Rue 21 2012 Annual Report Download - page 34

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2011. This increase was attributable to a 50 basis point increase in merchandise margin, primarily due to an
improvement in our initial mark-up rate in fiscal year 2012. Gross margin also improved by 10 basis points as a
percent of sales due to store occupancy costs in fiscal year 2012 compared to fiscal year 2011.
Selling, General and Administrative Expense
Selling, general and administrative expense increased 23.8%, or $46.9 million to $244.1 million in fiscal year
2012 from $197.2 million in fiscal year 2011. As a percentage of net sales, selling, general and administrative
expense increased 120 basis points to 27.1% in fiscal year 2012 as compared to 25.9% in fiscal year 2011.
Store operating expenses increased 21.4%, or $31.9 million to $180.9 million in fiscal year 2012 from $149.0
million in fiscal year 2011. Store operating expenses increased 50 basis points as a percentage of sales primarily due
to salary and related expenses. Corporate administrative and general expenses increased 31.1%, or $15.0 million to
$63.2 million in fiscal year 2012 from $48.2 million in fiscal year 2011. Corporate administrative expenses
increased 70 basis points primarily due to a 50 basis point increase in stock based compensation, a 30 basis point
increase due to a California wage and hour case settlement and related costs, and a 10 basis point increase for non-
recurring professional fees. Corporate administrative and general expenses were offset by a 20 basis point decrease
in salary and related expenses as a percentage of sales.
Depreciation and Amortization Expense
Depreciation and amortization expense increased to 3.7% as a percentage of net sales in fiscal year 2012 as
compared to 3.5% in fiscal year 2011. Depreciation and amortization expense increased 23.8%, or $6.4 million, in
fiscal year 2012 to $33.0 million from $26.6 million in fiscal year 2011, and was primarily due to the continued
opening of new stores and conversions, investments in information technology and the completion of the
distribution center expansion during fiscal year 2012.
Provision for Income Taxes
The increase in provision for income taxes of $0.7 million in fiscal year 2012 from fiscal year 2011 was due
primarily to a $5.6 million increase in pre-tax income. The effective tax rate was at 35.9% in fiscal year 2012 as
compared to 38.0% in fiscal year 2011. This rate decrease was primarily the result of corporate restructuring and
discrete events, including various tax credit programs in fiscal year 2012.
Net Income
Net income increased 12.7%, or $4.9 million, to $43.9 million in fiscal year 2012 from $39.0 million in fiscal
year 2011. This increase was due to the factors discussed above.
Fiscal Year 2011 Compared to Fiscal Year 2010
Net Sales
In fiscal year 2011, our net sales increased 19.8%, or $125.6 million, to $760.3 million from $634.7 million in
fiscal year 2010. This increase in net sales was due to an increase of approximately 14.7% in the number of
transactions and an increase in the average dollar transaction of approximately 4.2%. The average dollar value of
transactions increased due to a higher average unit retail slightly offset by a decrease in units per transaction. During
fiscal year 2011, we opened 120 new stores and closed three stores compared to 105 new stores and 2 store closures
in fiscal year 2010. Our comparable store sales increased 0.4% in fiscal year 2011 compared to an increase of 2.1%
in fiscal year 2010. There were 611 comparable stores and 144 non-comparable stores open at January 28, 2012
compared to 523 and 115, respectively, at January 29, 2011.
In fiscal year 2011, net sales of girls apparel, girls accessories and guys apparel and accessories represented
56.6%, 25.0% and 18.4%, respectively, of total net sales compared to 55.9%, 25.7% and 18.4%, respectively, for
fiscal year 2010. For fiscal year 2011, the girls apparel, girls accessories and guys apparel and accessories categories
grew by approximately 21.3%, 16.0% and 19.8%, respectively, as compared to fiscal year 2010.
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