Costco 2012 Annual Report Download - page 33

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Excluding the impact of consolidating Mexico, the gross margin comparison as a percent of net sales
would have been a decrease of 18 basis points during 2011. Changes in foreign currencies relative to
the U.S. dollar positively impacted gross margin by approximately $149 in 2011, primarily due to the
positive impacts of the Canadian dollar, Mexican peso, and Japanese yen of approximately $84, $18,
and $18, respectively.
Selling, General and Administrative (SG&A) Expenses
2012 2011 2010
SG&A expenses ................................. $9,518 $8,691 $7,848
SG&A expenses as a percent of net sales ............ 9.81% 9.98% 10.29%
2012 vs. 2011
SG&A expenses as a percent of net sales improved 17 basis points compared to 2011. Excluding the
effect of gasoline price inflation, SG&A expenses improved nine basis points, primarily due to an
eleven basis point improvement in our warehouse operating costs, largely payroll. This improvement
was partially offset by contributions to an initiative reforming alcohol beverage laws in Washington
State and higher stock compensation expense, which had negative impacts of two basis points each.
Higher costs related to the modernization of our information systems and related activities, which
includes the re-platforming of our e-commerce sites, also adversely impacted our SG&A percentage.
Changes in foreign currencies relative to the U.S. dollar positively impacted SG&A expenses by
approximately $45 in 2012, primarily due to the positive impacts of the Canadian dollar and Mexican
peso by approximately $27 and $18, respectively.
2011 vs. 2010
SG&A expenses as a percent of net sales improved 31 basis points in 2011 compared to 2010.
Excluding the effect of gasoline price inflation, SG&A expenses improved 11 basis points, primarily due
to a 15 basis point improvement in our warehouse operating costs, largely payroll. This improvement
was partially offset by a non-recurring benefit of $24, or three basis points, recorded in fiscal 2010
related to the refund of a previously recorded Canadian employee tax liability.
The consolidation of Mexico, which compared to our other operating segments has lower SG&A
expenses as a percent of its own net sales, favorably impacted SG&A expenses as a percent of net
sales by seven basis points in 2011. Changes in foreign currencies relative to the U.S. dollar negatively
impacted SG&A expenses by approximately $116 in 2011, primarily due to the negative impacts of the
Canadian dollar, Japanese yen, and Mexican peso by approximately $65, $16, and $12, respectively.
Preopening Expenses
2012 2011 2010
Preopening expenses .................................... $37 $46 $26
Warehouse openings, including relocations .................. 17 24 14
Preopening expenses include costs for startup operations related to new warehouses and the
expansion of ancillary operations at existing warehouses. Preopening expenses vary due to the
number of warehouse openings, the timing of the opening relative to our year-end, whether the
warehouse is owned or leased, and whether the opening is in an existing, new, or international market.
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