Dick's Sporting Goods 2014 Annual Report Download - page 54

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28
Field & Stream stores in five states and three True Runner stores in three states, totaling approximately 34.2 million square feet
on a consolidated basis.
Income from Operations
Income from operations increased $17.3 million to $554.1 million in fiscal 2014 from $536.8 million in fiscal 2013.
Gross profit increased 7% to $2,086.7 million in fiscal 2014 from $1,944.0 million in fiscal 2013, but decreased as a percentage
of net sales by 67 basis points compared to fiscal 2013. The decline in the gross profit rate was driven by a decrease in
merchandise margin of 58 basis points and an increase in shipping expenses of 17 basis points in fiscal 2014 compared to fiscal
2013. During fiscal 2014, the decrease in merchandise margin was primarily driven by higher promotional activity, partially
offset by changes in sales mix to higher margin categories, as discussed above. The increase in shipping expenses during fiscal
2014 was the result of the growth and increased penetration of eCommerce sales as compared to the Company's total net sales.
The decline in the gross profit rate was partially offset by leverage in occupancy costs, which decreased 10 basis points as a
percentage of net sales. Though overall occupancy costs increased $62.3 million from fiscal 2013, these costs decreased as a
percentage of net sales as occupancy costs increased at a lower rate than the 10% increase in net sales during fiscal 2014. Every
10 basis point change in merchandise margin would impact earnings before income taxes for fiscal 2014 by approximately $6.8
million.
Selling, general and administrative expenses increased approximately 8% to $1,502.1 million in fiscal 2014 from $1,386.3
million in fiscal 2013, but decreased as a percentage of net sales by 27 basis points. Fiscal 2014 includes (i) a pre-tax gain on
the sale of a Gulfstream G650 corporate aircraft of $14.4 million, (ii) severance charges totaling $3.7 million and (iii) non-cash
impairment charges totaling $14.3 million related to the Company's golf restructuring. Fiscal 2013 included a $7.9 million non-
cash impairment charge to reduce the carrying value of a Gulfstream G450 corporate aircraft held for sale to fair market value.
Apart from the enumerated items, the year over year change in selling, general and administrative expenses as a percentage of
net sales is due primarily to lower administrative payroll and related benefit costs, which increased in fiscal 2014 by $6.1
million from fiscal 2013 but decreased as a percentage of net sales by 20 basis points.
Pre-opening expenses increased to $30.5 million in fiscal 2014 from $20.8 million in fiscal 2013. Pre-opening expenses in any
period fluctuate depending on the timing and number of store openings and relocations. During fiscal 2014, the Company
opened 46 new Dick's Sporting Goods stores, one new Golf Galaxy store and eight new Field & Stream stores. Additionally, the
Company relocated five Dick's Sporting Goods stores and two Golf Galaxy stores in the current year. During fiscal 2013, the
Company opened 40 new Dick's Sporting Goods stores, one new Golf Galaxy store, two new Field & Stream stores and one
new True Runner store and relocated one Dick's Sporting Goods store and repositioned one Golf Galaxy store.
Income Taxes
The Company's effective tax rate was 38.1% for fiscal 2014 as compared to 38.2% for fiscal 2013.
Fiscal 2013 (52 weeks) Compared to Fiscal 2012 (53 weeks)
Net Income
The Company reported net income for the year ended February 1, 2014 of $337.6 million, or $2.69 per diluted share, as
compared to net income of $290.7 million, or $2.31 per diluted share, in fiscal 2012. Fiscal 2013 net income included $4.3
million, net of tax, or $0.03 per diluted share, related to the partial recovery from the Company's previously impaired
investment in JJB Sports and $4.7 million, net of tax, or $0.04 per diluted share, related to a non-cash impairment charge to
reduce the carrying value of a Gulfstream G450 corporate aircraft held for sale to fair market value. Fiscal 2012 net income
included a charge of $27.6 million, net of tax, or $0.22 per diluted share, related to the Company's impairment of its investment
in JJB Sports. Additionally, fiscal 2012 included approximately $0.03 per diluted share for the 53rd week.