Dick's Sporting Goods 2006 Annual Report Download - page 27

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The following discussion and analysis should be read in conjunction with “Five-Year Financial Summary” and our consolidated
financial statements and related notes appearing elsewhere in this report. This Annual Report contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. See page 33 “Forward Looking Statements.”
Overview
The Company is an authentic full-line sporting goods retailer offering a broad assortment of brand-name sporting goods equipment,
apparel and footwear in a specialty store environment. On July 29, 2004, a wholly owned subsidiary of Dick’s Sporting Goods, Inc.
completed the acquisition of Galyan’s. The Consolidated Statements of Income include the operation of Galyan’s from the date of
acquisition forward for the year ended January 29, 2005.
As of February 3, 2007 we operated 294 stores, with approximately 16.7 million square feet, in 34 states, the majority of which
are located primarily throughout the eastern half of the United States.
Executive Summary
The Company reported net income for the year ended February 3, 2007 of $112.6 million or $2.03 per diluted share as compared
to net income of $73.0 million and earnings per diluted share of $1.35 in 2005. The increase in earnings was attributable to an
increase in sales as a result of a 6.0% increase in comparable store sales, new store sales and an increase in gross profit margins
partially offset by an increase in selling, general and administrative expenses as a percentage of sales.
Net sales increased 19% to $3,114 million in 2006 from $2,625 million in 2005. This increase resulted primarily from a comparable
store sales increase of 6.0%, or $105.9 million on a 52 week to 52 week basis, and $383.1 million from the net addition of new
stores in the last five quarters which are not included in the comparable store base and the inclusion of a 53rd week of sales.
Income from operations increased 49% to $197.7 million in 2006 from $132.7 million in 2005 due primarily to the increase in gross
profit, and the inclusion of merger integration and store closing costs in 2005 partially offset by an increase in selling, general and
administrative costs.
As a percentage of net sales, gross profit increased to 28.79% in 2006 from 28.10% in 2005. The gross profit percentage increased
primarily due to an increase in the merchandise margin percentage, lower freight and distribution costs as a percentage of sales and
lower occupancy costs as a percentage of sales.
Selling, general and administrative expenses increased by 73 basis points. The increase as a percentage of sales was due primarily to
recording stock compensation expense in fiscal 2006 upon the Company’s adoption of SFAS 123R on January 29, 2006, an increase
in net advertising expense and higher bonus expense this year.
We ended the year with no borrowings on our line of credit and excess borrowing availability totaled $333.5 million as of
February 3, 2007.
25
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS