For the year, gross margin decreased by 40 basis points to 44.0% excluding the one-time inventory obsolescence charge of $6.7 million. This decline was driven by a 60 basis point increase in merchandise cost due to increased promotion activity and increase in cotton pricing which we believe may have peaked in the fourth quarter, a 20 basis point increase in freight costs due to fuel surcharges, offset by a 40 basis point decrease in sourcing and warehousing costs.
Gross margin for the fourth quarter of 41.5% excluding the one-time charge was a 70 basis point increase compared to the 40.8% of the prior year. This increase reflects a 70 basis point reduction in merchandise cost, a 20 basis point reduction in sourcing and warehousing, offset by a 20 basis point increase in freight costs.
For the full year, selling, general and administrative expenses excluding the one-time asset impairment charge of $1.5 million and severance costs of $1.3 million have increased by $2.6 million to $112.3 million (40.8% of sales) from $109.7 million (40.0% of sales) last year. Selling, general and administrative expenses for the fourth quarter excluding one-time charges increased to $30.2 million (38.5% of sales) from $27.4 million (35.2% of sales) in the prior year. Increases have been driven by escalations in retail operating costs associated with insurance claims, utilities, credit card fees and store maintenance.
During the fiscal year, the Company opened one store, closed one store, remodeled twelve stores, relocated seven existing stores and ended the year with 265 stores.
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-Ltd..jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Thermore (Far East) Ltd.")
