Dick's Sporting Goods 2006 Annual Report Download - page 29

The increase in comparable store sales is mostly attributable to sales increases in men’s and women’s apparel, kids, athletic and
casual footwear, licensed merchandise, baseball, hunting, camping and guns, partially offset by lower sales of bikes, boots, snow
sports and outerwear accessories.
Private Label Sales For the year ended February 3, 2007, private label product sales in total for all stores represented 14.1%
of sales, an increase from last year’s 11.9% of sales. These private label sales are for the merchandise developed by Dick’s.
Store Count During 2006, we opened 39 stores and relocated two stores. As of February 3, 2007 we operated 294 stores,
with approximately 16.7 million square feet, in 34 states.
Income from Operations 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, partially offset by an increase in selling, general and administrative costs.
Gross profit increased 22% to $896.7 million in 2006 from $737.6 million in 2005. 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 improved merchandise margins in
the majority of the Company’s product categories, lower freight and distributions costs as a percentage of sales (14 basis points)
due to cost minimization practices at our distribution centers and lower occupancy costs as a percentage of sales (14 basis points)
due to the leverage from higher sales.
Selling, general and administrative expenses increased to $682.6 million in 2006 from $556.3 million in 2005 due primarily to an
increase in store count and continued investment in corporate and store infrastructure.
The 73 basis point increase over last year was due primarily to an increase in net advertising expense (29 basis points), the
recording of stock compensation expense in 2006 due to the Company’s adoption of FAS 123R (78 basis points) and higher bonus
expense (19 basis points) partially offset by a decrease in store payroll (40 basis points) due to the leverage from higher sales.
Merger integration and store closing costs associated with the purchase of Galyan’s of $37.8 million were recognized in 2005. The
cost relates primarily to closing Dick’s stores in overlapping markets and advertising the re-branding and re-grand opening of the
former Galyan’s stores.
Pre-opening expenses increased by $5.6 million to $16.4 million in 2006 from $10.8 million in 2005. Pre-opening expenses were
for the opening of 39 new stores and relocation of two stores in 2006 compared to the opening of 26 new stores and relocation
of four stores in 2005. Pre-opening expenses in any year fluctuate depending on the timing and number of store openings and
relocations. During 2006, Dick’s recognized rental costs associated with its operating leases that were incurred during the construction
period in accordance with FSP 13-1, “Accounting for Rental Costs Incurred during a Construction Period.”
Gain on Sale of Investment Gain on sale of investment was $1.8 million in 2005. The gain resulted from the sale of a portion
of the Company’s non-cash investment in its third-party Internet commerce provider.
Interest Expense, Net Interest expense, net, decreased by $3.0 million to $10.0 million in 2006 from $13.0 million in 2005 due
primarily to lower average borrowings on the Company’s senior secured revolving credit facility.
Fiscal 2005 Compared to Fiscal 2004
Net Income Net income increased to $73.0 million in 2005 from $68.9 million in 2004. This represented an increase in diluted
earnings per share of $0.05, or 4% to $1.35 from $1.30. The increase in earnings was attributable to an increase in net sales and
gross profit margin percentage, partially offset by an increase in selling, general and administrative expenses as a percentage of
sales, a $5.5 million after tax decrease in the gain on sale of investment and a $10.5 million after tax increase in merger integration
and store closing costs associated with the acquisition of Galyan’s.
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