Ross 2014 Annual Report Download - page 30

Cost of goods sold. Cost of goods sold in fiscal 2014 increased $577.0 million compared to the prior year mainly due to
increased sales from the opening of 86 net new stores during the year and a 3% increase in sales from comparable stores.
Cost of goods sold as a percentage of sales for fiscal 2014 decreased approximately 5 basis points from the prior year primarily
due to a 20 basis point increase in merchandise gross margin. This improvement was partially offset by a 15 basis point
increase in buying costs.
Cost of goods sold in fiscal 2013 increased $349.5 million compared to the prior year mainly due to increased sales from the
opening of 77 net new stores during the year and a 3% increase in sales from comparable stores.
Cost of goods sold as a percentage of sales for fiscal 2013 decreased approximately 15 basis points from the prior year.
This improvement was due primarily to a 45 basis point increase in merchandise gross margin, which was partially offset by
increases in occupancy of about 20 basis points and increases in distribution and buying expenses of about 5 basis points
each.
We cannot be sure that the gross profit margins realized in fiscal 2014, 2013, and 2012 will continue in future years.
Selling, general and administrative expenses. For fiscal 2014, selling, general and administrative expenses (“SG&A”)
increased $89.0 million compared to the prior year, mainly due to increased store operating costs reflecting the opening of 86
net new stores during the year. SG&A as a percentage of sales for fiscal 2014 decreased by approximately 30 basis points
compared to the prior year primarily due to tight expense control.
For fiscal 2013, SG&A increased $88.5 million compared to the prior year, mainly due to increased store operating costs
reflecting the opening of 77 net new stores during the year. SG&A as a percentage of sales for fiscal 2013 increased by
approximately 15 basis points compared to the prior year primarily due to higher costs related to the relocation of our data
center.
The largest component of SG&A is payroll. The total number of employees, including both full and part-time, as of fiscal year end
2014, 2013, and 2012 was approximately 71,400, 66,300, and 57,500, respectively.
Interest expense (income), net. In fiscal 2014, net interest expense increased by $3.2 million primarily due to the issuance
of our unsecured 3.375% Senior Notes due September 2024. As a percentage of sales, net interest expense in fiscal 2014
increased by approximately five basis points compared to the same period in the prior year. The table below shows the
components of interest expense and income for fiscal 2014, 2013, and 2012:
($ millions)
2014 2013 2012
Interest expense on long-term debt $ 13.0 $ 9.7 $ 9.7
Other interest expense 1.2 1.4 1.7
Capitalized interest (10.8) (10.8) (3.9)
Interest income (0.4) (0.5) (0.6)
Total interest expense (income), net $ 3.0 $ (0.2) $ 6.9
Taxes on earnings. Our effective tax rate for fiscal 2014, 2013 and 2012 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 2015 will be between 37%
and 38%.
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