The effective income tax rate for the 2012 third quarter was 37.4 percent compared to a rate of 37.1 percent for the 2011 third quarter. This increase in the effective tax rate was primarily associated with state income tax items. The 2011 period benefited from decreases in state income tax reserves while the 2012 period included expense associated with an increase in reserves. In addition, both periods benefited from decreases in a state income tax valuation allowance associated with state income tax credits; however, the 2011 period’s benefit exceeded the 2012 period’s benefit.
39-Week Period Results
For the 39-week period ended November 2, 2012, total sales increased 11.2 percent over the comparable 2011 period, to $11.81 billion, including an increase in same-store sales of 5.3 percent.
For the 2012 period, operating profit increased by 15 percent to $1.1 billion and, as a percentage of sales, increased 34 basis points to 9.6 percent. Excluding certain items as set forth in the accompanying table, the Company’s operating profit increased 14 percent to $1.1 billion, or 9.6 percent of sales, in the 2012 39-week period compared to 9.4 percent of sales in the 2011 39-week period.Gross profit, as a percentage of sales, was 31.5 percent in the 2012 39-week period compared to 31.6 percent in the 2011 period, a decrease of 8 basis points. Factors favorably impacting the gross profit rate included a significantly lower LIFO provision, higher inventory markups and improved transportation efficiencies. These positive factors were offset by higher markdowns and lower price increases than in the 2011 period. In addition, consumables, which generally have lower markups than non-consumables, represented a greater percentage of sales in the 2012 period than in the 2011 period. A LIFO provision of $1.2 million was recorded in the 2012 period compared to a $25.4 million provision in the 2011 period. SG&A was 21.9 percent as a percentage of sales in the 2012 period compared to 22.3 percent in the 2011 period, an improvement of 42 basis points. Excluding certain items as set forth in the accompanying table, SG&A, as a percentage of sales, improved by 32 basis points partially due to the favorable impact of the 11.2 percent sales increase. In addition, retail labor expense increased at a rate lower than the increase in sales, partially due to ongoing benefits of the Company’s workforce management system. Various cost reduction efforts affecting expenses also contributed to the overall decrease in SG&A as a percentage of sales. Costs that increased at a rate higher than the sales increase included fees associated with the increased use of debit cards and advertising.
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