Revision Boosts 2004 Profit at Gap

Clothing retailer Gap Inc. said Thursday that errors in the way it accounted for certain leases would increase its previously reported fiscal 2004 earnings by a penny a share.

The company, which is following the lead of many other retailers in changing its lease-related accounting, also said it planned to restate its earnings for the two previous years.

Full-year earnings for the year ended Jan. 29 were $1.2 billion, or $1.21 a share, compared with $1.1 billion, or $1.20, as previously reported.

The company also reported fiscal fourth-quarter 2004 earnings of $378 million, or 40 cents a share. Gap had previously posted preliminary earnings of $370 million, or 40 cents, for the quarter but had warned of possible adjustments because of the review of lease-related accounting.

Earlier this month, Gap said it would restate past results to bring its lease accounting practices in line with federal rules.

The Securities and Exchange Commission recently clarified its lease accounting rules, forcing many retail and restaurant companies to review their methods.

Gap said the correction would decrease retained earnings by $131.7 million as of Feb. 2, 2002, and increase net earnings by $300,000 in fiscal 2002 and $600,000 in fiscal 2003.

Gap’s annual report for fiscal 2005, which will include restated results, is expected to be filed with securities regulators this month, the San Francisco company said in a statement.

Gap shares rose 23 cents Thursday to $21.35 on the New York Stock Exchange.