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BGFV » Topics » Fiscal 2006 Compared to Fiscal 2005

These excerpts taken from the BGFV 10-K filed Mar 10, 2008.
Fiscal 2006 Compared to Fiscal 2005
 
Net Sales.  Net sales increased by $62.8 million, or 7.7%, to $876.8 million for fiscal 2006 from $814.0 million for fiscal 2005. The growth in net sales was primarily attributable to an increase of $31.9 million in same store sales and an increase of $32.3 million in new store sales, net of sales for closed stores, which reflected the opening of 35 new stores, net of relocations, since January 2, 2005. Net sales for the fourth quarter of fiscal 2005 included $1.2 million related to our initial recognition of gift card breakage (gift cards sold and store merchandise credits issued where the likelihood of redemption by the customer is remote). Gift card breakage for fiscal 2006 totaled $0.4 million, of which $0.1 million was recorded in the fourth quarter. Same store sales increased 4.0% for fiscal 2006 compared with fiscal 2005. Store count at the end of fiscal 2006 was 343 versus 324 at the end of fiscal 2005 as we opened 19 new stores in fiscal 2006.
 
Gross Profit.  Gross profit increased by $21.4 million, or 7.6%, to $301.2 million, or 34.4% of net sales, in fiscal 2006 from $279.8 million, or 34.4% of net sales, in fiscal 2005. The increase in gross profit was primarily attributable to the following:
 
  •  Product selling margins for fiscal 2006, which exclude buying, store occupancy and distribution center costs, increased 20 basis points versus fiscal 2005.
 
  •  Distribution center costs for fiscal 2006 increased by $7.7 million, or 54 basis points, due primarily to the commencement of operations at our new larger distribution center, higher labor-related costs and increased trucking expense, related in part to higher gasoline prices. Depreciation expense increased $1.8 million over fiscal 2005. Distribution center costs capitalized into inventory for fiscal 2006 decreased $0.8 million, or 13 basis points, compared to fiscal 2005.
 
  •  Store occupancy costs increased by $4.0 million over fiscal 2005, due mainly to new store openings. Store occupancy costs as a percentage of net sales decreased by 3 basis points due to higher sales in fiscal 2006.
 
  •  Inventory reserve provisions for fiscal 2006 decreased $3.0 million, or 45 basis points, from the prior year due primarily to a lower provision for shrink offset partially by an increased provision for the realizability of the value of returned goods.
 
Selling and Administrative Expense.  Selling and administrative expense increased by $12.8 million, or 5.6%, to $242.8 million, or 27.7% of net sales, in fiscal 2006 from $230.0 million, or 28.3% of net sales, in fiscal 2005. The increase in selling and administrative costs was primarily attributable to the following:
 
  •  Store-related expense, excluding occupancy, increased by $7.1 million due primarily to an increase in store count, but declined 46 basis points as a percentage of net sales as store labor savings, due in part to


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Table of Contents

merchandise delivery efficiencies provided by our new distribution center and higher sales for fiscal 2006, allowed leveraging of this expense.
 
  •  Store-related expense in fiscal 2006 was favorably impacted by our receipt of $0.7 million resulting from the settlement of a class-action lawsuit relating to purchasing card fees.
 
  •  Advertising expense increased by $1.7 million in fiscal 2006 due primarily to increased newspaper advertising costs, but declined 22 basis points as a percentage of net sales.
 
  •  Administrative expense for fiscal 2006 also reflected increased labor-related costs of $2.5 million, or 9 basis points, to support our continuing growth and internal control initiatives, and stock-based compensation expense of $2.2 million, or 25 basis points, due to our implementation of Statement of Financial Accounting Standards (“SFAS”) No. 123(R) on January 2, 2006.
 
  •  Legal and audit expense decreased by $1.2 million, or 20 basis points, in fiscal 2006 as a result of higher costs incurred in fiscal 2005 associated with the restatement of our prior period consolidated financial statements.
 
Other Income.  In fiscal 2005, we recorded proceeds from the settlement of a claim related to the required relocation of one of our stores, which was located on land acquired by a city redevelopment agency through eminent domain proceedings. Settlement proceeds totaled $1.8 million, of which $1.4 million was recorded as other income and $0.4 million was recorded in selling and administrative expense primarily as a reduction in legal fees incurred in connection with this eminent domain proceeding.
 
Interest Expense.  Interest expense increased by $1.7 million, or 28.7%, to $7.5 million in fiscal 2006 from $5.8 million in fiscal 2005. The increase in interest expense primarily reflects the impact of higher short-term interest rates partially offset by lower average debt levels.
 
