Rue 21 2010 Annual Report Download - page 40

Administrative and general expenses increased as a percentage of net sales to 7.1% in fiscal year 2010 as
compared to 6.9% in fiscal year 2009 due primarily to the incremental public company and stock-based
compensation expenses as discussed above. Excluding the impact of the incremental public company and
stock-based compensation expenses, administrative and general expenses as a percentage of net sales, would
have decreased to 6.2% in fiscal year 2010 as compared to 6.3% in fiscal year 2009.
Depreciation and Amortization Expense
Depreciation and amortization expense increased as a percentage of net sales to 3.4% in fiscal year 2010 from
3.2% in fiscal year 2009, or $5.0 million. The increase in depreciation and amortization expense was primarily due
to the continued opening of new stores and conversions, investments in information technology and the completion
of the distribution center expansion during fiscal year 2010.
Provision for Income Taxes
The increase in provision for income taxes of $5.1 million in fiscal year 2010 from fiscal year 2009 was due
primarily to a $13.4 million increase in pre-tax income. The effective tax rate was at 39.2% in fiscal year 2010 as
compared to 39.5% in fiscal year 2009. This rate decrease was the result of state tax credits offset by non-deductible
expenses in fiscal year 2010.
Net Income
Net income increased 37.4%, or $8.2 million, to $30.2 million in fiscal year 2010 from $22.0 million in fiscal
year 2009. This increase was due to the factors discussed above.
Fiscal Year 2009 Compared to Fiscal Year 2008
Net Sales
In fiscal year 2009, our net sales increased 34.3%, or $134.2 million, to $525.6 million from $391.4 million in
fiscal year 2008. This increase in net sales was due to an increase of approximately 33% in the number of
transactions, primarily driven by new store openings and an increase of approximately 1% in the average dollar
value of transactions per store. During fiscal year 2009, we opened 88 new stores and closed 2 stores compared to
99 new stores and 2 store closures in fiscal year 2008. Our comparable store sales increased 7.8% in fiscal year 2009
compared to an increase of 3.7% in fiscal year 2008. Comparable store sales increased by $100.5 million and non-
comparable store sales increased by $33.7 million for fiscal year 2009 compared to fiscal year 2008. There were
417 comparable stores and 118 non-comparable stores open at January 30, 2010 compared to 330 and 119,
respectively, at January 31, 2009.
In fiscal year 2009, net sales of girls apparel, girls accessories and guys apparel and accessories represented
56.7%, 24.3% and 19.0%, respectively, of total net sales compared to 58.3%, 23.5% and 18.2%, respectively, for
fiscal year 2008. For fiscal year 2009, the girls accessories and guys apparel and accessories categories grew by
approximately 39% and 40%, respectively. The girls apparel category grew by approximately 31%. The increase in
the guys apparel and accessories category as a percentage of net sales was due to management efforts to expand the
number of items in the guys apparel and accessories category.
Gross Profit
Gross profit increased 40.7%, or $54.3 million, in fiscal year 2009 to $187.9 million from $133.6 million in
fiscal year 2008. Gross margin increased 170 basis points to 35.8% for fiscal year 2009 from 34.1% for fiscal year
2008. This increase was attributable to a 90 basis point increase in merchandise margin, due primarily to lower
merchandise costs throughout most of fiscal year 2009. Gross margin as a percent of sales was also positively
impacted by an 80 basis point decrease in store occupancy, distribution and buying costs, as these costs increased at
a rate lower than net sales.
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