Pottery Barn 2010 Annual Report Download - page 45

Fiscal 2010 vs. Fiscal 2009
Selling, general and administrative expenses increased by $68,650,000, or 7.0%, in fiscal 2010 compared to
fiscal 2009. Including expense of approximately $16,384,000 from asset impairment and early lease termination
charges for underperforming retail stores and $4,319,000 associated with the retirement of our former Chairman
and Chief Executive Officer, selling, general and administrative expenses as a percentage of net revenues
decreased to 30.0% in fiscal 2010 from 31.6% in fiscal 2009 (which included $32,898,000 from asset impairment
and early lease termination charges for underperforming retail stores and $5,981,000 associated with the exit of
excess distribution capacity). This decrease was primarily driven by lower employment costs (including the rate
benefit from a higher proportion of total company net revenues being generated year-over-year in the
direct-to-customer channel, which incurs a lower rate of employment expenses than the retail channel), a
decrease in asset impairment and lease termination charges related to our underperforming retail stores in fiscal
2010, a decrease in other general expenses, expense related to the exit of excess distribution capacity recorded in
fiscal 2009 that did not recur in fiscal 2010, and a reduction in the total company advertising expense rate despite
the impact from a higher proportion of total company net revenues being generated year-over-year in the
direct-to-customer channel. This decrease was partially offset by expense associated with the retirement of our
former Chairman and Chief Executive Officer in fiscal 2010.
In the direct-to-customer channel, selling, general and administrative expenses as a percentage of
direct-to-customer net revenues decreased approximately 190 basis points in fiscal 2010 compared to fiscal 2009.
This decrease as a percentage of net revenues was primarily driven by a reduction in the advertising expense rate
and lower employment costs.
In the retail channel, selling, general and administrative expenses as a percentage of retail net revenues decreased
approximately 150 basis points in fiscal 2010 compared to fiscal 2009. This decrease as a percentage of net
revenues was primarily driven by a decrease in asset impairment and lease termination charges related to our
underperforming retail stores in fiscal 2010 and lower employment costs.
Fiscal 2009 vs. Fiscal 2008
Selling, general and administrative expenses decreased by $111,224,000, or 10.2%, in fiscal 2009 compared to
fiscal 2008. Including expense of approximately $32,898,000 from asset impairment and early lease termination
charges for underperforming retail stores and $5,981,000 associated with the exit of excess distribution capacity,
selling, general and administrative expenses as a percentage of net revenues decreased to 31.6% in fiscal 2009
from 32.5% in fiscal 2008. This decrease as a percentage of net revenues was primarily driven by the year-over-
year benefit from our infrastructure cost reduction program implemented at the end of fiscal 2008 and advertising
expense reductions associated with our catalog circulation optimization strategy. Further contributing to this
decrease was severance related costs of approximately $10,344,000 associated with our infrastructure cost
reduction program recorded in fiscal 2008, which did not recur in fiscal 2009. This decrease as a percentage of
net revenues was partially offset by an increase in incentive compensation expense in fiscal 2009; an
approximate $16,000,000 benefit related to a gain on the sale of our corporate aircraft, an $11,023,000 benefit
associated with the reversal of performance-based stock compensation expense and a net $9,350,000 incentive
payment received from a landlord to compensate us for terminating a store lease prior to its original expiration,
all of which were recorded in fiscal 2008 and did not recur in fiscal 2009; and an increase in asset impairment
and lease termination costs related to our underperforming retail stores and the exit of excess distribution
capacity in fiscal 2009.
In the direct-to-customer channel, selling, general and administrative expenses as a percentage of
direct-to-customer net revenues decreased approximately 290 basis points in fiscal 2009 compared to fiscal 2008.
This decrease as a percentage of net revenues was primarily driven by fiscal 2009 advertising expense reductions
associated with our catalog circulation optimization strategy.
In the retail channel, selling, general and administrative expenses as a percentage of retail net revenues decreased
approximately 180 basis points in fiscal 2009 compared to fiscal 2008. This decrease as a percentage of net
revenues was primarily driven by a year-over-year reduction in employment costs due to our infrastructure cost
reduction program. This decrease was partially offset by a $9,350,000 incentive payment received from a
31
Form 10-K