REI (Recreational Equipment, Inc.) reported flat net income of $30.2 million in 2011 on net sales to $1.80 billion, up 8.4 percent from 2010 as investments in the business and warm weather in the winter ate into profit margins during the critical holiday season.
“We experienced strong sales in 2011. However, because winter weather failed to arrive, our profitability was impacted,” said Brian Unmacht, REI’s executive vice president. “Looking ahead, our underlying strong financial position allows us to continue our growth plans and invest in ways that make it easy for customers and members to shop REI however they wish online, on the go or in one of our stores.”
The nation’s largest retail co-operative, REI reported gross profits of $763.1 million, or 42.4 percent of net sales, compared to $729.0 million, or 44.0 percent of net sales in 2010. Operating expenses reached $646.8 million, or 36.0 percent of net sales, compared to 36.9 percent a year earlier. Those include $60.1 million in advertising, up nearly 27 percent from 2010.
Operating income reached $116.2 million, or 6.5 percent of net sales, down 50 basis points from 2010. Income before patronage funds and income taxes reached $128.4 million, down just 0.9 percent from 2010. As a cooperative, REI pays income taxes only on income not distributed to its members. For 2011, it reported a $16.4 million provision for income taxes, essentially flat with 2010.
REI shares its profits with its members through an annual patronage refund in proportion to their eligible purchases. Based on the co-op’s 2011 performance, $99.8 million in patronage refunds will be distributed to 4.7 million active members in March. In addition, REI Visa card holders will receive $37.4 million in rebates from purchases made with their REI Visa cards last year. As a result, more than $137.2 million will be returned to REI members, an all-time high.
Net income reached $30.2 million, or 1.7 percent of net sales, down 10 basis points from 2010. Net cash provided by operating activities declined to $62.6 million from $132.2 million.
REI ended the year with $316.1 million in inventory, up 21.5 percent. Accounts payable were $146.6 million, up 25.2 percent. Retained earnings climbed 21.2 percent to $420 million.
REI opened eight new stores in 2011, including its first foray into New York City in the historic Puck Building in SoHo, and three additional stores in the Tri-State area of New York, New Jersey and Connecticut. It opened its first store in South Carolina in Greenville and expanded its presence in California and Washington. The company also invested in its rei.com and rei-outlet.com web sites to make them faster and easier to use and launched a new mobile app to extend their reach to customers on-the-go.
