Gap’s Credit Ratings Are Lowered

Gap Inc.’s corporate credit and debt ratings were cut by Standard & Poor’s and Moody’s Investors Service on concern about the largest U.S. clothing chain’s operating performance and increasing competition.

The retailer’s long-term corporate credit, senior unsecured debt and senior unsecured bank loan ratings were lowered to BBB+ from A by S&P.;

The ratings company set a “stable” outlook for Gap, which also owns the Banana Republic and Old Navy chains.

Gap’s senior unsecured notes and floating-rate notes were cut to Baa2 from A3 by Moody’s, which kept the retailer’s outlook at “negative.”

Competition has intensified in recent years as new entrants have successfully imitated Gap’s business model, S&P; said. Though Gap has added stores aggressively, it strayed from its target customers in each brand, S&P; said. A continued lack of momentum in sales at stores open at least a year has hurt Gap’s operating profitability, Moody’s said.

Shares of San Francisco-based Gap fell 85 cents, or 6%, to $13.05 on the New York Stock Exchange. The stock has fallen 43% in the last year.