Rue 21 2010 Annual Report Download - page 39

The following table summarizes the number of stores open at the beginning of the period and at the end of the
period.
2010 2009 2008
Stores at beginning of period ...................................... 535 449 352
Stores opened during period(1) .................................... 105 88 99
Stores closed during period ....................................... (2) (2) (2)
Stores at end of period ........................................... 638 535 449
Store conversions during the period ................................. 31 26 21
(1) Stores opened during period do not include existing stores that have been converted.
Fiscal Year 2010 Compared to Fiscal Year 2009
Net Sales
In fiscal year 2010, our net sales increased 20.8%, or $109.1 million, to $634.7 million from $525.6 million in
fiscal year 2009. This increase in net sales was due to an increase of approximately 20.3% in the number of
transactions, primarily driven by new store openings. During fiscal year 2010, we opened 105 new stores and closed
2 stores compared to 88 new stores and 2 store closures in fiscal year 2009. Our comparable store sales increased
2.1% in fiscal year 2010 compared to an increase of 7.8% in fiscal year 2009. Comparable store sales increased by
$115.6 million and non-comparable store sales decreased by $6.5 million for fiscal year 2010 compared to fiscal
year 2009. There were 523 comparable stores and 115 non-comparable stores open at January 29, 2011 compared to
417 and 118, respectively, at January 30, 2010.
In fiscal year 2010, net sales of girls apparel, girls accessories and guys apparel and accessories represented
55.9%, 25.7% and 18.4%, respectively, of total net sales compared to 56.7%, 24.3% and 19.0%, respectively, for
fiscal year 2009. For fiscal year 2010, the girls apparel, girls accessories and guys apparel and accessories categories
grew by approximately 19.0%, 27.8% and 17.1%, respectively, as compared to fiscal year 2009.
Gross Profit
Gross profit increased 25.0%, or $46.9 million, in fiscal year 2010 to $234.8 million from $187.9 million in
fiscal year 2009. Gross margin increased 120 basis points to 37.0% for fiscal year 2010 from 35.8% for fiscal year
2009. This increase was attributable to a 120 basis point increase in merchandise margin, primarily due to an
improvement in our initial mark-up rate in fiscal year 2010. Gross margin as a percent of sales was not impacted by
store occupancy, distribution and buying costs, as these costs were flat as a rate to net sales in fiscal year 2010
compared to fiscal year 2009.
Selling, General and Administrative Expense
Selling, general and administrative expense increased 21.6%, or $28.9 million to $163.0 million in fiscal year
2010 from $134.1 million in fiscal year 2009. As a percentage of net sales, selling, general and administrative
expense increased 20 basis points to 25.7% in fiscal year 2010 as compared to 25.5% in fiscal year 2009. In fiscal
year 2010, we incurred $3.1 million in public company expenses and stock-based compensation expense of
$2.2 million. In fiscal year 2009, we incurred $2.5 million in public company expenses and stock-based
compensation expense of $0.4 million. In November 2009, we and Apax Partners, L.P (Apax) agreed to terminate
the letter agreement relating to financial advisory services provided to the Company. As part of termination
agreement, we were required to pay Apax a one-time termination fee of $1.5 million, which is included as a
component of public company expenses in fiscal year 2009. Excluding the impact of these items, selling, general
and administrative expenses as a percentage of net sales, would have leveraged 10 basis points in fiscal year 2010.
Store operating expenses increased by $20.4 million primarily resulting from the operation of 638 stores as of
January 29, 2011 compared to the operation of 535 stores as of January 30, 2010. As a percentage of net sales, store
operating expenses were flat at 18.6% in each of fiscal year 2010 and fiscal year 2009.
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