GSI Commerce Inc. said its Q4 revenues rose 14% to $148.7 million from $130.3 million. Merchandise revenues rose 17.2% to $223.1 million from $190.3 million last year. Service revenues jumped 67.4% to $112 million from $66.9 million.  Sporting goods revenues advanced 23% to $182.6 million from $147.8 million. Other revenues were down 4.5% to $40.6 million from $42.5 million.  Operating earnings rose to $30.2 million from $23.5 million. GM improved to 55.6% from 49.3%.

The primary driver of gross margin improvement is the continued mix shift of the business to non-inventory owned e-commerce services, as well as the growth of its marketing services business. Strong performance from product sales also helped gross margins.

“Sports had a good quarter, and ended up despite some sluggishness in the middle part of the year, having a good year,” said Michael Conn, GSI's CFO. “And as that grows faster than product sales overall, that's beneficial from a mix perspective because it's got the highest margins in terms of the components of product sales.”

Conn also noted sporting goods is having a “good quarter” so far in Q1. He noted that the Giants win in the Super Bowl has been a positive, especially considering that New York is a much bigger market than the home of last year's winners, the Indianapolis Colts.

Net earnings in the quarter fell to $16.5 million, or 30 cents a share, from $67.9 million, or $1.33, a year ago. The bottom line decline reflects a loss of $5 million on investments.

For the year, net revenues grew 23% to $750 million. Sporting goods revenues climbed 22.2% to $384.5 million from $314.7 million; other revenues declined 12.8% to $127.7 million from $146.5 million. Gross margins for the year were 52.5%, an increase of 680 basis points from last year.

But, operating earnings fell to $4.9 million from $9.6 million due to higher operating costs.

For the 2008 first quarter, GSI expects net revenue in the range of $188 million to $193 million or an increase of 29% to 32%. It expects to incur an operating loss of $18 million to $19 million as depreciation and amortization is expected to be approximately $13 million versus approximately $7 million last year and includes $2 million for amortization of acquisition related intangibles.

For Q1 2008 non-GAAP income from operations, GSI expects to be in a range of break even to a loss of $1 million compared to positive $3.8 million last year, with the largest driver the of negative variance being the operation of its expanded fulfillment network which was not in operation in the first quarter of last year, as well as higher payroll taxes based on the shift to restricted stock from stock options.