CompUSA 2010 Annual Report Download - page 71

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GEOGRAPHIES:
North American sales benefited from increased retail and internet sales in the consumer channel, the result of opening seven retail
stores in 2010, the Circuit City acquisition in 2009, and the increased sales from the Industrial Products segment. On a constant
currency basis, North American sales would have grown 8.9%. The movement in the exchange rates positively impacted sales by
approximately $19.9 million.
European sales grew primarily from an increase in business to business sales. On a constant currency basis, European sales would
have increased 29.6%. Movement in foreign exchange rates negatively impacted sales by approximately $52.9 million.
CHANNEL SALES:
Worldwide consumer-channel revenue, defined as revenues from retail stores, consumer websites, inbound call centers and shopping
channels, grew primarily from volume increases in computers, including laptops and netbooks and consumer electronics, including
televisions, reflecting improved global economic conditions. On a constant currency basis and excluding the WStore acquisition,
worldwide consumer channel sales increased 2.4%.
Worldwide business to business channel sales grew primarily from an improvement in global economic conditions and the WStore
acquisition in 2009. On a constant currency basis and excluding the WStore acquisition, worldwide business to business channel sales
grew 18.1%.
2009 versus 2008:
The growth in Technology products sales in 2009 compared to 2008 was driven by increased retail and internet sales, opening of five
retail stores and the two acquisitions completed in 2009. The Circuit City acquisition and the WStore acquisition contributed $67.3
million and $63.8 million in sales, respectively. On a constant currency basis, translating 2009 foreign results at 2008 exchange rates,
Technology product sales would have grown 10.5% or $120.9 million. Adjusting for the impact of the number of weeks, Technology
products sales increased 8.3% for the year. North American technology sales increased 14.3% in 2009 compared to 2008 benefiting
from the opening of five retail stores and the Circuit City acquisition. On a constant currency basis, translating 2009 Other North
America results at 2008 exchange rates, North American technology products sales would have grown to 15.2%. The movement in
exchange rates negatively impacted sales by approximately $17.3 million. Adjusting for the impact of the number of weeks, North
American technology sales would have increased 16.7%. European technology products sales declined 9.8% to $848.5 million as the
result of slower business to business sales. Sales attributable to the WStore acquisition totaled $63.8 million for the year. On a
constant currency basis, European sales would have increased 1.2%. Movement in foreign exchange rates accounted for $103.6
million of the sales decline in Europe for the year. Adjusting for the impact of the number of weeks, European sales would have
declined 8.3%. As in the United States, sales slowed in the second half of 2008 in Europe and Canada for both consumer and business
to business sales as the result of a slowdown in economic activity Industrial products sales decline was attributable to the slowdown in
business to business economic activity. The Company announced plans to exit its Software solutions segment during the second
quarter of 2009. Substantially all of the third party business activities of ProfitCenter Software had ended as of December 31, 2009.
Current and prior year results for this segment are now included in Corporate and other.
GROSS MARGIN
Consolidated gross margin declined by 70 basis points in 2010 versus 2009 as the Company continued to lower certain product prices,
offered freight discounts on the Company’ s North American websites and incurred start up costs related to the new distribution center
in North America partially offset by improvement in gross margin in Europe and in Industrial Products. Gross margin is dependent on
variables such as product mix, vendor price protection and other sales incentives, competition, pricing strategy, cooperative
advertising funds required to be classified as a reduction to cost of sales, freight discounting and other variables, any or all of which
may result in fluctuations in gross margin.
Consolidated gross margin declined by 60 basis points in 2009 versus 2008 as the Company lowered certain product prices and
offered freight incentives in order to maintain and grow market share and to respond to competitive pricing pressures that started in
2008. Additionally, consolidated gross margin has been impacted by a shift in mix, as higher margin Industrial Products accounted for
a smaller percentage of consolidated revenues than in previous years.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES/REORGANIZATION AND OTHER CHARGES
Selling, general and administrative expenses increased in 2010 over 2009 primarily as a result of the increased sales volume, increases
in facility and other operating costs related to opening additional retail stores and reorganization costs related to the WStore
acquisition. Selling, general and administrative costs as a percent of sales declined 30 basis points as sales grew at a faster rate than