Cabela's 2012 Annual Report Download - page 53

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43
Comparisons and analysis of our gross profit on merchandising revenue are presented below for the
years ended:
2012 2011
Increase
(Decrease) % Change
(Dollars in Thousands)
Merchandise sales $ 2,778,903 $ 2,505,733 $ 273,170 10.9%
Merchandise gross profit 1,009,742 892,492 117,250 13.1
Merchandise gross profit as a percentage of
merchandise sales 36.3% 35.6% 0.7%
Merchandise Gross Profit – Our merchandise gross profit increased $117 million, or 13.1% to $1 billion
in 2012 compared to 2011. The increase in our merchandise gross profit was primarily due to better inventory
management, which reduced the need to mark down product, continued improvements in vendor collaboration, an
ongoing focus on private label products, and further improvements in price optimization.
Our merchandise gross profit as a percentage of merchandise sales increased to 36.3% in 2012 from 35.6%
in 2011. The increase in the merchandise gross profit in 2012 compared to 2011 was primarily due to continued
improvements in pre-season and in-season inventory management and vendor collaboration, which allowed us to
avoid significant end of season markdowns as we transitioned from fall to spring merchandise. The increase in our
merchandise gross profit as a percentage of merchandise sales was partially offset by an adverse product mix shift
due to increased sales of firearms, ammunition, and power sports products, which carry a lower margin.
Selling, Distribution, and Administrative Expenses
Selling, distribution, and administrative expenses include all operating expenses related to our retail stores,
Internet website, distribution centers, product procurement, Cabela’s CLUB credit card operations, and overhead
costs, including: advertising and marketing, catalog costs, employee compensation and benefits, occupancy costs,
information systems processing, and depreciation and amortization.
Comparisons and analysis of our selling, distribution, and administrative expenses are presented below for
the years ended:
2012 2011
Increase
(Decrease) % Change
(Dollars in Thousands)
Selling, distribution, and administrative expenses $ 1,046,861 $ 954,125 $ 92,736 9.7%
SD&A expenses as a percentage of total revenue 33.6% 33.9% (0.3)%
Retail store pre-opening costs $ 12,523 $ 9,700 $ 2,823 29.1
Selling, distribution, and administrative expenses increased $93 million, or 9.7%, in 2012 compared to 2011.
However, expressed as a percentage of total revenue, selling, distribution, and administrative expenses decreased
30 basis points to 33.6% in 2012 compared to 33.9% in 2011. The most significant factors contributing to the
changes in selling, distribution, and administrative expenses in 2012 compared to 2011 included:
• an increase of $59 million in employee compensation, benefits, and contract labor primarily due to the
opening of new retail stores and increases in staff for other retail stores, merchandising support areas,
distribution centers, credit card growth support, and general corporate overhead support;
• an increase of $15 million in building costs and depreciation primarily related to the operations and
maintenance of our new and existing retail stores as well as corporate offices;