Gap goes for Margin Improvement

Building margin seems like a pretty fair plan while also controlling their inventory at the same time so they don't have to do so many markdowns.

Operating margins, which rose to 8.3 percent in fiscal 2007 from 7.4 percent
a year earlier, are expected to range from 8.5 percent to 9.5 percent for fiscal
2008, Gap said. Gap said it expects to reduce capital spending to about $500
million in fiscal 2008 from $682 million in fiscal 2007.

They are also closing about 85 poorer performing mostly Gap brand stores in 2008 as well. It looks like the company may be trying to slide further toward the Banana Republic side of the business and the higher margins that you normally see there. It seems like a good idea once consumer spending starts to pick up in the 2nd half of the year.