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Management
Discussion & Analysis pg 1
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SG&A rate was 33.5% of revenues in fiscal 2002 compared with a
pro forma rate of 32.9% last fiscal year. The SG&A rate
increase was primarily the result of the deleveraging impact of
the comparable store sales decline, higher distribution costs and
increased expenses associated with the remerchandising of Sam
Goody stores, partially offset by reduced advertising
expenditures. In addition, both fiscal 2002 and pro forma 2001
included approximately $16 million of goodwill amortization.
Goodwill amortization will cease at the beginning of fiscal 2003
with our adoption of SFAS No. 142, Goodwill and Other
Intangible Assets.
International (1) Results of
operations at Future Shop since its acquisition at the beginning
of November fiscal 2002. Future Shop revenues were $596 million in fiscal 2002, a 10% increase compared with last year’s pro forma results. For the year, comparable store sales increased 17.4%, before the impact of foreign currency exchange rate fluctuations. The comparable store sales gains were driven by increased sales of entertainment software products and consumer electronics, which includes the rapidly expanding digital product category. In fiscal 2002, Future Shop’s gross profit was 23.4% of revenues, a decrease of 0.9% of revenues compared with last year’s pro forma results. The decline was mainly due to a shift in the sales mix driven by increased sales of lower-margin entertainment software products. The impact of the sales mix shift was partially offset by lower costs associated with consumer financing offers due to lower interest rates and more favorable terms related to a new private-label credit card agreement. For the year,
the SG&A rate was 19.7% of revenues, compared with 21.4% of
revenues last year, on a pro forma basis. Increased leverage
resulting from strong comparable store sales gains and controlled
expenses contributed to the SG&A rate decrease.
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