MOVADO GROUP, INC. Operating Expenses . Operating expenses for fiscal 2001 were $163.3 million or 50.9% of net sales as  compared to $152.6 million or 51.7% of net sales in fiscal 2000. The increase in operating expenses of  approximately 7% or $10.7 million relates to several areas, including advertising and marketing expenses, which increased $0.4 million or 1%; selling expenses, which increased $2.2 million or 5%; distribution costs, which decreased $0.2 million or 2%, and general and administrative expenses, which increased  $8.3 million or 21%. The increase in advertising costs related to advertising increases of $1.3 million in the Movado Boutiques and cooperative advertising programs offset by a decrease of expenditures for special events, point of sale  support material such as displays and product brochures and media advertising programs. Increases in  advertising expenses at the Movado Boutiques reflect the costs associated with new business initiatives. Selling expenses increased in both the Company’s wholesale and retail businesses. Increases in selling expenses in the wholesale business primarily reflect higher levels of sales commissions due to sales increases in the Movado brands and increases in head count to support the launch of the Tommy Hilfiger line. Increases in selling expenses associated with the Company’s retail operations relate primarily to the  addition of one new outlet and two new Movado Boutiques in fiscal 2001 as well as the annualized cost of stores opened during fiscal 2000. Distribution expenses are largely variable in nature and these expenses grew proportionately with increases in unit volume shipments offset by a nonrecurring charge of $1.0 million made in fiscal 2000 for expenses related to the relocation of the Company’s U.S. distribution operations.  Increases in general and administrative expenses were substantially due to the recording of a management bonus as a result of exceeding corporate performance targets, a moving and relocation expense associated with the shutdown of the distribution and service center in Lyndhurst, N.J. and costs associated with new business initiatives including staffing costs for the launch of the Tommy Hilfiger brand, Movado Boutiques and Company outlet stores. In addition, there were cost increases in a small number of general and administrative expenses which are consistent with industry cost increases. Operating expenses for fiscal 2000 were $152.6 million or 51.7% of net sales as compared to $133.4 million or 48.0% of net sales in fiscal 1999. The increase in operating expenses of approximately 14% or $19.2 million relates to several areas, including advertising and marketing expenses, which increased $8.1 million or 15%;  selling expenses, which increased $4.5 million or 12%; distribution costs, which increased $2.3 million or 38%, and general and administrative expenses, which increased $4.3 million or 12%. The increase in advertising costs related to increased media and cooperative advertising programs with retailers in support of the Company’s brands, higher advertising production costs due to the launch of  new media campaigns for both the Concord and ESQ brands, increased spending on point of sale support material such as displays and product brochures, and the development of a new advertising and marketing management team. 33