Rue 21 2010 Annual Report Download - page 41

Selling, General and Administrative Expense
Selling, general and administrative expense increased 34.2%, or $34.2 million to $134.1 million in fiscal year
2009 from $99.9 million in fiscal year 2008. As a percentage of net sales, selling, general and administrative
expenses remained constant at 25.5% in fiscal year 2009 as compared to fiscal year 2008. 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 the termination agreement, we were required to pay Apax a one-time
termination fee of $1.5 million, which is included in selling, general and administrative expenses. Additionally, our
expense related to our stock-based awards increased by $0.4 million to $0.4 million for fiscal year 2009, as
compared to $0 for fiscal year 2008. Excluding the impact of these items, selling, general and administrative
expenses as a percentage of net sales, would have decreased to 25.1% in fiscal year 2009.
Store operating expenses increased by $24.5 million primarily resulting from the operation of 535 stores as of
January 30, 2010 compared to the operation of 449 stores as of January 31, 2009. As a percentage of net sales, store
operating expenses decreased slightly to 18.5% in fiscal year 2009 from 18.6% in fiscal year 2008.
Depreciation and Amortization Expense
Depreciation and amortization expense increased as a percentage of net sales to 3.2% in fiscal year 2009 from
2.9% in fiscal year 2008, or $5.4 million. The increase was due to the growth in capital expenditures of $7.1 million
and $6.2 million in fiscal year 2009 and fiscal year 2008, respectively.
Provision for Income Taxes
The increase in provision for income taxes of $6.4 million in fiscal year 2009 from fiscal year 2008 was due
primarily to a $15.7 million increase in pre-tax income. The effective tax rate increased to 39.5% in fiscal year 2009
from 38.8% in fiscal year 2008. This increase was the result of an increase in the amount of non-deductible expenses
in fiscal year 2009.
Net Income
Net income increased 74.2%, or $9.4 million, to $22.0 million in fiscal year 2009 from $12.6 million in fiscal
year 2008. This increase was due to the factors discussed above.
Fiscal Year 2008 Compared to Fiscal Year 2007
Net Sales
Net sales increased 31.8%, or $94.5 million, to $391.4 million in fiscal year 2008 from $296.9 million in fiscal
year 2007. The increase in net sales was due to an increase of approximately 23% in the number of transactions,
driven by new store openings and an increase of approximately 2% in the average dollar value of transactions per
store.
Comparable store sales increased 3.7% for fiscal year 2008 compared to an increase of 7.8% for fiscal year
2007. Comparable store sales increased by $66.7 million and non-comparable store sales increased by $27.8 million.
There were 330 comparable stores and 119 non-comparable stores open at January 31, 2009 compared to 260 and
92, respectively, at February 2, 2008.
The increase in the girls accessories and guys apparel and accessories categories as a percentage of net sales
and the approximate corresponding decrease in the girls apparel category as a percentage of net sales was reflective
of varying category sales growth rates. The girls accessories and guys apparel and accessories categories grew by
approximately 42% and 45%, respectively. Girls apparel category growth was approximately 25%. The increase in
girls accessories as a percentage of net sales was due to management efforts to expand the number of items in the
girls accessories category.
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