Fiscal
2006 Compared to Fiscal 2005


 



Net Sales.  Net sales increased by
$62.8 million, or 7.7%, to $876.8 million for fiscal
2006 from $814.0 million for fiscal 2005. The growth in net
sales was primarily attributable to an increase of
$31.9 million in same store sales and an increase of
$32.3 million in new store sales, net of sales for closed
stores, which reflected the opening of 35 new stores, net of
relocations, since January 2, 2005. Net sales for the
fourth quarter of fiscal 2005 included $1.2 million related
to our initial recognition of gift card breakage (gift cards
sold and store merchandise credits issued where the likelihood
of redemption by the customer is remote). Gift card breakage for
fiscal 2006 totaled $0.4 million, of which
$0.1 million was recorded in the fourth quarter. Same store
sales increased 4.0% for fiscal 2006 compared with fiscal 2005.
Store count at the end of fiscal 2006 was 343 versus 324 at the
end of fiscal 2005 as we opened 19 new stores in fiscal 2006.


 



Gross Profit.  Gross profit increased by
$21.4 million, or 7.6%, to $301.2 million, or 34.4% of
net sales, in fiscal 2006 from $279.8 million, or 34.4% of
net sales, in fiscal 2005. The increase in gross profit was
primarily attributable to the following:


 














































  • 
Product selling margins for fiscal 2006, which exclude buying,
store occupancy and distribution center costs, increased
20 basis points versus fiscal 2005.
 
  • 
Distribution center costs for fiscal 2006 increased by
$7.7 million, or 54 basis points, due primarily to the
commencement of operations at our new larger distribution
center, higher labor-related costs and increased trucking
expense, related in part to higher gasoline prices. Depreciation
expense increased $1.8 million over fiscal 2005.
Distribution center costs capitalized into inventory for fiscal
2006 decreased $0.8 million, or 13 basis points,
compared to fiscal 2005.
 
  • 
Store occupancy costs increased by $4.0 million over fiscal
2005, due mainly to new store openings. Store occupancy costs as
a percentage of net sales decreased by 3 basis points due
to higher sales in fiscal 2006.
 
  • 
Inventory reserve provisions for fiscal 2006 decreased
$3.0 million, or 45 basis points, from the prior year
due primarily to a lower provision for shrink offset partially
by an increased provision for the realizability of the value of
returned goods.


 



Selling and Administrative Expense.  Selling
and administrative expense increased by $12.8 million, or
5.6%, to $242.8 million, or 27.7% of net sales, in fiscal
2006 from $230.0 million, or 28.3% of net sales, in fiscal
2005. The increase in selling and administrative costs was
primarily attributable to the following:


 
















  • 
Store-related expense, excluding occupancy, increased by
$7.1 million due primarily to an increase in store count,
but declined 46 basis points as a percentage of net sales
as store labor savings, due in part to





24




Table of Contents






merchandise delivery efficiencies provided by our new
distribution center and higher sales for fiscal 2006, allowed
leveraging of this expense.


 














































  • 
Store-related expense in fiscal 2006 was favorably impacted by
our receipt of $0.7 million resulting from the settlement
of a
class-action
lawsuit relating to purchasing card fees.
 
  • 
Advertising expense increased by $1.7 million in fiscal
2006 due primarily to increased newspaper advertising costs, but
declined 22 basis points as a percentage of net sales.
 
  • 
Administrative expense for fiscal 2006 also reflected increased
labor-related costs of $2.5 million, or 9 basis
points, to support our continuing growth and internal control
initiatives, and stock-based compensation expense of
$2.2 million, or 25 basis points, due to our
implementation of Statement of Financial Accounting Standards
(“SFAS”) No. 123(R) on January 2, 2006.
 
  • 
Legal and audit expense decreased by $1.2 million, or
20 basis points, in fiscal 2006 as a result of higher costs
incurred in fiscal 2005 associated with the restatement of our
prior period consolidated financial statements.


 



Other Income.  In fiscal 2005, we recorded
proceeds from the settlement of a claim related to the required
relocation of one of our stores, which was located on land
acquired by a city redevelopment agency through eminent domain
proceedings. Settlement proceeds totaled $1.8 million, of
which $1.4 million was recorded as other income and
$0.4 million was recorded in selling and administrative
expense primarily as a reduction in legal fees incurred in
connection with this eminent domain proceeding.


 



Interest Expense.  Interest expense increased
by $1.7 million, or 28.7%, to $7.5 million in fiscal
2006 from $5.8 million in fiscal 2005. The increase in
interest expense primarily reflects the impact of higher
short-term interest rates partially offset by lower average debt
levels.


 




EXCERPTS ON THIS PAGE:

10-K (2 sections)
Mar 10, 2008

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