Hibbett Sporting Goods, Inc. posted a strong high-teens increase in net sales in the third quarter, but even management admitted that they were likely a little overworried about comping against strong Katrina related sales last year as the retailer offered a bit too strong of promotions during tax free weekends in many states. The promotions accounted for much of the margin decrease, but net income was still up double-digits for the period. The start of November was described as “much better than expected.”

Mickey Newsome, company chairman and CEO, said that August had a positive double-digit comp and September posted a mid-single-digit comp store sales increase. October came in with a low-single-digit gain, but Newsome said the trend was very good because it was up against the strong results last year related to the effects of Katrina. For instance, for the period from September 10 through October 28 last year 62 Katrina affected stores were up 63%. He said that without those 62 stores this year, September and October would have comped up over 10%. The first 19 days of November and the fourth quarter were positive mid-single-digits, but would have been positive mid- to high-single-digits without the “Katrina stores.”

Excluding the effects of tax free days and Katrina, comps would have risen “at least high-single-digits,” said Mr. Newsome. More than half of all Hibbett stores saw double-digit comps for the quarter. Urban stores, which account for approximately 40% of the store base, were trailing the rest of the fleet. The third quarter benefited from increased transactions and increased comp store items, but a little bit more than half the gain came from increased selling prices.

Branded was said to be up double-digits, with Jeff Rosenthal, VP of merchandising, pointing to Under Armour and Nike as particularly strong. Youth, lady, and men's activewear were all up double-digits. The license business was up double-digits with key drivers for the quarter in NFL jerseys, such as Reggie Bush, Peyton Manning, and Michael Vick as well as the St. Louis Cardinals winning the World Series providing a “very big positive.” College, led by women's and kids, was up double-digits.

Footwear was up mid-single-digits, led by kids footwear and cleated footwear up double-digits. Athletic women’s footwear was up single-digits. Rosenthal noted Nike Shox, Jordans, and Air Force Ones, New Balance Zips, Heely's, Under Armour and Nike football cleats, Asics running shoes, and DC Skateboard shoes as strong performers.

Equipment sales were up double-digits, mostly due to team sports, led by baseball, football, and soccer, all up double-digits. Football was led by Shock Doctor, Under Armour, and Nike. Soccer, coming off the World Cup, was up with adidas and Nike. Baseball was up double-digits led by Mizuno East, Nike, and Under Armour. Fitness equipment was up in the single-digits, with Rosenthal saying they “expect to have a good fourth quarter in it.”

Hibbett opened 20 new stores and closed two during the quarter, bringing the store base to 590 stores. For the fourth quarter, the company expects to open approximately 25 stores, while closing one. In 2007, they plan to open 100 to 105 stores and close 5 to 10.

For the fourth quarter, HIBB expects earnings per diluted share between 34 cents and 38 cents on a 3% to 5% comps gain. Guidance for 2007 was increased to $1.12 to $1.16 per diluted share and a comparable store sales increase in the 3% to 5% range.

Hibbett Sporting Goods
Third Quarter Results
(in $ millions) 2006 2005 Change
Total Sales $129.7  $110.6  +17.2%
GP %  33.2% 33.6% -30 bps
Net Income $9.9  $8.2  +21.5%
Diluted EPS 31¢ 24¢ +29.2%
Comps +7.1% +5.4%  
Inventory* $130.9  $105.4  +24.2%
*at quarter-end