Rue 21 2010 Annual Report Download - page 10

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Most of our new stores will be opened in strip centers and regional malls in small- and middle-market
communities. In addition, we plan to continue to convert our existing stores into our larger rue21 etc! layout,
which averages approximately 5,000 square feet. This store layout allows us to offer an increased proportion
of higher margin categories, such as accessories, intimate apparel, footwear and fragrances. As of
January 29, 2011, more than 70% of our store base was in the rue21 etc! layout. We converted 31 stores
to the rue21 etc! layout in fiscal year 2010 and plan to convert 35 stores in fiscal year 2011. Historically,
these conversions result in increased store profitability and generate return on investment in excess of 30%
over a twelve-month period.
•Drive Comparable Store Sales. We seek to maximize our comparable store sales by increasing the
penetration of our diversified product categories, increasing our rue21 brand awareness, continuing to
provide our distinctive store experience and converting existing stores to our larger rue21 etc! layout. We
believe that our fashionable merchandise selections and affordable prices create more shopping excitement
for our customers, increase our brand loyalty and drive sales. We believe significant opportunities exist to
grow our higher margin accessories and footwear categories, both of which have been recent drivers of
comparable store sales growth. We also believe that our ability to quickly and consistently introduce the
newest fashions into our stores keeps our shopping experience fresh and exciting and drives repeat customer
visits.
•Improve Profit Margins. We believe we have the opportunity to drive margin expansion through scale
efficiencies, implementation of advanced planning and allocation systems and business processes, continued
cost discipline and changes in merchandise mix. We believe our strong expected store growth will permit us
to take advantage of economies of scale in sourcing and to leverage our existing infrastructure, corporate
overhead and fixed costs. We are focused on increasing efficiencies in our supply chain and distribution
systems to achieve better product flow and a leaner inventory position. We believe the expansion of our
higher margin categories, such as accessories and footwear, will increase our overall margins over time.
Our Stores
As of January 29, 2011, we operated 638 stores in 44 states throughout the United States. Our stores are located
in strip centers, regional malls and outlet centers.
We have an ongoing strategy to convert our existing store base into the larger rue21 etc! layout. As a result, we
have worked with our landlords to either convert or relocate our existing stores to attractively priced new locations,
either in the same shopping center or in shopping centers in close proximity to the existing store, that would allow us
to prominently showcase all of our product lines in a compelling store layout. In fiscal year 2010, we converted 31
stores to our rue21 etc! layout, which features expanded accessories categories.
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