Gap Restates Earnings Amid Accounting Change

Clothing retailer Gap Inc. (GPS) Thursday said errors in the way it accounted for certain leases will increase its previously-reported 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 plans to restate its earnings for the years 2003 and 2002.

Full-year earnings for 2004 were $1.2 billion, or $1.21 per share, compared to $1.1 billion, or $1.20 per share, as previously reported.

The company also reported fourth-quarter 2004 earninr 40 cents a share, for the quarter but had warned of possibly adjustments due to the review of lease-related accounting.

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

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

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

Most adjustments relate to periods prior to fiscal 2002, the company said.

Gap's annual report for the year ended in January 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, or more than 1 percent, to close at $21.35 Thursday on the New York Stock Exchange (search).