Banana Republic 2014 Annual Report Download - page 34

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Net Sales Discussion
Our net sales for fiscal 2014 increased $287 million, or 2 percent, compared with fiscal 2013 primarily due to an
increase in net sales at Old Navy and Athleta; partially offset by the unfavorable impact of foreign exchange of
about $130 million and a decrease in net sales at Gap. The unfavorable impact of foreign exchange was primarily
due to the weakening of the Canadian dollar and Japanese yen against the U.S. dollar. The foreign exchange
impact is the translation impact if net sales for fiscal 2013 were translated at exchange rates applicable during
fiscal 2014. On this basis, our net sales for fiscal 2014 increased 3 percent compared with fiscal 2013. We believe
this metric enhances the visibility of underlying sales trends by excluding the impact of foreign currency exchange
rate fluctuations.
Our net sales for fiscal 2013 increased $497 million, or 3 percent, compared with fiscal 2012 primarily due to an
increase in net sales at Gap Global and our newer brands; partially offset by the unfavorable impact of foreign
exchange of about $240 million primarily due to the weakening of the Japanese yen and Canadian dollar against
the U.S. dollar. The foreign exchange impact is the translation impact if net sales for fiscal 2012 were translated at
exchange rates applicable during fiscal 2013. On this basis, our net sales for fiscal 2013 increased 5 percent
compared with fiscal 2012. We believe this metric enhances the visibility of underlying sales trends by excluding
the impact of foreign currency exchange rate fluctuations. Fiscal 2013 consisted of 52 weeks compared with 53
weeks in fiscal 2012.
Cost of Goods Sold and Occupancy Expenses
($ in millions)
Fiscal Year
2014 2013 2012
Cost of goods sold and occupancy expenses $ 10,146 $ 9,855 $ 9,480
Gross profit $ 6,289 $ 6,293 $ 6,171
Cost of goods sold and occupancy expenses as a percentage of net sales 61.7% 61.0% 60.6%
Gross margin 38.3% 39.0% 39.4%
Cost of goods sold and occupancy expenses as a percentage of net sales increased 0.7 percent in fiscal 2014
compared with fiscal 2013.
• Cost of goods sold increased 0.4 percent as a percentage of net sales in fiscal 2014 compared with fiscal 2013,
primarily driven by increased promotional activities and markdowns; partially offset by the reclassification of a
portion of income related to our credit card program from operating expenses to cost of goods sold. Cost of
goods sold as a percentage of net sales in fiscal 2014 for our foreign subsidiaries was also negatively impacted
by foreign exchange as our merchandise purchases are primarily in U.S. dollars.
• Occupancy expenses increased 0.3 percent as a percentage of net sales in fiscal 2014 compared with fiscal
2013, primarily driven by the incremental cost related to new stores without a corresponding increase in total
net sales.
Cost of goods sold and occupancy expenses as a percentage of net sales increased 0.4 percent in fiscal 2013
compared with fiscal 2012.
• Cost of goods sold increased 0.5 percent as a percentage of net sales in fiscal 2013 compared with fiscal 2012,
primarily driven by increased promotional activities.
• Occupancy expenses decreased 0.1 percent as a percentage of net sales in fiscal 2013 compared with fiscal
2012, primarily driven by the increase in net sales.
In fiscal 2015, we expect that gross margins will continue to be negatively impacted by the continuing depreciation
of the Canadian dollar, Japanese yen, and other foreign currencies as our merchandise purchases are primarily in
U.S. dollars and also by our continuing expansion of Company-operated stores in international markets, which
generally have higher occupancy costs.