Hibbett Sports, Inc. attributed its decreased comps 
and sales for the third quarter largely to the shifting calendar that has plagued many retailers throughout the year. Management noted on a conference all with analysts that overall sales increased 7.8% on a calendar basis, while comparable store sales increased 1.2%. Management further detailed the results as “August was positive mid-single-digits, September was flat, and October was negative low-single-digits.” The company attributed the downturn in October to the warm weather as “apparel was the softest piece of the business.” However, on a fiscal basis, comps and margins were both down, while expenses were up, which caused the retailer to post a low-20s decrease in net income for the third quarter. Traffic was said to be flat on a calendar basis, as were transactions in units. An increase in average selling prices drove the calendar comp store gain.
On a calendar basis, August enclosed malls outperformed strip stores for the first time in more than three years. But in the September/October period, the trend reverted back to status quo. For the quarter, enclosed malls were flat, while strip center stores were up 2%. Of the urban-focused stores, management noted that, especially going through back-to-school, “the trend gets a lot better than it was.” Apparel sales in these stores was “slightly negative,” but dramatically different from the Q2 trend. This shift was attributed to a change in direction on some of the apparel, where most of the brands are not athletic from an urban apparel side. However, footwear is definitely being driven by Nike on the urban side. In general, the apparel piece of the business was a little less than expected, and footwear was a little more than expected. The urban stores performed very well in August, but not as good in September and October.
The company said the first 15 days of November by the calendar comps are down the single-digits, but that this downturn was planned as the company opted to not anniversary a year-ago sale, instead opting to wait until Black Friday and the weekend following Thanksgiving. CEO Mickey Newsome said he expects the weekend after Thanksgiving to be very strong, the ten days before Christmas to be very strong, and the week after. That has been a continuing trend.
On the conference call, the company said that on a calendar basis, athletic apparel performed “very well from Nike and Under Armour.” All genders, men's, women's and kids were said to be up in athletic apparel, with management bullish on the category, expecting the trend to improve as the holiday business in December and January approaches. Urban apparel was described as improved from Q1 and Q2, with the company “optimistic that this will turn positive in the fourth quarter.” License apparel was down single-digits, with College down slightly and Pro down the same as the overall business. College is expected to turn positive in Q4, while Pro is expected to “continue to be challenging.”
Footwear performed better than expected for the third quarter, up single-digits. Key items for Back-to-School were Nike Shox, Air Force Ones, Air Jordan, ASICS technical running shoes, New Balance Zips, adidas Bounce product, DC and Etnies. Classic footwear, however, was said to have remained tough. Basketball from a performance side was said to be doing much better, more from a price point and end-user. Some of the player shoes, besides Jordans, did not perform as well, but Jordan continued to perform “at a pretty high rate.”
Equipment was down single-digits, but accessories were up high-single-digits with bags and backpacks leading the way.
Looking ahead from a product standpoint, management still sees significant growth with Under Armour and Nike apparel. Urban apparel becoming back to a more normalized level where the company will start seeing comp store gains. In footwear, technical running product, like that from Asics should grow, with Nike and adidas both gaining market share. Additionally, the company noted that Q2 will see the launch of Under Armours cross-trainers, but that Nike will mirror that launch with one of their own.
Hibbett opened 18 new stores and closed 2 stores during the third quarter, bringing the store base to 650 in 23 states at quarter-end. The company plans to open 42 to 46 stores and close 2 stores in the fourth quarter. Twelve of the fourth quarter store openings are planned for the state of Texas in small markets, as usual. For fiscal 2008, the company plans to open 86 to 90 stores while closing about 9 stores. 95% of the new stores opened in 2007 and 2008 will be in strip centers. The company said that it will focus on the states it currently has stores in, but that if it were to move outside this area, it would likely look at southern Maryland or southern Delaware.
For the fourth fiscal quarter, the company expects to report earnings per diluted share of 36 cents to 44 cents with a low-single-digit comparable store sales increase on a calendar basis and a mid-single-digit increase in comparable store sales on a fiscal basis.
For fiscal 2008, the company expects to report earnings of $1.07 to $1.15 per diluted share with a slightly positive comparable store sales increase on both a calendar and fiscal basis.
