Net sales in the fourth quarter of 2020 increased $30.4 million, or 11.1%, to $304.2 million from the fourth quarter of 2019.
Comparable store sales for the fourth quarter of 2020 increased 10.5% primarily as a result of continued execution against the Company's transformation plan and healthy consumer demand for home improvement projects.
Net merchandise sales increased 11.2% while net services sales (install and freight) increased 10.2% over the prior year.
As previously announced, the Company closed 14 stores and opened one new store in the fourth quarter of 2020 bringing total store count to 410 as of December 31, 2020.
Gross profit increased 5.4% in the fourth quarter of 2020 to $117.9 million from $111.9 million in the comparable period in 2019 and gross margin decreased 210 basis points to 38.8% in the fourth quarter of 2020 from 40.9% in the fourth quarter of 2019.
For the fourth quarter of 2020, the Company reported a net positive $1.8 million impact from anti-dumping and countervailing duty rate changes compared to 2019.
Additionally, the fourth quarter of 2020 included costs related to Canadian and U.S. store closures.
Excluding these items as shown on the table that follows, Adjusted Gross Profit (a non-GAAP measure) increased by $3.5 million and Adjusted Gross Margin (a non-GAAP measure) decreased by 290 basis points.
The decrease in adjusted gross margin was due to last year's approximately $13 million benefit from the retroactive exclusion of tariffs on certain flooring products imported from China (discussed in the "Section 301 Tariffs" section that follows) partially offset by merchandising sourcing and cost-out efforts, and, to a lesser extent, selective retail price increases.
Operating income was $18.4 million for the fourth quarter of 2020 compared to $19.3 million for the fourth quarter of 2019.
Adjusted Operating Income (a non-GAAP measure) was $18.8 million for the fourth quarter of 2020, a year-over-year decrease of $0.6 million compared to adjusted operating income of $19.4 million for the fourth quarter of 2019.
The year-over-year decrease was more than fully due to the approximately $11 million benefit to adjusted operating income in the fourth quarter of 2019 as a result of the retroactive exclusion of tariffs (discussed in the "Section 301 Tariffs" section that follows), which did not repeat in the fourth quarter of 2020, mostly offset by higher net sales, merchandising sourcing and cost-out efforts, and selective retail price increases, and SG&A leverage in 2020.
The Company had other income of $68 thousand for the three months ended December 31, 2020 compared to other expense of $0.5 million for the three months ended December 31, 2019.
Both years reflected interest on borrowings on our Credit Agreement.
The interest expense on borrowings in 2020 was offset by a favorable adjustment of $1.2 million for the reversal of interest expense associated with anti-dumping and countervailing duty rate changes.
Full-year results
Net sales increased $5.1 million, or 0.5%, to $1,098 million in 2020 from $1,093 million in 2019, which includes a $10.4 million increase in non-comparable store net sales partially offset by a decrease of $5.3 million, or 0.5%, in comparable store net sales.
Following a 20% decrease in net sales in the second quarter due to the impact of COVID-19, the Company recovered to deliver a strong second-half performance.
Net merchandise sales increased 2.0% while net services sales (install and freight) decreased 10.0% over the prior year.
The Company closed nine net stores in 2020, and as of December 31, 2020, operated 410 stores.
Gross profit of $427.7 million in 2020 increased $24.0 million from 2019 and, as a percent of sales, gross margin in 2020 increased to 39.0% from 36.9% in 2019.
When excluding items in the table that follows, adjusted gross profit of $426.3 million in 2020 increased $22.3 million versus 2019 and adjusted gross margin in 2020 increased to 38.8% from 37.0% in 2019.
This 180-basis point improvement in adjusted gross margin was due primarily to merchandising sourcing and, to a lesser extent, cost-out efforts and selective retail price increases.
Operating income was $56.3 million in 2020, compared to operating income of $16.7 million in 2019.
When excluding items in the table that follows, adjusted operating income was $63.6 million and adjusted operating margin was 5.8% in 2020, compared to $24.7 million, or 2.3%, in 2019.
The primary driver of the increase was the Company's execution on its profitability initiatives, which increased adjusted gross margin and reduced advertising expense. ■