Hibbett Sports, Inc. (HIBB)

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Hibbett Sports, Inc. (HIBB)

F4Q09 Earnings Call

March 13, 2009 10:00 am ET


Michael J. Newsome - Chairman of the Board, Chief Executive Officer

Gary A. Smith – Vice President, Chief Financial Officer

Jeffry O. Rosenthal – President, Chief Operating Officer


Chris Svezia - Susquehanna Financial Group

Dan Wewer - Raymond James & Associates

Sam Poser - Sterne, Agee & Leach

Rick Nelson - Stephens, Inc.

Anthony Lebiedzinski – Sidoti & Co.

Reed Anderson - D.A. Davidson & Co.

Mitchell Kaiser - Piper Jaffray

Elizabeth Montgomery – Longbow Capital Partners

Jeff Mintz - Wedbush Morgan Securities, Inc.

John [Purdy] – Principle Global Investors

Jim Chartier – Moness, Crespi, Hart & Co.

Sean McGowan - Needham & Company



Welcome to the Hibbett Sports, Inc. conference call. Today’s call is being recorded. At this time for opening remarks and introductions I would like to turn the call over to the Chairman and Chief Executive Officer, Mr. Mickey Newsome.

Michael Newsome

This is Mickey Newsome and I have with me Jeff Rosenthal, our President and Chief Operating Officer and Gary Smith, our VP and Chief Financial Officer. We appreciate you being on the call today and we appreciate your interest in Hibbett Sporting Goods. Before we start, Gary Smith will cover the Safe Harbor language.

Gary Smith

In order for us to take advantage of Safe Harbor rules, I would like to remind you that any projections or statements made today reflect our current views with respect to future events and our financial performance. There is no assurance that such events will occur or that any projections will be achieved. Our actual results could differ materially from any projections due to various risk factors which are described from time-to-time in our periodic reports with the SEC.

Michael Newsome

Thank you Gary. As you know from our press release late yesterday, our fourth quarter earnings per share were $0.26 compared to $0.25 one year ago. Also, we improved our cash position year-over-year. We ended the year with $24.7 million in cash and no debt.

Overall sales for the quarter increased 3.6% and same store sales decreased 2.8%. November was negative 2.6%. December was negative 2.6%. January was negative 3.8%. But January actually was stronger than was indicated. We had 350 days of closed stores due to the snow and ice in Kentucky and surrounding states. Without that we feel January would have probably been a little bit better than November and December.

The number of items per transaction were positive 1.2% and the average selling price of an item was up 2.3%. Both of these indicate a little less traffic in our stores in the fourth quarter. Now I am happy to report first quarter sales have greatly improved through yesterday. We are positive high single digits through yesterday. We are encouraged but cautious with these results. There is lots of uncertainty in front of us and in front of the economy in general.

The first quarter feels good to us obviously. The second quarter could be more of a challenge because we have a 5% comp store sales in the second last year and we had the stimulus checks in the second quarter last year and those were very meaningful to our consumer. We do feel good about the third and fourth quarter but we are cautious because you never know what is out there in the future.

Now why have sales greatly improved in the first quarter? Number one, we have improved as a company at Hibbett Sporting Goods. It is all about systems, systems, systems. We are in stock more with the right product in the right stores in the right quantity relative to last year.

Number two, our stores are selling each customer more items versus last year. Our items per transaction are up.

Number three, our merchant selection of the right merchandise has been great. We are really on target. We are getting better vendor support as we grow. Vendors know we have cash on our balance sheet and that we are not a credit risk. That is resulting in more of the best and most effective merchandise.

In real estate last year we opened 69 new stores and closed 12. Many of the 12 closures were in closed malls. This year we expect to open 65 to 70 new stores with 15 to 20 closures net of reloc’s. We expect to open 40-50 new stores net of closures. Real estate is very uncertain in these times. We are having fall outs from the landlord side. We are going to be conservative with our projections on new stores. Most new stores will be in strip centers and not enclosed malls. We will do more relocations and expansions of our over performing stores this year. We will probably to 10-12 of each of those.

When the current economy improves we will grow our new stores faster. There is no shortage of small markets that need us.

Now Gary Smith will speak to you about our financials.

Gary Smith

Fourth quarter sales were $147.9 million, a 3.6% increase from the previous year. Comps were down 2.8%. Gross profit increased 260 basis points due to improvements in mark downs, inventory shrinkage and inbound freight. Also we levered occupancy and warehouse costs.

Store occupancy cost is down mid single digits on a per store basis year-over-year due to more stores in favorable percentage rent and distribution costs in the fourth quarter were less dollars than the previous year. Selling and admin costs increased 138 basis points over the prior year due to increases in incentive compensation and the de-leveraging of store payroll. Operating income was $12.7 million and 8.6% versus last year’s $11.8 million and 8.2%. Diluted earnings per share came in at $0.26 versus last year’s $0.25.

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