Gap ( GPS) sharply reduced its fourth-quarter earnings forecast after saying same-store sales and total revenue both declined last month.

Net sales were $2.34 billion for the five weeks ended Dec. 30, down 4% from the same period in 2005. Same-store sales decreased 8%.

Gap North America's comp sales fell 9%, and at Banana Republic North America, same-store sales were up 2%. Old Navy's domestic stores had a 10% drop in same-store sales.

"Although Banana Republic continued to make good progress in its turnaround, we continued to experience negative traffic trends at Gap and Old Navy," said Sabrina Simmons, senior vice president of corporate finance at Gap.

"Given the weak traffic trends, we needed to take significant action on promotions and markdowns at these two brands, which drove Gap Inc.'s overall merchandise margins significantly below last year," she continued. "We expect continued margin pressure into January as we work to clear remaining holiday product at Gap and Old Navy."

Gap now expects full-year earnings of 83 cents to 87 cents a share, well below its previous guidance of $1.01 to $1.06.

Paul Pressler, the president and CEO of Gap, said in a statement that management and the board are "reviewing Gap and Old Navy's brand strategies. We are committed to making the necessary changes to improve performance."

Shares of Gap were falling 2.7% in premarket trading Thursday.