REI Sees Double Digit Sales and Income Increases in 2006

REI finished 2006 with strong top-line increases and income out-pacing sales gains. Adding to the company’s 9.5% comp-sales increase for the year, REI opened seven new stores — Santa Monica, Calif., Mountain View, Calif., Chula Vista, Calif., Maple Grove, Minn., Greensboro, N.C., Pineville, N.C., and Austin, Texas. This brought total sales to $1.18 billion for the year, an increase of 15.6%. REI also increased their membership base by 10%, or 551,000 members.

Slightly stronger gross margins, which were up 30 basis points to 44.2%, helped operating income climb 22.8% from $86.0 million in 2005 to $105.5 million this year. After a distribution of $58 million to its active members through the annual patronage refund, net income increased 23.1% to $40.3 million compared to $32.7 million last year.

Based on 2006 results, REI will dedicate $3.6 million through its grants program in support of conservation and recreational access around the country in 2007. This year, REI rolled out several new environmental programs, including the purchase of renewable energy for 20 stores. REI’s Pittsburgh store earned a LEED-CI Silver rating from the United States Green Building Council. The company also announced that all REI Adventures trips beginning in 2007 would be carbon neutral at no additional cost to customers.

“REI has a rich history of giving back, but we are also thinking hard about the future and our impact on the planet. In 2006, we made green power purchases to neutralize 30% of the carbon emissions from our electrical power usage, we created a policy that requires sustainability in the paper goods we buy, and we've begun to close the waste loop at retail stores through a nationwide recycling program,” REI’s president & CEO Sally Jewel wrote in a letter to members. “Even as we share our success, careful financial management allows us to invest in new retail stores, exciting new REI gear and apparel products, a new distribution center to improve service to members, and the supporting infrastructure necessary.”

In order to support future growth, REI undertook several initiatives throughout the year. The company broke ground on a new eastern regional distribution center in Bedford, PA, and announced plans to construct a prototype store in Boulder, Colo. REI also has plans to focus more on eastern expansion over the course of the next few years.