Gap Outlook Downgraded

Gap Inc., the largest U.S. clothing retailer, on Friday saw its credit rating outlook cut to negative by Moody’s Investors Service. The company’s long-term debt rating was confirmed at Ba3.

The outlook change reflects a concern that Gap will fail to meet profit expectations for 2002.

There also are uncertainties now that President and Chief Executive Millard Drexler is retiring. His move comes after 24 months of declining same-store sales. As part of a turnaround strategy, stores are returning to traditional styles after experiments with bright colors and tight fits.

“It will be some time before it is evident whether these merchandising changes are gaining traction with the customer,” Moody’s said.

Gap has $3.4 billion of debt.

Shares of San Francisco-based Gap rose 21 cents to $14.06 on the New York Stock Exchange.