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## Results of Operations 

## MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

The following table expresses items from our statements of operations, as a percentage of net sales: 

<img src='content_image/106311.jpg'>

## Fiscal year ended January 29, 2005 compared to fiscal year ended January 31, 2004 

Net Sales. Net sales increased 11.6% in 2004 compared to 2003. We attribute this $326.1 million increase in net sales primarily to new stores in 2004 and 2003 which are not included in our comparable store net sales calculation and to a slight increase in comparable store net sales of 0.5% in 2004. Comparable store net sales are positively affected by our expanded and relocated stores, which we include in the calculation, and, to a lesser extent, are negatively affected when we open new stores or expand stores near existing stores. If not for the positive effect of relocated stores, our comparable store net sales results would have been negative in 2004. Our stores larger than 10,000 square feet continue to produce our best comparable store net sales results. 

The following table summarizes the components of the changes in our store size and count for fiscal years ended January 29, 2005 and January 31, 2004. 

<img src='content_image/106317.jpg'>

Of the 3.6 million selling square foot increase in 2004, approximately 0.9 million in selling square feet was added by expanding existing stores. 

Gross Profit. Gross profit margin decreased to 35.6% in 2004 compared to 36.4% in 2003. The decrease is primarily due to the following: 

• Merchandise cost, including inbound freight, increased approximately 20 basis points, primarily due to increases in inbound freight costs. Inbound freight costs increased due to higher fuel costs and higher import rates. 

• Markdown expense increased approximately 15 basis points due primarily to hurricane related markdowns in the third quarter of 2004, markdowns taken on lower than planned seasonal sell through of Christmas merchandise and a longer after Christmas holiday sale than in the prior year resulting in higher promotional markdowns. 

• Occupancy costs increased approximately 65 basis points due to deleveraging associated with the low comparable store net sales increase and the increase in rent expense in 2004 due to lease accounting changes 

