his perspective and his design team’s perspective and Mark and I share that. I think it is a positive move and I am confident that he let his leadership and his design team will be able to get it done for us so we can see the improvements we are all expecting in Gap in 2010. Adrienne Tennant - Friedman, Billings, Ramsey & Co.: What do you think his critique of 2009 products would have been?

Probably not fair for me to mention but again what I like about him is he shares one of the same attributes that I have and he is very self-critical. In that business there is a lot of subjectivity. I think he would like to have some re-do’s as I would for some of the decisions I made in 2009. At the end of the day 1969 was a very big success. I think he has a lot of ideas to build on 1969. He has other complementary product categories he is working on that I have seen and I have been privy to. I am in New York quite often and spend time with him. At the end of the day the combination of [Marka], Pam, Karen Hillman and Patrick’s leadership I am confident you will see what we are all expecting to see at The Gap in 2010.

Thanks everybody for joining us on the call today. As always the IR team will be available after the call for further questions. Thank you.

This does conclude today’s conference call. You may now disconnect.