Barnes and Noble 2008 Annual Report Download - page 12

at B. Dalton stores and a $10.8 million decrease in sales
at Barnes & Noble.com.
Barnes & Noble store sales decreased $123.4 million,
or 2.7%, during fi scal 2008 to $4,525.0 million from
$4,648.4 million during fi scal 2007 and accounted for
88.3% of total Company sales. The 2.7% decrease in
Barnes & Noble store sales was primarily attributable
to a 5.4% decrease in comparable store sales or $237.7
million, closed stores that decreased sales by $101.3
million, off set by new Barnes & Noble store sales of
$208.5 million.
B. Dalton sales decreased $17.0 million, or 20.1%,
during fi scal 2008 to $67.5 million from $84.5 million
during fi scal 2007. This decrease was primarily attribut-
able to the closing of 33 B. Dalton stores.
Barnes & Noble.com sales decreased $10.8 million, or
2.3%, during fi scal 2008 to $466.1 million from $476.9
million during fi scal 2007. This decrease was primarily
attributable to a 1.3% decrease in comparable sales or
$6.1 million.
In fi scal 2008, the Company opened 35 Barnes & Noble
stores and closed 22, bringing its total number of Barnes
& Noble stores to 726 with 18.7 million square feet. The
Company closed 33 B. Dalton stores, ending the period
with 52 B. Dalton stores and 0.2 million square feet. As
of January 31, 2009, the Company operated 778 stores in
the fi fty states and the District of Columbia.
Cost of Sales and Occupancy
The Company’s cost of sales and occupancy includes
costs such as merchandise costs, distribution center
costs (including payroll, freight, supplies, depreciation
and other operating expenses), rental expense, common
area maintenance and real estate taxes, partially off set
by landlord tenant allowances amortized over the life of
the lease.
Cost of sales and occupancy decreased $139.2 million, or
3.8%, to $3,540.6 million in fi scal 2008 from $3,679.8
million in fi scal 2007. As a percentage of sales, cost of
sales and occupancy decreased to 69.1% in fi scal 2008
from 69.6% in fi scal 2007. This decrease was primar-
ily attributable to reduced promotional markdowns,
better product mix and increased volume through the
Company’s distribution centers, which more than off set
the deleveraging of fi xed occupancy costs on the negative
comparable store sales.
Selling and Administrative Expenses
Selling and administrative expenses increased $25.7
million, or 2.1%, to $1,251.5 million in fi scal 2008
from $1,225.8 million in fi scal 2007. As a percentage
of sales, selling and administrative expenses increased
to 24.4% in fi scal 2008 from 23.2% in fi scal 2007.
Included in selling and administrative expenses in
fi scal 2008 were an $11.7 million impairment charge
for property and equipment, an $8.3 million charge for
the settlement with the State of California regarding
the collection of sales and use taxes on sales made by
Barnes & Noble.com from 1999 to 2005, $4.1 million of
severance related to the elimination of certain corpo-
rate offi ce expenses and a $3.0 million charge related
to a management resignation. Included in selling and
administrative expenses in fi scal 2007 were legal costs
of $11.1 million, and an impairment charge of $5.9 mil-
lion, off set by a $6.4 million gain in insurance proceeds
from the Hurricane Katrina settlement. Excluding these
charges, selling and administrative expenses increased
in fi scal 2008 as a percentage of sales to 23.9% from
23.0% in fi scal 2007. This increase was primarily due
to the deleveraging of fi xed expenses with the negative
comparable store sales.
Depreciation and Amortization
Depreciation and amortization increased $5.0 million,
or 2.9%, to $173.6 million in fi scal 2008 from $168.6
million in fi scal 2007. The increase was primarily due to
the depreciation on additional capital expenditures for
existing store maintenance, technology investments and
new store openings, off set by $2.6 million of acceler-
ated depreciation in fi scal 2007 related to an Internet
distribution center closing.
Pre-Opening Expenses
Pre-opening expenses increased $2.4 million, or 23.2%,
in fi scal 2008 to $12.8 million from $10.4 million in
fi scal 2007. This was primarily the result of the timing of
new store openings.
Operating Profi t
The Company’s consolidated operating profi t decreased
$58.7 million, or 29.1%, to $143.3 million in fi scal
2008 from $202.0 million in fi scal 2007. This decrease
in operating profi t was primarily due to the negative
comparable store sales, as well as the matters discussed
above.
2008 Annual Report 11