Dick's Sporting Goods 2011 Annual Report Download - page 57

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Income Taxes
The Company’s effective tax rate was 38.9% for fiscal 2011 as compared to 38.8% for fiscal 2010.
Fiscal 2010 Compared to Fiscal 2009
Net Income
The Company reported net income of $182.1 million, or $1.50 per diluted share, in fiscal 2010
compared to net income of $135.4 million, or $1.15 per diluted share, in fiscal 2009. Net income for
fiscal 2010 included expenses relating to future lease obligations and asset impairment charges resulting
from the closure of 12 underperforming Golf Galaxy stores of approximately $9.8 million, net of tax, or
$0.08 per diluted share, and expenses related to a litigation settlement of approximately $6.5 million,
net of tax, or $0.05 per diluted share. Net income for fiscal 2009 included approximately $6.1 million of
merger and integration costs, net of tax, or $0.05 per diluted share.
Net Sales
Net sales increased 10% to $4,871.5 million in fiscal 2010 from $4,412.8 million in fiscal 2009, due
primarily to a 7.2% increase in consolidated same store sales and the opening of new stores. The
Company’s e-commerce business was included in the Company’s consolidated same store sales
calculation beginning in fiscal 2010. The 7.2% consolidated same store sales increase consisted of a
6.5% increase in Dick’s Sporting Goods stores, a 5.1% increase in Golf Galaxy and a 38.1% increase in
e-commerce. The inclusion of the e-commerce business resulted in an increase of approximately 73
basis points to the Company’s consolidated same store sales calculation for fiscal 2010.
The increase in consolidated same store sales was broad based, with increases in apparel and footwear.
The consolidated same store sales increase was driven primarily by an increase in transactions of
approximately 6.5% at Dick’s stores. Every 1% change in consolidated same store sales would have
impacted fiscal 2010 earnings before income taxes by approximately $13 million.
Store Count
During 2010, we opened 26 Dick’s stores and two Golf Galaxy stores, relocated two Dick’s stores,
closed one Dick’s store and closed 12 underperforming Golf Galaxy stores, resulting in an ending store
count of 525 stores with approximately 25.9 million square feet in 43 states.
Income from Operations
Income from operations increased $83.6 million to $309.2 million in fiscal 2010 from $225.6 million in
fiscal 2009.
Gross profit increased 19% to $1,449.0 million in fiscal 2010 from $1,216.9 million in fiscal 2009. As a
percentage of net sales, gross profit increased to 29.75% in fiscal 2010 from 27.58% in fiscal 2009. The
217 basis point increase was due primarily to a 140 basis point increase in merchandise margins that
resulted from changes in sales mix at our Dick’s stores, a reduction in clearance activity at our Golf
Galaxy stores and the inventory liquidation event at the Chick’s stores prior to their conversion to
Dick’s stores in May 2009. Gross profit was further impacted by the leverage of fixed occupancy and
freight and distribution costs resulting primarily from the increase in consolidated same store sales
compared to fiscal 2009. Every 10 basis point change in merchandise margin would have impacted fiscal
2010 earnings before income taxes by approximately $4 million.
Selling, general and administrative expenses increased 16% to $1,129.3 million in fiscal 2010 from
$972.0 million in fiscal 2009, and as a percentage of net sales, selling, general and administrative
expenses increased by 115 basis points. Administrative expenses increased 77 basis points as a
percentage of net sales from fiscal 2009 primarily due to higher costs related to our relocated corporate
Dick’s Sporting Goods, Inc. 2011 Annual Report 35