Abercrombie & Fitch 2011 Annual Report Download - page 48

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The decrease in stores and distribution expense rate for Fiscal 2010 was primarily driven by lower
store occupancy and payroll costs as a percentage of net sales.
Shipping and handling costs, including costs incurred to store, move and prepare the products for
shipment and costs incurred to physically move the product to the customer, associated with
direct-to-consumer operations were $38.9 million and $30.7 million for Fiscal 2010 and Fiscal 2009,
respectively. Handling costs, including costs incurred to store, move and prepare the products for shipment
to the stores were $42.8 million and $34.1 million for Fiscal 2010 and Fiscal 2009, respectively. These
amounts are recorded in Stores and Distribution Expense in our Consolidated Statement of Operations.
Marketing, General and Administrative Expense
Marketing, general and administrative expense during Fiscal 2010 was $400.8 million compared to
$353.3 million in Fiscal 2009. For Fiscal 2010, the marketing, general and administrative expense rate was
11.6%, compared to 12.1% for Fiscal 2009.
The increase in marketing, general and administrative expense for Fiscal 2010 was primarily due to
increases in compensation and benefits, including incentive and equity compensation, and net legal
expense.
Other Operating Income, Net
Other operating income, net for Fiscal 2010 was $10.1 million compared to $13.5 million for Fiscal
2009.
The decrease for Fiscal 2010 was primarily driven by lower net gains from foreign currency
denominated transactions compared to Fiscal 2009. In Fiscal 2009, other operating income also benefited
from a reduction of an other-than-temporary impairment of $9.2 million related to the Company’s trading
auction rate securities, partially offset by a reduction of a related put option of $7.7 million.
Interest Expense (Income), Net and Tax Expense from Continuing Operations
Fiscal 2010 interest expense was $7.8 million, offset by interest income of $4.4 million, compared to
interest income of $8.2 million, offset by interest expense of $6.6 million for Fiscal 2009. The decrease in
interest income was primarily the result of a lower average rate of return on investments. The increase in
interest expense was due primarily to imputed interest expense related to certain store lease transactions
and higher fees associated with the unsecured amended credit agreement.
The effective tax rate from continuing operations for Fiscal 2010 was 34.3% compared to 33.9% for
Fiscal 2009, in each year benefiting from foreign operations.
Loss from Discontinued Operations, Net of Tax
The Company completed the closure of its RUEHL branded stores and related direct-to-consumer
operations in the fourth quarter of Fiscal 2009. Accordingly, the after-tax operating results appear in
Income (Loss) from Discontinued Operations, Net of Tax on the Consolidated Statements of Operations
and Comprehensive Income. Results from discontinued operations, net of tax, were immaterial for Fiscal
2010. Loss from discontinued operations, net of tax, was $78.7 million for Fiscal 2009.
Refer to Note 17, “Discontinued Operations,” of the Notes to Consolidated Financial Statements
included in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this Annual
Report on Form 10-K for further discussion.
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