GAP VS. ANF Financial Statement Analysis Group 1 Angeles Huang Charles Towle Robin Thieu

Outline Industry Overview (a) Companies Overview (b) Corporate Factsheets (b) Accounting Analysis Perspective Capital Structure & Solvency (c) Short-term Liquidity (b) Equity Analysis Perspective Asset Utilization (a) Return on Invested Capital (c) Financial Analysis Perspective Profitability (a) Valuation (b) Conclusion (a) Group 1 Ratios RNOA/ ROCE EPS/ VALUE ANF

Industry Overview (a)

Companies Overview (b)

Corporate Factsheets (b)

Accounting Analysis Perspective

Capital Structure & Solvency (c)

Short-term Liquidity (b)

Equity Analysis Perspective

Asset Utilization (a)

Return on Invested Capital (c)

Financial Analysis Perspective

Profitability (a)

Valuation (b)

Conclusion (a)

Apparel Industry American Eagle Aeropostale J Crew Urban Outlet Nordstrom

GAP Inc. ANF Co. Companies Overview 1976 1996 2007

GAP Inc.

ANF Co.

Corporate Factsheets 2007 Fiscal

Common-Size Analysis 2007 Fiscal

Capital Structure - Solvency Accounting Analysis Perspective

Liquidity Accounting Analysis Perspective

Liquidity Accounting Analysis Perspective S&P Short-Term Issuer Credit Rating: BB+

Cash reinvestment ratio Accounting Analysis Perspective

Asset Utilization Equity Analysis Perspective Sales to Cash Eq. 5.49 4.70 3.99 3.43 3.65 Sales to Receivables - - - - - Sales to inventories 9.35 9.12 9.13 9.25 8.45 Sales to working capital 19.07 11.55 9.72 8.01 7.55 Sales to PPE 4.88 4.94 4.84 4.82 4.44 Sales to total assets 1.92 1.83 1.70 1.60 1.57 Sales to Cash Eq. 6.36 6.69 6.86 4.64 3.70 Sales to Receivables 77.28 77.99 81.92 121.31 193.42 Sales to inventories 9.86 8.40 9.71 10.59 10.85 Sales to working capital 12.56 11.41 12.23 16.96 7.73 Sales to PPE 3.11 3.48 3.71 3.07 3.34 Sales to total assets 1.56 1.64 1.78 1.48 1.44

RNOA Equity Analysis Perspective ANF 2007 RNOA NOPAT $ 457 = 20.3% Avg NOA $ 1,512 Sales $ 3,750 Profit margin = 11.87% Asset turnover = 2.48 RNOA = 20.3% GAP 2007 RNOA NOPAT $ 832 = 11.1% Avg NOA $ 5,075 Sales $ 15,763 Profit margin = 5.14% Asset turnover = 2.25 RNOA = 11.1% GAP vs ANF and Industries' RNOA GAP ANF

ROCE Equity Analysis Perspective

Profitability Financial Analysis Perspective PB ratio 3.30 3.42 3.22 EPS 1.05 0.94 1.26 PE Ratio 17 23 16 PB ratio 3.87 5.29 6.62 EPS 5.51 4.78 3.80 PE Ratio 13 18 20

Valuation Financial Analysis Perspective

Conclusion Conclusion GAP ANF Chosen Current Ratio 1.68 2.10 ANF Cash to Current Liabilities 79.7% 119.4% ANF Asset turnover 3.11 2.48 ANF Profit margin 5.28% 12.18% ANF RNOA 16.39% 30.20% ANF ROCE 17.63% 31.47% ANF EPS 1.05 5.51 ANF Valuation $ 18.44 $ 116.91 ANF Market price (5/13/2008) $ 18.85 $ 72.65 SELL/HOLD BUY

Current Ratio

Cash to Current Liabilities

Asset turnover

Profit margin

RNOA

ROCE

EPS

Valuation

Market price (5/13/2008)

Thank you very much !!! Group 1