Stein Mart 2011 Annual Report Download - page 19

Table of Contents
Gross Profit. The following table compares gross profit for fiscal 2010 to fiscal 2009 (dollar amounts in thousands):
The decrease in gross profit reflects a $14.2 million decrease in the comparable store group and a $6.0 million decrease in the closed store
group, offset by a $2.2 million increase in the non-comparable store group. Gross profit as a percent of sales decreased during 2010 primarily
due to a 0.6 percent of sales increase in markdowns and negative leverage on lower sales. Markdowns were higher in 2010 due to the
competitive retail environment.
Selling, General and Administrative Expenses. The following table compares SG&A expenses for fiscal 2010 to fiscal 2009 (dollar amounts
in thousands):
Excluding pre-tax asset impairment and store closing charges in both years and the $1.2 million charge associated with changing our physical
inventory process in 2010, SG&A expenses decreased $18.7 million to $283.9 million or 24.0 percent of sales from $302.6 million or 24.8
percent of sales for 2009. This decrease reflects a $23.7 million decrease in store expenses offset by a $3.2 million increase in advertising
expenses and a $1.8 million increase in corporate expenses. Store expense reductions include a $9.0 million decrease in personnel expenses
resulting from our new supply chain process, a $9.0 million decrease in other store operating and depreciation expenses and a $5.7 million
decrease due to the elimination of operating costs from closed stores. Other store operating expenses were lower as a result of continued cost
savings initiatives. Depreciation expense was lower as a result of asset impairment charges taken at the end of fiscal 2009. Advertising spend
was higher to increase our marketing impact.
Asset impairment charges were $7.3 million higher in 2009 due to more store closings and a greater number of stores with projected cash flows
that did not support the carrying value of their long-lived assets which required a write-down of their assets. Store closing charges were $0.7
million lower this year because there were fewer store closings and this year includes an offsetting $1.2 million gain on a lease buyout by a
landlord for the early termination of a lease.
Other income, net. The following table compares other income, net for fiscal 2010 to fiscal 2009 (dollar amounts in thousands):
The increase in other income, net is primarily due to our second quarter recognition of $9.7 million of other income related to cumulative
breakage on unused gift and merchandise return cards since the inception of these programs. Prior to the second quarter of 2010, we had not
recognized breakage on card balances pending our final determination of the interpretation of the escheat laws applicable to our operations and
historical redemption patterns. The remaining increase in other income was from our magazine subscription program and breakage income
recognized in the second half of 2010.
Income Taxes. The following table compares income tax expense for fiscal 2010 to fiscal 2009 (dollar amounts in thousands):
The income tax expense for 2010 was favorably impacted by the reversal of the remaining $6.0 million deferred tax asset valuation allowance
established in 2008. In the fourth quarter of 2010, we were no longer in a cumulative three-year loss position because the Company’
s income in
the last two years exceeded the loss incurred in 2008. Excluding this favorable tax adjustment, the ETR was 19.6 percent in 2010 compared to
31.6 percent in 2009. The 2010 rate was lower than the federal statutory rate of 35.0 percent due to the impact of favorable changes in book/tax
differences on our valuation allowance prior to the year-end reversal and favorable settlements of state income tax examinations. The 2009
ETR was lower than the federal statutory rate of 35.0 percent due to the effect of certain book/tax differences on the valuation allowance
including a tax accounting method change made in the third quarter of 2009.
17
2010 2009 Decrease
Gross profit
$
312,308
$
330,357
$
(18,049
)
Percentage of net sales
26.4
%
27.1
%
(0.7
)%
2010 2009 Decrease
Selling, general and administrative expenses
$
288,208
$
313,703
$
(25,495
)
Percentage of net sales
24.4
%
25.7
%
(1.3
)%
2010 2009 Increase
Other income, net
$
29,430
$
18,405
$
11,025
Percentage of net sales
2.5
%
1.5
%
1.0
%
2010 2009
Decrease
Income tax expense
$
4,439
$
10,856
$
(6,417
)
Effective tax rate
8.3
%
31.6
%
(23.3
)%