Ross 2012 Annual Report Download - page 27

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Cost of goods sold in fiscal 2011 increased $511.0 million compared to the prior year mainly due to increased sales from the
opening of 70 net new stores during the year and a 5% increase in sales from comparable stores.
Cost of goods sold as a percentage of sales for fiscal 2011 decreased approximately 35 basis points from the prior year. This
improvement was mainly the result of a 50 basis point increase in merchandise gross margin, which included a 15 basis point
benefit from lower shortage. In addition, occupancy leveraged 20 basis points. These improvements were partially offset by
increases in freight costs of about 20 basis points, distribution expenses of about 10 basis points, and buying costs of about five
basis points.
We cannot be sure that the gross profit margins realized in fiscal 2012, 2011, and 2010 will continue in future years.
Selling, general and administrative expenses. For fiscal 2012, selling, general and administrative expenses (“SG&A”)
increased $133.8 million compared to the prior year, mainly due to increased store operating costs reflecting the opening of 74 net
new stores during the year. SG&A as a percentage of sales for fiscal 2012 decreased by approximately 35 basis points compared
to the prior year primarily due to leverage on store operating expenses.
For fiscal 2011, SG&A increased $74.3 million compared to the prior year, mainly due to increased store operating costs reflecting
the opening of 70 net new stores during the year. SG&A as a percentage of sales for fiscal 2011 decreased by approximately 50
basis points compared to the prior year due equally to a combination of leverage on both general and administrative and store
operating expenses.
The largest component of SG&A is payroll. The total number of employees, including both full and part-time, as of fiscal year end
2012, 2011, and 2010 was approximately 57,500, 53,900, and 49,500, respectively.
Interest expense (income), net. In fiscal 2012, interest expense decreased by $3.5 million primarily due to higher
capitalization of construction interest. Interest income decreased by $0.1 million primarily due to lower investment yields as
compared to the prior year. As a percentage of sales, net interest expense in fiscal 2012 decreased by approximately five basis
points compared to the same period in the prior year. The table below shows interest expense and income for fiscal 2012, 2011,
and 2010:
($ millions) 2012 2011 2010
Interest expense $ 7.5 $ 11.0 $ 10.7
Interest income (0.6) (0.7) (1.1)
Total interest expense, net $ 6.9 $ 10.3 $ 9.6
Taxes on earnings. Our effective tax rate for fiscal 2012, 2011 and 2010 was approximately 38% in each year, which represents
the applicable combined federal and state statutory rates reduced by the federal benefit of state taxes deductible on federal
returns. The effective rate is impacted by changes in laws, location of new stores, level of earnings, and the resolution of tax
positions with various taxing authorities. We anticipate that our effective tax rate for fiscal 2013 will be about 38%.
Net earnings. Net earnings as a percentage of sales for fiscal 2012 were higher compared to fiscal 2011 primarily due to
both lower cost of goods sold and lower SG&A expenses as a percentage of sales. Net earnings as a percentage of sales for
fiscal 2011 were higher compared to fiscal 2010 primarily due to both lower cost of goods sold and lower SG&A expenses as a
percentage of sales.