Dick's Sporting Goods 2010 Annual Report Download - page 51

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adiZero shoe launch. Store payroll expenses decreased 31 basis points as a percentage of net sales primarily due to maintaining
store payroll at levels similar to last year’s period despite the increase in sales in fiscal 2010 compared to fiscal 2009.
The Company recorded $10.1 million of merger and integration costs during fiscal 2009. These costs related to the integration of
Chick’s operations and included duplicative administrative costs and management, advertising and severance expenses associated
with the conversions from Chick’s stores to Dick’s stores.
Pre-opening expenses increased $1.3 million to $10.5 million in fiscal 2010 from $9.2 million in fiscal 2009. Pre-opening expenses
were for the opening of 26 new Dick’s stores and two Golf Galaxy stores, as well as the relocation of two Dick’s stores in fiscal
2010 compared to the opening of 24 new Dick’s stores and one Golf Galaxy store and the relocation of one Dick’s store in fiscal
2009. Pre-opening expenses in any year fluctuate depending on the timing and number of store openings and relocations.
Interest Expense
Interest expense increased $9.5 million to $14.0 million in fiscal 2010 from $4.5 million in fiscal 2009. Interest expense for fiscal
2010 includes $10.6 million related to rent payments under the Company’s financing lease for its corporate headquarters building,
which it began occupying in January 2010. Interest expense related to the Company’s other debt obligations decreased $1.1 million,
primarily due to a decrease in average borrowings under the Company’s Second Amended and Restated Credit Agreement (the
“Credit Agreement”). The Company did not make any borrowings under the Credit Agreement during fiscal 2010.
Income Taxes
The Company’s effective tax rate was 38.8% for the year ended January 29, 2011 as compared to 39.3% for the year ended
January 30, 2010. The effective tax rate for fiscal 2010 reflects the Company’s efforts to simplify the organization of its tax
entities.
Fiscal 2009 Compared to Fiscal 2008
Net Income (Loss)
The Company reported net income of $135.4 million in fiscal 2009, which included merger and integration costs of $6.1 million,
net of tax, or $0.05 per diluted share, compared to a net loss of $39.9 million in fiscal 2008. The net loss in 2008 included
impairment charges of $161.7 million, net of tax, or $1.45 per diluted share, and merger and integration costs of $12.3 million,
net of tax, or $0.11 per diluted share.
Net Sales
Net sales increased 7% to $4,412.8 million in fiscal 2009 from $4,130.1 million in fiscal 2008, due primarily to new store sales and
the addition of e-commerce sales, partially offset by a consolidated same store sales decrease of 1.4%. Golf Galaxy was included
in the Company’s consolidated same store sales calculation in fiscal 2009.
The decrease in consolidated same store sales was mostly attributable to sales decreases in exercise, other footwear and golf
equipment and accessories. These sales decreases were partially offset by increases in athletic apparel, athletic footwear,
hunting, guns and outerwear and outerwear accessories.
The consolidated same store sales decrease was driven primarily by a decrease in average unit retail price of approximately 1.2%
and an increase in transactions of approximately 0.4% at Dick’s stores. Every 1% change in consolidated same store sales would
have impacted fiscal 2009 earnings before income taxes by approximately $12 million.
Store Count
During 2009, we opened 24 Dick’s stores and one Golf Galaxy store, relocated one Dick’s store, closed one Dick’s store, converted
the Golf Shop to a Golf Galaxy store and converted 12 Chick’s Sporting Goods stores to Dick’s Sporting Goods stores, resulting in
an ending store count of 510 stores, with approximately 24.8 million square feet, in 43 states.
Income from Operations
Income from operations increased $195.2 million to $225.6 million in fiscal 2009 from $30.4 million in fiscal 2008, which included
impairment charges of $193.4 million.
Dick’s Sporting Goods, Inc. ¬2010 Annual Report 31