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Gap Inc. Reports Third Quarter Earnings Per Share Of $0.63 – Up From $0.38 Last Year

(2) Online sales shipped from distribution centers located outside the U.S. were $44 million ($33 million for Canada and $11 million for Europe) and $34 million ($24 million for Canada and $10 million for Europe) for the thirteen weeks ended October 27, 2012 and October 29, 2011, respectively.

(3) Franchise sales were $90 million ($78 million for Gap and $12 million for Banana Republic) and $81 million ($71 million for Gap and $10 million for Banana Republic) for the thirteen weeks ended October 27, 2012 and October 29, 2011, respectively.

(4) Net sales outside of the U.S. and Canada (including Direct and franchise) were $564 million and $525 million for the thirteen weeks ended October 27, 2012 and October 29, 2011, respectively.

Additional Results and 2012 Outlook

Earnings per Share

Third quarter diluted earnings per share of $0.63 increased 66 percent compared with $0.38 for the third quarter last year. This includes a benefit of about $0.02 related to tax credits.

The company increased its fiscal year 2012 diluted earnings per share guidance to be in the range of $2.20 to $2.25. This compares with diluted earnings per share of $1.56 in fiscal year 2011.

Depreciation and Amortization

The company continues to expect depreciation and amortization expense, net of amortization of lease incentives, for fiscal year 2012 to be about $475 million.

Operating Expenses

Third quarter operating expenses were $1.1 billion, up $105 million compared with the third quarter last year, with continued investments in marketing and store payroll. Marketing expenses for the quarter were $178 million, up $29 million compared with the third quarter last year, driven primarily by investments in Gap brand marketing and customer relationship marketing.

The company is continuing to invest in its businesses, and on a year-over-year basis, expects operating expenses in the fourth quarter of fiscal year 2012 to increase by at least as much as the 11 percent increase in the third quarter. As a result, the company continues to expect operating expenses to deleverage in the fourth quarter.

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