Barnes and Noble 1997 Annual Report Download - page 19

The following table sets forth, for the periods indicated, the
percentage relationship that certain items bear to total revenues of
the Company:
FISCAL YEAR 1997 1996 1995
Revenues 100.0% 100.0% 100.0%
Cost of sales
and occupancy 72.2 72.9 73.1
Gross margin 27.8 27.1 26.9
Selling and administrative
expenses 19.3 19.0 19.4
Depreciation and
amortization 2.8 2.5 2.4
Pre-opening expenses 0.4 0.7 0.6
Restructuring charge — — 6.3
Operating margin(1) 5.3 4.9 (1.8)
Interest expense, net
and amortization of
deferred financing fees 1.4 1.6 1.4
Earnings (loss) before
provision (benefit)
for income taxes and
extraordinary charge(1) 3.9 3.3 (3.2)
Provision (benefit) for
income taxes(1) 1.6 1.2 (0.5)
Earnings (loss) before
extraordinary charge(1) 2.3 2.1 (2.7)
Extraordinary charge 0.4 — —
Net earnings (loss) 1.9% 2.1% (2.7)%
(1)
If operating margin, earnings (loss) before provision (benefit) for income
taxes and extraordinary charge, provision (benefit) for income taxes and
earnings (loss) before extraordinary charge were presented before the
effects of the restructuring charge of $123,768 during fiscal 1995, the per-
centage relationship that these items would bear to total revenues of the
Company would be 4.5%, 3.1%, 1.4% and 1.7%, respectively.
52 WEEKS ENDED JANUARY 31, 1998 COMPARED WITH 53 WEEKS
ENDED FEBRUARY 1, 1997
Revenues
The Company’s revenues increased 14.2% during fiscal 1997
to $2.797 billion from $2.448 billion during fiscal 1996. Fiscal 1996
includes 53 weeks; excluding the impact of the 53rd
week, revenues increased 16.0%. Fiscal 1997 revenues from
Barnes & Noble stores, which contributed 80.3% of total
revenues, increased 20.7% to $2.246 billion from $1.861 billion
in fiscal 1996.
The increase in revenues was primarily due to the 9.4%
increase in Barnes & Noble comparable store sales and the open-
ing of an additional 65 Barnes & Noble stores during 1997. This
increase was slightly offset by declining revenues of B. Dalton
stores which closed 53 stores and posted a comparable store sales
decline of 1.1%. BarnesandNoble.com, the Company’s new online
subsidiary, also contributed to the increase in revenue, posting
$14.6 million of revenues during its first partial year
of operations.
Cost of Sales and Occupancy
The Company’s cost of sales and occupancy includes costs
such as rental expense, common area maintenance, merchant
association dues, lease-required advertising and adjustments
for LIFO.
Cost of sales and occupancy increased 13.1% during fiscal
1997 to $2.019 billion from $1.785 billion in fiscal 1996 resulting in
an increase in the Company’s gross margin rate to 27.8% in fiscal
1997 from 27.1% in fiscal 1996. The gross margin expansion
reflects more direct buying, reduced costs of shipping and
handling, and improvements in merchandise mix.
Selling and Administrative Expenses
Selling and administrative expenses increased $74.7 million,
or 16.0% to $540.4 million in fiscal 1997 from $465.7 million in
fiscal 1996. Selling and administrative expenses increased
to 19.3% of revenues during fiscal 1997 from 19.0% during fiscal
1996 primarily as a result of the start-up expenses from
BarnesandNoble.com. Excluding BarnesandNoble.com, selling
and administrative expenses would have declined to 18.9% of
revenues, reflecting operating leverage improvement.
15
Management’s Discussion and Analysis of Financial Condition and Results of Operations continued