Hibbett Sporting Goods, Inc. announced preliminary results for the fourth quarter and fiscal year ended January 29, 2005. HIBB also announced that fourth quarter and fiscal year earnings, and earnings for certain prior periods, are subject to adjustment based on the outcome of a pending review of its lease related accounting.
Net sales for the 13-week period ended January 29 increased 17.4% to $107.1 million compared with $91.2 million for the year-ago period. Comparable store sales increased 5.2% in the fourth quarter of fiscal 2005. Preliminary net income for the fourth fiscal quarter increased 26.8% to $8.2 million compared with $6.5 million in the fourth fiscal quarter of last year. Earnings per diluted share increased 29.6% to $0.35 compared with $0.27 in the prior year.
Net sales for the full year increased 17.6% to $377.5 million compared with $321.0 million for the 52-week period ended January 31, 2004. Comparable store sales increased 5.7% in fiscal 2005. Preliminary net income for fiscal 2005 increased 25.6% to $25.6 million compared with $20.3 million in fiscal 2004. Earnings per diluted share increased 24.4% to $1.07 from 86 cents in the prior year.
For the quarter, the Company opened a net of 14 new stores. For the year, the Company opened a net of 54 new stores, bringing the store base to 482 in 22 states. Hibbett plans to open a net of approximately 70 new stores in fiscal 2006, including approximately 14 in the first quarter.
Mickey Newsome, Chairman, President and Chief Executive Officer, stated, “For the first time in our history, we exceeded the $100 million mark for quarterly sales. This achievement reflects the strong performance of both new and existing stores and continued momentum in athletic footwear and team equipment. Footwear and team equipment comps were up double-digits. The apparel category was down mid single-digits as we continued to comp against very strong pro licensed apparel from a year ago.”
“Stronger than planned sales, the leveraging of occupancy, operating and administrative costs as well as continued efficiencies at our distribution center were the primary drivers behind achieving the 12% operating margin in the quarter. Also, with the emphasis on high levels of customer service throughout our stores on a daily basis and with a focus on achieving full margin, we believe we have a proven and profitable store model that can lead us to continued earnings growth as we execute our new store growth plans.”
Changes in Lease Related Accounting
On February 7, 2005, the Office of the Chief Accountant of the Securities and Exchange Commission issued a letter regarding certain accounting issues for operating leases and leasehold improvements. Like many other companies in the retail industry, the Company has further evaluated its accounting practices and has, accordingly, determined to change the way it accounts for build-out periods, construction allowances and the depreciation of leasehold improvements.
The results presented in these preliminary results exclude these changes. The Company currently believes that the necessary adjustments will reduce net income per diluted share for fiscal year 2005 by $0.01 to $0.03 and $0.02 to $0.04 for fiscal year 2004. This estimate is subject to change as the Company completes its internal review and its independent registered public accountants complete its audit for fiscal 2005.
The Company expects to change its historical accounting practices in the following ways:
- Construction allowances have been recorded as reductions to property and equipment and depreciation expense, rather than being recorded on the balance sheet as a deferred credit and amortized over the life of the lease as a reduction to rent expense.
- The Company's statements of cash flows reflected construction allowances received as a reduction of capital expenditures within “investing activities” rather than as “operating activities.”
- The Company had excluded the build-out period of its stores from its straight-line rent expense calculations.
- The Company has historically depreciated leasehold improvements over its useful economic life, as opposed to the non-cancelable lease term. The Company now plans to retroactively restate the estimated useful lives of leasehold improvements to conform to the lesser of the useful life or the non-cancelable term of the lease.
The Company has determined it will review and restate its financial statements for fiscal 2005, fiscal 2004 and fiscal 2003 to implement these corrections. The Company expects to complete its review in conjunction with the completion of the regular audit of its fiscal 2005 financial statements and to timely file its Form 10-K for the fiscal year ended January 29, 2005.
Fiscal 2006 Outlook
For the first quarter ending April 30, 2005, the Company expects to report earnings per diluted share of approximately $0.38 to $0.42 and a comparable store sales increase in the mid to high single-digit range compared with earnings of $0.34 per diluted share in the prior-year period. Guidance for fiscal 2006 is estimated at approximately $1.26 to $1.32 per diluted share and a comparable store sales increase in the range of 4% to 5%. This guidance excludes any effect of SFAS No. 123(R), “Share Based Payment” related to the recognition of stock-based compensation expense, which will not be effective until the third quarter of fiscal 2006, which has yet to be determined. This estimate reflects the proper accounting for leases.
Mr. Newsome added, “Heading into what has historically been a very strong quarter of the year, we are pleased to see that February comps are in the high single-digit range. New store openings in the first quarter are expected to exceed the number of openings in the first quarter a year ago. This accelerated schedule is related somewhat to the carryover of delayed fourth quarter openings, but it also reflects our ability to continue to find attractive Hibbett-type opportunities.”
The per share results reported for all periods presented herein reflect the effect of the three-for-two stock split that was distributed on April 16, 2004, to stockholders of record on April 1, 2004.
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES Unaudited Statements of Operations Excluding Lease Accounting Adjustments (Dollars in thousands, except per share amounts) 13 Weeks Ended 52 Weeks Ended January 29, January 31, January 29, January 31, -------------------- -------------------- 2005 2004 2005 2004 -------- -------- -------- -------- Net sales $107,081 $91,222 $377,534 $320,964 Cost of goods sold, including warehouse, distribution, and store occupancy costs 72,397 62,216 257,011 218,565 -------- -------- -------- -------- Gross profit 34,684 29,006 120,523 102,399 Store operating, selling, and administrative expenses 19,725 16,943 72,638 63,194 Depreciation and amortization 2,044 1,897 7,620 7,267 -------- -------- -------- -------- Operating income 12,915 10,166 40,265 31,938 Interest income (166) (31) (475) (106) -------- -------- -------- -------- Income before provision for income taxes 13,081 10,197 40,740 32,044 Provision for income taxes 4,873 3,722 15,176 11,696 -------- -------- -------- -------- Net income 8,208 6,475 25,564 20,348 ======== ======== ======== ======== Net Income per common share: Basic earnings per share $0.36 $0.28 $1.10 $0.88 ======== ======== ======== ======== Diluted earnings per share $0.35 $0.27 $1.07 $0.86