Barnes and Noble 1998 Annual Report Download - page 37

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6
The following table sets forth, for the periods indicated, the percentage relationship that certain items bear to total sales of
the Company:
Fiscal Year 1998 1997 1996
Sales 100.0% 100.0% 100.0%
Cost of sales and occupancy 71.3 72.2 72.9
Gross margin 28.7 27.8 27.1
Selling and administrative expenses 19.2 19.3 19.0
Depreciation and amortization 2.9 2.8 2.5
Pre-opening expenses 0.3 0.4 0.7
Operating margin(1) 6.3 5.3 4.9
Interest expense, net and amortization of deferred financing fees (0.8) (1.4) (1.6)
Equity in net loss of barnesandnoble.com llc (2.4) — —
Gain on formation of barnesandnoble.com llc 2.1 — —
Earnings before provision for income taxes
and extraordinary charge(1) 5.2 3.9 3.3
Provision for income taxes(1) 2.1 1.6 1.2
Earnings before extraordinary charge(1) 3.1 2.3 2.1
Extraordinary charge, net — 0.4 —
Net earnings 3.1% 1.9% 2.1%
(1) If operating margin, earnings before provision for income taxes and extraordinary charge, provision for income taxes and earnings before extraordinary charge were
presented without barnesandnoble.com during fiscal 1997, the percentage relationship that these items would bear to total sales of the Company would be 5.8%, 4.5%,
1.8% and 2.7%
52 Weeks Ended January 30, 1999 Compared
with 52 Weeks Ended January 31, 1998
Sales
The Company’s sales increased 7.5% during fiscal 1998 to
$3.006 billion from $2.797 billion during fiscal 1997. Fiscal 1998
sales from Barnes & Noble stores, which contributed 83.7% of
total sales, increased 12.0% to $2.515 billion from $2.246 billion
in fiscal 1997.
The increase in sales was primarily due to the 5.0% incre a s e
in Barnes & Noble comparable store sales and the opening of an
additional 50 Barnes & Noble stores during 1998. This incre a s e
was slightly offset by declining sales of B. Dalton, due to 43 store
closings and a comparable store sales decline of 1.4%. In addi-
tion, fiscal 1997 includes barnesandnoble.com sales of $14.6
million whereas fiscal 1998 does not include sales for barn e s -
andnoble.com due to the conversion to the equity method of
accounting as of the be ginning of the ye a r. Excluding
b a rnesandnoble.com sales in fiscal 1997, retail sales incre a s e d
8.0% during fiscal 1998 .
Cost of Sales and Occupancy
The Company’s cost of sales and occupancy includes costs
such as rental expense, common area maintenance, merchant
association dues, lease-required advertising and adjustments
for LIFO.
Cost of sales and occupancy increased to $2.143 billion in
fiscal 1998 from $2.019 billion in fiscal 1997. The Company ’ s
gross margin rate increased to 28.7% in fiscal 1998 from 27.8% in
fiscal 1997. Excluding barnesandnoble.com in fiscal 1997 the re t a i l
gross margin rate was 27.9%. The current year improvement in
gross margin reflects more direct buying, increased distribution
center efficiencies, better shrinkage control, and a more - f avo r a b l e
m e r chandise mix.