Cash America 2014 Annual Report Download - page 69

54
Merchandise Sales Activities
Proceeds From Disposition of Merchandise
Profit from the disposition of merchandise represents the proceeds received from the disposition of
merchandise in excess of the cost of disposed merchandise, which is generally the principal amount loaned on an
item or the amount paid for purchased merchandise. Management separates proceeds from disposition of
merchandise and gross profit on disposition of merchandise into two groups, retail sales and commercial sales.
Retail sales include the sale of jewelry and general merchandise direct to consumers through the Company’s
locations or over the internet through auction and other similar sites. Commercial sales include the sale of refined
gold, platinum, silver and diamonds to brokers or manufacturers. The following table summarizes the proceeds
from the disposition of merchandise and the related profit for the years ended December 31, 2014 and 2013 (dollars
in thousands):
Year Ended December 31,
2014 2013
Retail Commercial Total Retail Commercial Total
Proceeds from disposition $528,312 $131,694 $660,006 $427,644 $167,795 $595,439
Gross profit on disposition $173,714 $12,155 $185,869 $151,757 $33,069 $184,826
Gross profit margin 32.9
%
9.2
%
28.2
%
35.5
%
19.7
%
31.0
%
Percentage of total gross profit 93.5
%
6.5
%
100.0
%
82.1
%
17.9
%
100.0
%
During 2013 and 2014, the Company shifted its strategy to place a greater emphasis on retail disposition of
merchandise and much less reliance on the disposition of commercial merchandise due to the prevailing lower
market price for pure gold. The percentage of gross profit from commercial sales has become a less significant
percentage of the total gross profit from dispositions. Management expects this trend to continue and will focus on
the profit from the retail disposition of merchandise in future periods.
As a result of this shift in strategy, proceeds and gross profit from disposition of merchandise for retail
merchandise increased by $100.7 million, or 23.5%, and $22.0 million, or 14.5%, respectively, from 2013 to 2014.
Excluding the Company’s Mexico-based pawn operations, which were sold in August 2014, proceeds from the
domestic disposition of retail merchandise increased $106.2 million, and gross profit from the disposition of retail
merchandise remained at $22.0 million after this exclusion.
Proceeds and gross profit from disposition of merchandise for commercial merchandise decreased by $36.1
million and $20.9 million, respectively, from 2013 to 2014, primarily as a result of lower average price of gold sold
in 2014.
Total gross margin decreased from 31.0% in 2013 to 28.2% in 2014, due to lower gross margin on retail
sales, which declined mainly as a result of discounting of retail merchandise prices on general merchandise items to
enhance sales, and lower gross margin on commercial dispositions. In addition, the Company increased the
allowance for merchandise held for disposition by $1.5 million in 2014 due to the increase in the mix of general
merchandise to total merchandise held for disposition. General merchandise typically requires a slightly higher
allowance than jewelry due to its higher risk of losing value over time. This expense also contributed to the gross
margin decrease from 2013 to 2014. However, total gross profit from the disposition of merchandise increased $1.0
million, or 0.6% overall.
Merchandise turnover decreased slightly from 2013 to 2014, from 2.4 times to 2.3 times.