Hibbett Sports is taking a more conservative approach to new store growth for the new fiscal year as the retailer keeps an eye on the weaker economy. The small-market-operator is starting to see more competition from the likes of Dicks Sporting Goods and Academy Sports & Outdoor in some of those small markets, but the major challenge remains slower traffic in the mall and a generally weak consumer environment driven by higher costs in food and fuel, along with a lack of any strong new trends to drive consumers into the store.
HIBB does expect to see less negative impact from the Heelys implosion as they move through the year, with each quarter facing easier comps against the year-ago business. They see little real lift coming from the Under Armour performance trainer launch, as crosstraining is such a small piece of the business, but do see some upside coming from the amount of marketing that UA and Nike expect to roll out to promote their respective offerings in the category.
Net sales for the 13-week fourth quarter of 2007 declined 5.5% to $142.8 million from $151.2 million in the 14-week fourth quarter in the previous year. Comparable store sales decreased 7.3% on a comparable 13-week period versus a 5.9% increase in Q4 last year. Fiscal comps decreased 4.7% for the period. On a calendar basis, November comped up “slightly less than 1%,” but management said they were more promotional during Thanksgiving weekend than the previous year. HIBB said December and January were both negative 10% on a calendar basis. Looking at formats, the retailers non-urban stores outperformed urban stores, with non-urban down 5% on a comp calendar basis and urban down 9% for the quarter. Strip center stores outperformed enclosed mall stores, with strip centers down 6% and enclosed malls down 8% for the period.
Hibbett saw less traffic in their stores in the fourth quarter and consumers purchased “slightly lower price points” than last year. Price per item was down about 3% for the quarter.
The second key reason for the decline was the lack of a hot item. The 2006 Holiday period was the season of the Heelys shoe and HIBBs licensed business was also riding high after coming off of the St. Louis Cardinals World Series win and the Bears and Colts in the Super Bowl. The Red Sox were of little consequence in 2007 as was the Giants/Pats match-up in the Super Bowl.
The pro licensed apparel business was down in the fourth quarter, while the youth, ladies and college were said to be “very good.” Overall, the licensed apparel business was down in double-digits for the quarter. Conversely, the activewear business was up in double-digits, led by Under Armour and Nike. Management said that kids, womens and mens activewear was “way up,” but urban apparel remained “soft.” Footwear was down in single-digits, due to the tough Heelys comp, but also due to a Classics business that “remains soft.” Nike Shox, Air Force 1, Jordan and Asics reportedly “performed well.”
Management said some of the Reebok Classics have done a little bit better and they are still doing well with Air Force 1s and some of the Air Max 90, but K-Swiss has still been “a little bit tough.” Higher-end running shoes are also performing pretty well. Management called out Asics, Brooks, Mizuno and Nike as key brands.
Gross margins decreased 400 basis points to 31.3% of sales, due to increased markdowns and an unfavorable inventory adjustment. SG&A rose 120 basis points to 20.3% of sales.
Net income fell 35.7% to $8.1 million, or 26 cents a share, in the fourth quarter, compared to $12.6 million, or 39 cents, in the prior-year period.
Inventories increased 13.5% versus the previous year-end, but the increase was marginal on a store-by-store basis.
HIBB said the business has “improved some” in the first quarter-to-date period, with comps through March 13 still slightly negative less than 1%, but sequentially better. Footwear has reportedly improved from the fourth quarter trends.
Still, Hibbett lowered its guidance for the current fiscal year due to “difficult retail conditions.” Comps for fiscal 2009 are estimated to be a “breakeven to negative 3%,” resulting in EPS in the range of 88 cents to $1.00.
Average selling prices are expected to increase in the year ahead based on issues with labor coming out of China. HIBB said a lot of Nike footwear for the spring is at a higher retail and Nike is “probably on the forefront on already raising prices.” Other vendors are doing that also.
HIBB plans to open 87 new stores and estimates closing about 10 stores in fiscal 2009. They plan on opening 12 stores in Q1 followed by 20 in Q2, 27 in Q3 and 28 in the fourth quarter.
