Dick's Sporting Goods 2008 Annual Report Download - page 32

Store Count During 2007, we acquired 65 Golf Galaxy stores and 15 Chick’s Sporting Goods stores. In addition, we opened 46 Dick’s
stores and 16 Golf Galaxy stores, relocated one Dick’s store, and closed two Golf Galaxy stores, resulting in an ending store count of
434 stores, with approximately 21.1 million square feet, in 40 states.
Income from Operations Income from operations increased 36% to $268.8 million in 2007 from $197.7 million in 2006 due primarily
to the increase in sales and gross profi t margin, partially offset by an increase in selling, general and administrative costs.
Gross profi t increased 29% to $1,158.1 million in 2007 from $896.7 million in 2006. As a percentage of net sales, gross profi t
increased to 29.78% in 2007 from 28.79% in 2006. The gross profi t percentage increased primarily due to improved merchandise
margins in the majority of the Company’s product categories and lower freight and distribution costs as a percentage of sales
(38 basis points) due to cost minimization practices at our distribution centers offset by higher occupancy costs as a percentage
of sales (35 basis points) due to the leverage from higher sales in fi scal 2006 due to the 53rd week of sales.
Selling, general and administrative expenses increased to $870.4 million in 2007 from $682.6 million in 2006 due primarily to an
increase in store count and continued investment in corporate and store infrastructure.
The 46 basis point increase over fi scal 2006 was due primarily to higher payroll and fringe related expenses related to bonus
payments to employees (40 basis points), an increase in net advertising expense (3 basis points), and fi scal 2006 including a
53rd week of sales to offset fi xed costs included in selling, general and administrative expense.
Pre-opening expenses increased by $2.4 million to $18.8 million in 2007 from $16.4 million in 2006. Pre-opening expenses were for
the opening of 46 new Dick’s stores and 16 Golf Galaxy stores, as well as the relocation of one Dick’s store in 2007 compared to the
opening of 39 new stores and relocation of two stores in 2006. Pre-opening expenses in any year fl uctuate depending on the timing
and number of store openings and relocations.
Interest Expense, Net Interest expense, net, increased by $1.3 million to $11.3 million in 2007 from $10.0 million in 2006 due
primarily to costs related to the fi nancing of both the Golf Galaxy and Chick’s acquisitions during 2007. The Company ended fi scal
2007 with no outstanding borrowings under its Credit Agreement.
Liquidity and Capital Resources
Our primary capital requirements are for working capital, capital improvements and to support expansion plans, as well as for
various investments in store remodeling, store fi xtures and ongoing infrastructure improvements.
The change in cash and cash equivalents is as follows:
January 31, February 2, February 3,
Fiscal Year Ended 2009 2008 2007
Net cash provided by operating activities $ 159,811 $ 262,834 $ 139,609
Net cash used in investing activities (144,194) (435,296) (130,486)
Net cash provided by fi nancing activities 9,048 86,693 90,255
Effect of exchange rate changes on cash (135) 134 —
Net increase (decrease) in cash and cash equivalents $ 24,530 $ (85,635) $ 99,378
Operating Activities
Cash fl ow from operations is seasonal in our business. Typically, we use cash fl ow from operations to increase inventory in advance
of peak selling seasons, with the pre-Christmas inventory increase being the largest. In the fourth quarter, inventory levels are
reduced in connection with Christmas sales and this inventory reduction, combined with proportionately higher net income, typically
producing signifi cantly positive cash fl ow.
DICK’S SPORTING GOODS, INC. 2008 ANNUAL REPORT
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