The company's share price rose approximately 31% during the third quarter to $21.34. On Thursday, shares closed the trading day at $21.86, down $0.44 on the day but still near the top of its 52-week range, $9.41-$23.36.

Due mainly to investments in fall marketing at Gap and Old Navy, the company's operating expenses were up $40 million in the third quarter compared to the same year-earlier period. In the fourth quarter, the company expects operating expenses to be up by as much as $120 million. "This increase is due to increased marketing expense, higher variable store-related expenses related to driving comparable store sales improvement, and higher bonus expenses," the company said.

Company executives did not address its ongoing effort to renegotiate leases on the third quarter conference call. On recent calls, chief executive Glenn Murphy has said stores would be shrunk, remodeled and in some cases relocated, either within the mall or within the immediate area depending on negotiations with their existing lessors.

Last quarter, Murphy said the company was one year into a three- to five-year plan to reduce square footage by between 10% and 15%. The company expects to shed 2% of its square footage in 2009. "We still believe that, in general, economic conditions make this a slight net positive environment for someone with 40 million square feet [of leasing power]," he said.

In February, he said the company would be looking for concessions from building owners as part of its plan to lower overall costs while improving its stores, marketing and merchandising in order to recapture store traffic lost to rivals in recent years. "We've had to offer more value to our customers in order to get them inside our stores," he said. "Our third party partners, like the vendors who make our clothes, also have had to tighten their belts [to help with that effort], and third party marketing and goods providers also have [done the same] to bring us more value. We expect the same from the landlord community."

Murphy added that the owners of the buildings it leases are aware that, in addition to the store closings, the company is trying not only to elevate stores' presence with better locations and combination stores but also to shrink the size of some of its Old Navy stores. "There's no such thing as a perfect time [for this] but landlords understand our strategy; we've been working on this for the last six months and we've been having good two-way dialogues," Murphy said. "But at the end of the day our strategy is our strategy and it needs to be executed."