Ross 2015 Annual Report Download - page 36

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Cost of goods sold. Cost of goods sold in fiscal 2015 increased $638.9 million compared to the prior year mainly due to
increased sales from the opening of 84 net new stores during the year and a 4% increase in sales from comparable stores.
Cost of goods sold as a percentage of sales for fiscal 2015 decreased approximately five basis points from the prior year
primarily due to a 45 basis point increase in merchandise gross margin and five basis points of occupancy leverage. This
improvement was partially offset by a 35 basis point increase in distribution expenses related to our recent infrastructure
investments and higher freight costs of 10 basis points.
Cost of goods sold in fiscal 2014 increased $577.0 million compared to the prior year mainly due to increased sales from the
opening of 86 net new stores during the year and a 3% increase in sales from comparable stores.
Cost of goods sold as a percentage of sales for fiscal 2014 decreased approximately five basis points from the prior year
primarily due to a 20 basis point increase in merchandise gross margin. This improvement was partially offset by a 15 basis
point increase in buying costs.
We cannot be sure that the gross profit margins realized in fiscal 2015, 2014, and 2013 will continue in future years.
Selling, general and administrative expenses. For fiscal 2015, selling, general and administrative expenses (“SG&A”)
increased $123.4 million compared to the prior year, mainly due to increased store operating costs reflecting the opening of
84 net new stores and the impact of wage rate increases during the year. SG&A as a percentage of sales for fiscal 2015
decreased by approximately five basis points compared to the prior year primarily due to leverage resulting from the 4%
increase in comparable store sales.
For fiscal 2014, SG&A increased $89.0 million compared to the prior year, mainly due to increased store operating costs
reflecting the opening of 86 net new stores during the year. SG&A as a percentage of sales for fiscal 2014 decreased by
approximately 30 basis points compared to the prior year primarily due to tight expense control.
Interest expense (income), net. In fiscal 2015, net interest expense increased by $9.6 million and rose as a percentage of
sales, primarily due to the issuance of our unsecured 3.375% Senior Notes due September 2024 in the third quarter of fiscal
2014 and the reduction of capitalized interest. The table below shows the components of interest expense and income for
fiscal 2015, 2014, and 2013:
($000)
2015
2014
2013
Interest expense on long-term debt
$ 18,568
$ 12,990
$ 9,721
Other interest expense
1,252
1,230
1,350
Capitalized interest
(6,530
)
(10,825
)
(10,799
)
Interest income
(678
)
(411
)
(519
)
Interest expense (income), net
$ 12,612
$ 2,984
$ (247
)
Taxes on earnings. Our effective tax rates for fiscal 2015, 2014 and 2013 were approximately 37%, 38% and 38%,
respectively. The effective tax rate represents the applicable combined federal and state statutory rates reduced by the
federal benefit of state taxes deductible on federal returns. The effective rate is impacted by changes in laws, location of new
stores, level of earnings, and the resolution of tax positions with various taxing authorities. We anticipate that our effective
tax rate for fiscal 2016 will be between 37% and 38%.