Overstock.com 2013 Annual Report Download - page 49
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Table of Contents
The primary reason for the increase in fulfillment partner revenue for the year ended December 31, 2012 was an increase in sales of home and garden
products; partially offset by decreases in sales of electronics, jewelry and watches and books and media.
Our overall gross margins fluctuate based on our sales volume mix between our direct business and fulfillment partner business; changes in supplier
cost and / or sales price, including competitive pricing; inventory management decisions within the direct business; sales coupons and promotions; product
mix of sales; and operational and fulfillment costs.
The following table reflects our net revenues, cost of goods sold and gross profit for the year ended December 31, 2012 and 2011 (in thousands):
Revenue, net
Direct
$155,516
$163,609
$(8,093)
(4.9)%
Fulfillment partner
943,773
890,668
53,105
6.0 %
Total net revenues
$1,099,289
$1,054,277
$ 45,012
4.3 %
Cost of goods sold
Direct
$ 140,536
$149,660
$ (9,124)
(6.1)%
Fulfillment partner
760,323
725,529
34,794
4.8 %
Total cost of goods sold
$900,859
$875,189
$25,670
2.9 %
Gross Profit
Direct
$ 14,980
$13,949
$1,031
7.4 %
Fulfillment partner
183,450
165,139
18,311
11.1 %
Total gross profit
$198,430
$179,088
$ 19,342
10.8 %
Gross margins for the past eight quarterly periods and years ending December 31, 2012 and 2011 were:
Direct
8.0%
8.3%
10.3%
11.5%
9.6%
Fulfillment Partner
20.0%
19.6%
19.4%
18.9%
19.4%
Combined
18.1%
18.0%
18.2%
17.9%
18.1%
Direct
10.7%
9.6%
6.6%
7.0%
8.5%
Fulfillment Partner
20.7%
18.1%
17.6%
17.8%
18.5%
Combined
18.9%
16.9%
16.0%
16.2%
17.0%
The 110 and 90 basis point increases in direct and fulfillment gross margins, respectively, for the year ended December 31, 2012 when compared to
the same period in 2011 are primarily due to shifts in the sales mix into higher margin home and garden products and lower credit card fees, partially offset by
higher returns-related and freight costs.
The other factors described above, such as coupons, promotions and operational costs did not have a significant impact on the change in gross
margin.
Cost of goods sold includes stock-based compensation expense of $272,000 and $193,000 for the years ended December 31, 2012 and 2011,
respectively.
See "Executive Commentary" above for additional discussion.
Fulfillment costs include all warehousing costs, including fixed overhead and variable handling costs (excluding packaging costs), as well as credit
card fees and customer service costs, all of which we include as costs in calculating gross
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