At appears that Atkins dieters are cutting back on exercise as well as they embrace the low carb in an effort to lose weight rapidly. Hibbett Sporting Goods raised that issue as one potential reason for the slow down in Exercise Equipment sales they saw in the second quarter. Chairman, president and CEO Mickey Newsome also pointed to the increase in fitness facilities as a contributor. Weather and the tax-free holiday shift in southern states also had an impact on Q2 sales, as did the decline in Pro Licensed Apparel.

HIBB said product margins were hurt by a “more dramatic shift than expected” in sales from the Licensed Apparel category to Footwear. They said they may have been “a little bit too aggressive” in taking markdowns in Q2, but also said that aged inventory is “the best it’s been in several years.” Two-thirds of the margin erosion was due to markdowns.

Mr. Newsome said May was actually a very good month, but was up against a softer month last year that was affected by wet weather. Comps were up in the 7% to 8% range for the month. They took a lot of markdowns in the month in hopes of gaining the margin back in June and July on fresh product.

But June was described as a “tough month”, with comps up just “slightly” for the period. The weakness in Licensed Apparel took its toll against a year-ago month that had strong apparel sales. College Licensed Apparel category is expected to continue to perform well for Hibbett despite the hit Pro goods have taken on the fashion side of the business, but vendor deliveries that were described as “four to six weeks late” hurt sales in June. Footwear saw said to be stronger than expected and Exercise was weak.

July was the flip side to May, with weather hurting this year against a good July last year, as comps dipped low-single-digits for the period. Licensed Apparel and Exercise was again the culprit while Footwear was described as “very strong” for the month.

HIBB estimated that the shift in the tax-free weekend cost them $500,000 in comps sales.

Comps in the strip center stores, which make up 70% of Hibbett doors, were up around 4% for the quarter and the mall stores were said to be slightly positive. The weakness in Exercise hurt the strip stores heavier, while Licensed hurt the mall stores more. The strength in Footwear helped the mall stores.

College Licensed Apparel was off low-single-digits for Q2, while the Pro Licensed side fell in double-digits for the period. Jeff Rosenthal, VP of Merchandising said they were up against strong LBJ, Melo Tony, and Jordan sales in Q2 last year. They were also up against Michael Vick’s new jersey last year. Rosenthal said they bought Pro jerseys right this year and are making money at $39 and $49.

Branded Apparel was up low- to mid-single-digits on stronger Under Armour sales that continue to gain momentum for HIBB. Rosenthal said Enyce, Dickies and Ecko were all “very, very strong” in the Urban business.

Footwear was up high-single-digits, led by Women’s and Kid’s, which were up low-double-digits. Nike Shox, Nike Impax, adidas a3, K-Swiss Classic, Converse, and NB 574’s were all called out as key contributors. HIBB said they saw a definite shift to more higher priced technical footwear going forward.

In Hardlines, Team was up high-single-digits, with Football up high-doubles and Baseball up high-singles. HIBB pointed to Under Armour, Nike, and Easton here, especially new inflatables, shin shields, and receivers gloves from Nike.

Hibbett is looking ahead to the third quarter with some enthusiasm as comps are running up in the 5% to 6% range through the first few weeks of the month. They see some upside in Pro Licensed due to the expiration of the JC Penney exclusive with the Dallas Cowboys in five states. College is seen as positive due to the number of teams in the top 15 from the south.

Earnings for Q3 are seen in the range of 22 cents to 25 cents per diluted share on positive comps in the 2% to 3% range. Guidance for fiscal 2005 is estimated at approximately 96 cents to $1.02 per diluted share on a comp store sales increase in the range of 3% to 4% for the period.

In other news, the HIBB Board of Directors has appointed Alton E. “Al” Yother, who is EVP, Treasurer, and Controller of SouthTrust Corporation, to serve on the Board until the company's 2006 annual meeting. Mr. Yother replaces F. Barron Fletcher III, who has resigned from the Board to pursue other interests.


>>> A surprising miss here, but mitigated a great deal by the tight operational model. Now, if we can just get everyone eatin’ taters again…