) share repurchases offset weak fundamentals. Morgan Stanley reported that GPS operates an increasingly flexible economic model and can pull levers to hit EPS goals when missing sales targets. “When firing on many cylinders (not even all), we believe earnings power is significant. Changes to the capital structure ($400mm term loan and a $1.25bn 5.95% bond) should provide management with additional tools to offset sales misses. While likely enough to support EPS in the near-term (we lower 2011e to $1.87 from $1.90 despite March's -10% comp decline), we think many investors need to see stable, positive SSS to get more excited here.” Gap closed yesterday at $22.72.