Restoration Hardware 2015 Annual Report Download - page 46

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43
Interest expense—net
Interest expense increased $18.1 million to $35.7 million in fiscal 2015 compared to $17.6 million in fiscal 2014. Interest
expense consisted of the following:
Year Ended
 January 30, January 31,
 2016 2015
 (in thousands)
Amortization of convertible senior notes debt
discount ................................................................. $ 22,114 $ 7,969
Build-to-suit lease transactions .................................. 10,766 5,465
Other interest expense ................................................ 7,052 5,817
Capitalized interest for capital projects ...................... (2,311) (1,639 )
Interest income ........................................................... (1,944) (61 )
Total interest expense—net .................................. $ 35,677 $ 17,551
Income tax expense
Income tax expense was $58.8 million in fiscal 2015 compared to $57.2 million in fiscal 2014. Our effective tax rate was 39.2%
in fiscal 2015 compared to 38.6% in fiscal 2014.
Fiscal 2014 Compared to Fiscal 2013
Net revenues
Net revenues increased $316.5 million, or 20.4%, to $1,867.4 million in fiscal 2014 compared to $1,551.0 million in fiscal 2013.
Comparable brand revenue growth was 20% in fiscal 2014. We had 67 and 70 retail stores open at January 31, 2015 and February 1,
2014, respectively. Stores sales increased $114.8 million, or 14.0%, to $933.2 million in fiscal 2014 compared to $818.4 million in
fiscal 2013. Direct sales increased $201.6 million, or 27.5%, to $934.2 million in fiscal 2014 compared to $732.6 million in fiscal
2013. The increase in net revenues was due to a combination of the continued strong sales of our existing product assortment, as well
as the introduction of new products and the expansion of existing product assortment, which includes additional sizes, colors and
fabrics of existing offerings. The factors impacting the year-over-year comparability of our comparable brand revenue growth include
strong customer response to the mailing of our large format Source Books introduced in 2013, the launch of our new 2014 assortment
in our Galleries and on our websites, and our pricing and promotional strategy in fiscal 2014. We believe our brand awareness has
increased and has allowed us to further disrupt the highly fragmented home furnishings landscape and achieve market share gains.
Gross profit
Gross profit increased $133.9 million, or 24.0%, to $690.8 million in fiscal 2014 from $556.9 million in fiscal 2013. As a
percentage of net revenues, gross margin increased 1.1% to 37.0% of net revenues in fiscal 2014 from 35.9% of net revenues in fiscal
2013.
The increase in gross margin was primarily driven by higher merchandise margins in our core business, improvements in our
shipping costs, and leverage of our fixed retail occupancy costs. These increases were partially offset by higher outlet sales and
deleverage in our supply chain occupancy costs.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $23.0 million, or 4.6%, to $525.0 million in fiscal 2014 compared to
$502.0 million in fiscal 2013.
Selling, general and administrative expenses in fiscal 2014 included an approximately $8 million charge incurred in connection
with a legal claim alleging that the Company violated California’s Song-Beverly Credit Card Act of 1971 by requesting and recording
ZIP codes from customers paying with credit cards.