Stuart Burgdoerfer, EVP and CFO; Sharen Turney, CEO, Victoria's Secret; Nick Coe, CEO, Bath & Body Works; Andrew Meslow, Chief Administrative Officer, Bath & Body Works; and Martyn Redgrave, EVP and Chief Administrative Officer are all joining us today. After our prepared comments, we will be available to take your questions for as long as time permits. [Operator Instructions]Thanks, and now I'll turn the call over to Stuart. Stuart B. Burgdoerfer Thanks, Amie and good morning, everyone. Fourth quarter adjusted earnings per share increased 19% to $1.50 per share versus $1.26 last year and were at record levels. Our reported result was $1.17 per share versus $1.36 last year. The sale of the third-party apparel sourcing business negatively impacted this year's fourth quarter by about $0.03. Both this and last year's reported results include significant items as detailed in our press release. This year's reported fourth quarter results included the following: a pretax gain of $110.8 million or $0.32 per share related to the sale of our third-party apparel sourcing business; a pretax, principally noncash charge of $256.1 million or $0.74 per share related to intangible asset impairment and restructuring charges, including store closures at La Senza. The intangible asset impairment charge is to reduce the value of La Senza goodwill and other intangible assets in accordance with applicable accounting principles. Martyn Redgrave will talk about the store closures and restructuring charges later. And the last 2011 significant item is a tax benefit of $28.4 million or $0.09 per share related to certain discrete tax matters. I won't repeat the 2010 significant items, which are detailed in our press release. Our results discussed on this call exclude these significant items. You may have also noticed from the materials that we had reclassified La Senza's results from the Victoria's Secret segment to the Other segment. This presentation groups La Senza with our other international businesses. So now to take you through the fourth quarter results as detailed on Page 4 of the presentation.
Net sales were $3.515 billion versus $3.456 billion last year and comps increased 7%. Total sales were negatively impacted by the sale of the third-party apparel sourcing business by about $225 million. The gross margin rate increased 210 basis points to 43.9%. The sale of the sourcing business benefited our gross margin rate by about 250 basis points. Absent this impact, our gross margin rate would have been down about 40 basis points, as leverage and buying and occupancy expense of just over 100 basis points did not fully offset a decline in the merchandise margin rate. Our fourth quarter merchandise margin rate was negatively impacted by expected increased costs. Additionally, we were more promotional than initially anticipated, principally at Victoria's Secret Direct. The SG&A rate increased by 40 basis points due to the impact of the sourcing business sale. Absent this impact, the SG&A rate would've leveraged by about 110 basis points.Turning to operating income on Page 5. Total operating income increased $73 million to $786.5 million or 22.4% of sales. Excluding the negative impact of the sourcing business sale, operating income dollars increased 12%. Turning to our full year results on Page 6. Excluding the significant items described in our press release, earnings per share increased 26% to $2.60 versus $2.06 last year. Our operating income and earnings per share results were both records for the company. Net sales increased 8% to $10.364 billion and comps increased 10%. The gross margin rate increased 150 basis points to 39.3%, and was positively impacted by the sourcing business sale by about 70 basis points. Again, absent this impact, the gross margin rate would've increased 80 basis points as buying and occupancy leverage more than offset a slight decline in the merchandise margin rate. The SG&A rate was flat to last year at 24.4%, and was negatively impacted by the sourcing business sale by about 50 basis points.
Page 7 of the presentation details our full year operating income results. The full year operating income rate was 14.9%, and as we discussed with you in October, we are focused on achieving a high teens operating income rate over time. The operating income rate improved by 160 basis points driven by improvements in all 3 segments.Read the rest of this transcript for free on seekingalpha.com