DSW 2014 Annual Report Download - page 27

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Table of Contents
the reconciliation of gross profit excluding our luxury test was:
Fiscal
2014
2013
2012
(in thousands)
(as a percentage
of net sales)
(in thousands)
(as a percentage of
net sales)
(in thousands)
(as a percentage
of net sales)
DSW Inc. gross profit $ 755,021
30.2%
$ 739,287
31.2 %
$ 724,720
32.1%
Less: impact of the luxury test —
—%
(16,481)
(1.0)%
—
—%
DSW Inc. gross profit excluding luxury
test $ 755,021
30.2%
$ 755,768
32.2 %
$ 724,720
32.1%
For the DSW segment, the components of adjusted gross margin, excluding our luxury test, are as follows:
Fiscal
2014
2013
2012
DSW segment gross profit 30.9%
31.9 %
32.8%
Less: impact of the luxury test —%
(1.0)%
—%
DSW segment gross profit excluding luxury test 30.9%
32.9 %
32.8%
Store occupancy expense 10.7%
10.4 %
10.0%
Distribution and fulfillment expenses 2.1%
2.0 %
2.0%
DSW segment merchandise margin excluding luxury test 43.7%
45.3 %
44.8%
Fiscal 2014 vs. Fiscal 2013- DSW segment gross profit decreased 100 basis points driven by lower net shipping expense, lower initial markup and higher
markdown activity. Merchandise margin for the DSW segment decreased as a percentage of net sales to 43.7% for fiscal 2014 from 45.3% for fiscal 2013 as a
result of an increase in spring markdown activity, higher shipping costs and lower initial markups. Store occupancy expense as a percentage of net sales
increased due to asset impairments. Distribution and fulfillment expenses as a percentage of net sales remained relatively flat at 2.1% for fiscal 2014
compared to fiscal 2013. Related to our ABG segment, gross profit decreased 80 basis points for fiscal 2014 primarily as a result of asset impairments.
Fiscal 2013 vs. Fiscal 2012- For the DSW segment, gross profit decreased 90 basis points primarily as a result of inventory adjustments related to our luxury
test. Excluding the impact of the luxury test, gross profit as a percentage of net sales increased 10 basis points as a result of an improvement in merchandise
margin, partially offset by deleverage of occupancy expenses. Excluding the impact of the luxury test, merchandise margin for the DSW segment increased as
a percentage of net sales to 45.3% for fiscal 2013 from 44.8% for fiscal 2012 as a result of a reduction in markdown activity. Distribution and fulfillment
expenses as a percentage of net sales remained flat at 2.0% for fiscal 2013 compared to fiscal 2012. Gross profit for our ABG segment decreased 40 basis
points for fiscal 2013 as a result of the Loehmann's bankruptcy and subsequent reserve for the liquidation of DSW inventory.
Operating Expenses
Fiscal 2014 vs. Fiscal 2013- Operating expenses as a percentage of net sales were 20.5% and 21.0% for fiscal 2014 and fiscal 2013, respectively. Excluding
the impact of the settlement of the pension plan assumed in the merger with RVI of $14.7 million in fiscal 2013, operating expenses as a percentage of net
sales were 20.4%. The decrease as a percentage of net sales over the comparable prior year period was due to store expense growth, information technology
expenses and marketing expenses partially offset by lower incentive compensation.
Fiscal 2013 vs. Fiscal 2012- Operating expenses as a percentage of net sales were 21.0% and 21.3% for fiscal 2013 and fiscal 2012, respectively. As noted
above, operating expenses in fiscal 2013 were 20.4% excluding the impact of the pension plan settlement. In the fourth quarter of fiscal 2012, we increased
our estimate of an impairment in a lease assumed in the Merger with RVI by $6.0 million based on our expectation of reduced future sublease income and an
expected increase in real estate taxes. This increase was partially offset by our receipt of a court approved award of damages of $5.3 million from our
insurance carrier for a denied claim related to the 2005 data theft, partially offset by related expense of $1.3 million. Excluding the impact
23
Source: DSW Inc., 10-K, March 26, 2015 Powered by Morningstar® Document Research℠
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