Rue 21 2010 Annual Report Download - page 36

expanding the footprint of our distribution facility in Weirton, West Virginia. We also continue to invest in our
systems infrastructure, including implementation of the latest store merchandising, supply chain, financial and real
estate applications.
We believe our business strategy will continue to offer significant opportunity, but it also presents risks and
challenges. These risks and challenges include that we may not be able to effectively identify and respond to
changing fashion trends and customer preferences, that we may not be able to find desirable locations in strip
centers and regional malls or that we may not be able to effectively manage our operations which have grown
rapidly, or our future growth. We seek to ensure that addressing these risks does not divert our management’s
attention from continuing to build on the strengths that we believe have driven the growth of our business. We
believe our focus on maintaining the desirability of our products to our customers, maintaining and scaling our
supply chain resources and improving our in-store shopping experience and our customer service will contribute to
our ongoing success.
How We Assess the Performance of Our Business
In assessing the performance of our business, we consider a variety of performance and financial measures.
The key measures for determining how our business is performing are net sales, comparable store and non-
comparable store sales, gross profit margin and selling, general and administrative expense.
Net Sales
Net sales constitute gross sales net of any returns and merchandise discounts. Net sales consist of sales from
comparable stores and non-comparable stores.
Comparable Store Sales
A store is included in comparable store sales on the first day of the sixteenth month after its opening, as new
stores generally open with above run-rate sales volumes, which usually extend for a period of at least three months,
and comparability generally is achieved twelve months after the initial three-month period after store opening.
Comparable store sales include existing stores that have been converted to our rue21 etc! layout. When a store that is
included in comparable store sales is in the process of being converted to our rue21 etc! layout, net sales from that
store remain in comparable store sales. There may be variations in the way in which some of our competitors and
other apparel retailers calculate comparable or “same store” sales. As a result, data in this Annual Report on
Form 10-K regarding our comparable store sales may not be comparable to similar data made available by other
retailers. Non-comparable store sales include sales not included in comparable store sales and sales from closed
stores.
Measuring the change in year-over-year comparable store sales allows us to evaluate how our store base is
performing. Various factors affect comparable store sales, including:
• consumer preferences, buying trends and overall economic trends;
• our ability to identify and respond effectively to fashion trends and customer preferences;
• competition;
• changes in our merchandise mix;
• pricing;
• the timing of our releases of new merchandise and promotional events;
• the level of customer service that we provide in our stores;
• our ability to source and distribute products efficiently; and
• the number of stores we open, close and convert in any period.
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