Dick's Sporting Goods 2006 Annual Report Download - page 30

Net Sales Net sales increased 24% to $2,625 million in 2005 from $2,109 million in 2004. This increase resulted primarily from
a comparable store sales increase of 2.6%, or $36.7 million, and $478.9 million from the net addition of new stores in the last five
quarters which are not included in the comparable store base and the former Galyan’s stores which were included in the
comparable store base beginning in the second quarter of 2006.
The increase in comparable store sales is mostly attributable to sales increases in men’s and women’s apparel, exercise, athletic
and casual footwear, socks, licensed merchandise, baseball and accessories and guns, partially offset by lower sales of paintball,
in-line skates, bikes, hockey and hunting.
Private Label Sales For the year ended January 28, 2006, private label product sales in total for all stores represented 11.9% of
sales, an increase from last year’s 8.6% of proforma sales. These private label sales are for the merchandise developed by Dick’s,
and do not include any remaining private label products developed by Galyan’s.
Store Count During 2005, we opened 26 stores, relocated four stores and closed five stores. The store closures were a result of
the Galyan’s acquisition. As of January 28, 2006 we operated 255 stores, with approximately 14.7 million square feet, in 34 states.
Income from Operations Income from operations increased 20% to $132.7 million in 2005 from $110.9 million in 2004 due
primarily to the increase in gross profit, partially offset by an increase in merger integration and store closing costs and an increase
in selling, general and administrative costs.
Gross profit increased 26% to $737.6 million in 2005 from $586.5 million in 2004. As a percentage of net sales, gross profit
increased to 28.10% in 2005 from 27.81% in 2004. The gross profit percentage increased primarily due to improved merchandise
margins in the majority of the Company’s product categories, partially offset by higher occupancy costs as a percentage of sales
(50 basis points) due primarily to higher occupancy costs in the former Galyan’s stores, and higher freight expense as a percentage
of sales (39 basis points). The increase in freight expense was primarily due to an increase in the fuel surcharge charged by our carriers.
Selling, general and administrative expenses increased to $556.3 million in 2005 from $443.8 million in 2004 due primarily to an
increase in store count and continued investment in corporate and store infrastructure.
The 15 basis point increase over last year was due primarily to an increase in store payroll costs (64 basis points), a portion of
which is due to the negative leverage from lower sales in the former Galyan’s stores, partially offset by lower bonus expense
(28 basis points) and a decrease in corporate payroll expense (12 basis points), a portion of which is due to the synergies obtained
from the acquisition of Galyan’s.
Merger integration and store closing costs associated with the purchase of Galyan’s increased to $37.8 million in 2005 from
$20.3 million in 2004. The increase is primarily due 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 decreased by $0.7 million to $10.8 million in 2005 from $11.5 million in 2004. Pre-opening expenses
were for the opening of 26 new stores and relocation of four stores in 2005 compared to the opening of 29 new stores
and relocation of three stores in 2004. Pre-opening expenses in any year fluctuate depending on the timing and number of
store openings and relocations.
Gain on Sale of Investment Gain on sale of investment was $1.8 million in 2005 as compared to $11.0 million in 2004. 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, increased by $5.0 million to $13.0 million in 2005 from $8.0 million in 2004 due
primarily to higher interest rates and higher average borrowings on the Company’s senior secured revolving credit facility.
Other Income Other income in 2004 included a $1.0 million break-up fee related to our unsuccessful effort to acquire the assets
of a bankrupt retailer.
DICK’S SPORTING GOODS, INC. 2006 ANNUAL REPORT
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