Dick's Sporting Goods 2015 Annual Report Download - page 29

Income from Operations
Income from operations decreased $18.9 million to $535.2 million in fiscal 2015 from $554.1 million in fiscal 2014.
Gross profit increased 5% to $2,182.9 million in fiscal 2015 from $2,086.7 million in fiscal 2014, but decreased as a percentage
of net sales by 60 basis points compared to fiscal 2014. Fiscal 2014 included a $2.4 million write down of inventory relating to
our golf restructuring. Apart from the golf restructuring, gross profit decreased 63 basis points compared to fiscal 2014. The
decline in the gross profit rate was driven by a decrease in merchandise margin of 25 basis points coupled with an increase in
occupancy and shipping expenses during fiscal 2015 compared to fiscal 2014. The decrease in merchandise margin was
primarily driven by higher promotional activity. Occupancy costs increased $75.2 million from fiscal 2014. Our occupancy
costs are generally fixed in nature and fluctuate based upon the number of stores that we operate. As a percentage of net sales,
occupancy costs increased at a higher rate than the 7% increase in net sales during fiscal 2015. The increase in shipping
expenses during fiscal 2015 resulted from the growth and increased penetration of eCommerce sales as compared to the
Company's total net sales. Every 10 basis point change in merchandise margin would impact earnings before income taxes for
fiscal 2015 by approximately€$7.2 million.
Selling, general and administrative expenses increased 7% to $1,613.1 million in fiscal 2015 from $1,502.1 million in fiscal
2014, and increased as a percentage of net sales by 15 basis points. Fiscal 2015 includes a litigation settlement charge of $7.9
million. Fiscal 2014 included (i) a pre-tax gain on the sale of a Gulfstream G650 corporate aircraft of $14.4 million, and (ii)
asset impairment and severance charges related to the Company's golf restructuring of $14.3 million and $3.7 million,
respectively. Apart from the enumerated items, selling, general and administrative expenses increased as a percentage of net
sales by nine basis points. This increase was primarily driven by higher advertising expenses and planned investments to
support the Company's eCommerce initiatives, partially offset by lower incentive compensation expense compared to fiscal
2014.
Pre-opening expenses increased to $34.6 million in fiscal 2015 from $30.5 million in fiscal 2014. Pre-opening expenses in any
period fluctuate depending on the timing and number of store openings and relocations. Pre-opening rent expenses for our self-
developed store sites will generally exceed those for sites built to our specifications by our landlords since we are in possession
of the site for a longer period of time, which accelerates expense recognition but does not impact the timing of rent payments.
Income Taxes
The Company's effective tax rate was 37.8% for fiscal 2015 as compared to 38.1% for fiscal 2014.
Fiscal 2014 (52€weeks) Compared to Fiscal 2013 (52€weeks)
Net Sales
Net sales increased 10% to $6,814.5 million in fiscal 2014 from $6,213.2 million in fiscal 2013 due primarily to a 2.4%
increase in consolidated same store sales and the growth of our store network. The€2.4%€increase€in consolidated same store
sales contributed $146.4 million of the€increase€in net sales for fiscal 2014. The remaining $454.9 million€increase€in the
Company's noncomparable sales is attributable to new stores. The 2.4% increase in consolidated same store sales consisted of a
3.1% increase at Dick's Sporting Goods and a 9.2% decrease at Golf Galaxy. eCommerce sales penetration was 9.2% of total
net sales during the current period compared to 7.9% of total net sales during fiscal 2013, representing an approximate increase
of 28% in eCommerce sales across both Dick's Sporting Goods and Golf Galaxy.
The increase in consolidated same store sales was primarily driven by increases across most of our apparel, hardlines and
footwear categories, with the exception of the golf and hunting businesses. The same store sales increase at Dick's Sporting
Goods was driven by an increase in sales per transaction of approximately 1.9% and an increase in transactions of
approximately 1.2%. Based upon our fiscal 2014 sales mix, every 1% change in consolidated same store sales, which consists
of both brick and mortar and eCommerce sales, would impact earnings before income taxes for fiscal 2014 by approximately
$20.6 million.
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