Albertsons 2014 Annual Report Download - page 35

Gross Profit
Gross profit for fiscal 2014 was $2,532, compared with $2,336 last year, an increase of $196 or 8.4 percent.
Gross profit benefited from incremental fees of $198 earned under the TSA, $34 of cost reduction initiatives
including lower employee-related costs, $27 of lower logistics costs, $13 of a LIFO charge decrease, $7 of higher
fees from new product introductions net of lower independent retail customer fees and $6 of higher professional
services income from services provided to independent retail customers, offset in part by $30 of incremental
investments to lower prices to customers, $28 of higher shrink, $22 of lower sales volume and $6 of higher
advertising costs. Gross profit for fiscal 2014 also includes a multi-employer pension plan withdrawal charge of
$3. Gross profit as a percent of Net sales was 14.8 percent for fiscal 2014, compared with 13.6 percent last year.
The increase in Gross profit rate is primarily a result of incremental TSA fees earned.
Independent Business gross profit as a percent of Independent Business net sales was 4.8 percent for fiscal 2014,
compared with 4.5 percent last year. The 30 basis point increase in Independent Business gross profit rate is
primarily due to $13 of lower logistics costs, $7 of higher fees from new product introductions net of lower
independent retail customer fees and $6 of higher professional services income from services provided to
independent retail customers, offset in part by a $3 multi-employer pension plan withdrawal charge.
Save-A-Lot gross profit as a percent of Save-A-Lot net sales was 15.4 percent for fiscal 2014, compared with
15.9 percent last year. The 50 basis point decrease in Save-A-Lot gross profit rate is primarily due to $12 of
incremental investments to lower prices to customers, $8 of higher shrink and $3 of higher advertising costs.
Retail Food gross profit as a percent of Retail Food net sales was 27.0 percent for fiscal 2014, compared with
26.7 percent last year. The 30 basis point increase in Retail Food gross profit rate is primarily due to $34 of
benefits from cost reduction initiatives including lower employee-related costs, $14 of lower logistics costs and
$11 of a LIFO charge decrease, offset in part by $20 of higher shrink, $17 of incremental investments to lower
prices to customers and $3 of higher advertising costs.
Selling and Administrative Expenses
Selling and administrative expenses for fiscal 2014 were $2,114 compared with $2,487 last year, a net decrease
of $373 or 15.0 percent. Selling and administrative expenses for fiscal 2014 includes net charges and costs of
$58, comprised of severance costs and accelerated stock-based compensation charges of $46, asset impairment
and other charges of $16, contract breakage and other costs of $6 and a legal settlement charge of $5, offset in
part by a gain on sale of property of $15. Selling and administrative expenses for fiscal 2013 included net charges
and costs of $275, comprised of asset impairment and other charges of $227, severance costs and a multi-
employer pension plan withdrawal charge of $36 and store closure charges of $22, offset in part by a cash
settlement received from credit card companies of $10. When adjusted for these items, the remaining net
reduction in Selling and administrative expenses of $156 is primarily due to benefits from cost reduction
initiatives, including $57 of reduced occupancy related costs principally due to lower depreciation expense, $48
of reduced consulting fees and $40 of lower employee-related costs, $20 of lower sales volume primarily in
Retail Food and $7 of lower property reserves and other administrative expense, offset in part by $16 of
increased insurance costs.
Selling and administrative expenses for fiscal 2014 were 12.3 percent of Net sales, compared with 14.5 percent
of Net sales last year. Selling and administrative expenses as a percent of Net sales for fiscal 2014 includes 30
basis points from net charges and costs of $58 described immediately above. Selling and administrative expenses
as a percent of Net sales for fiscal 2013 includes 160 basis points from net charges and costs of $275 described
immediately above. After adjusting for the above items, the remaining 90 basis points net reduction in Selling
and administrative expenses as a percent of Net sales is primarily due to cost reduction initiatives, including
occupancy related costs including lower depreciation expense, reduced consulting fees and lower employee-
related costs, offset in part by increased insurance costs. As described in Part II, Item 8 of this Annual Report on
Form 10-K, Note 1 – Summary of Significant Accounting Policies, Selling and administrative expenses in all
periods presented no longer include reductions attributable to TSA fees earned.
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