Hibbett Inc (HIBB) 2003 Q3 法說會逐字稿

Good day, welcome to the Hibbett Sporting Goods conference call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the president and chief executive officer, Mr. Mickey Newsome. Please go ahead, sir.

Good morning, this is Mickey Newsome, I have with me Gary Smith, our chief financial officer. We appreciate your interest in Hibbett Sporting Goods and participation in this conference call today. Before we get started, Gary will cover the Safe Harbor language.

Good morning. In order for us to take advantage of Safe Harbor rules, I would like to remind you that any projections or statements made today reflect our current views with respect to future events in our financial performance. There is no assurance that such events will occur, or that any projections will be achieved. Our actual results could differ materially from any projections due to various risk factors which I describe from time to time in our periodic reports with the SEC.

Thank you, Gary. As you know from our press release later yesterday, Hibbett Sporting Goods had a great third quarter. Earnings per share were 32 cents. Sales increased 16.1%. Comp-store or same-store sales increased 5.3%. I think our buying staff did a great job with putting the right product in the right store and our operations staff did a great job of reemphasizing customer service and it paid off in the third quarter. Specific comments on third quarter sales. August was flat and that is the most important month but we weren't real concerned because we knew September was coming and we were going against 9/11 and we were right because September was up high single-digits. October was also up high single-digits. Therefore, we knew we were going to be good in October, we were going against the bombing of a year ago, and we had unseasonably cool, dry weather. Hibbett presents three major departments of merchandise: athletic apparel, athletic equipment, and athletic footwear, included cleated footwear which is very important to us. Now, remember we do not have hunting, fishing, camping, gun, ammo, very little golf and tennis. We're team sports.

We'll speak first to apparel. Apparel comps were up mid to high single-digits. In apparel, we're licensed products and active wear. We'll speak to licensed products first. Inside licensed products, we are college and pro. First we'll speak to college. College licensed products is very fan-based, very consistent. We had high-single digit comps in college. University of Alabama has had a great year in football, so has the University of Georgia and Oklahoma, all three schools we had nice increases. Some products that were good, mostly from Nike, in apparel was long sleeved tee shirts at $25, light-weight fleece, light-weight jackets made out of nylon, and Dri-Fit Technical Polo shirts at $60. In pro, which is more fashion driven and a more volatile business, we did have double-digit increases for comps. Retro MLB jerseys continued to be very strong at $150. Teams such as as Astros, Pirates, Braves, White Sox are very strong. NBA on-the-court jerseys were very strong. Nike and Reebok, both furnished these Jerseys. The Tracy McGrady Jersey was the number one seller. NBA retro shooting shirts at $60 were very strong: the old 76er Dr. J. Business was very good. NFL pro apparel was flat. It was the weakest piece. Now, active wear branded mid to high single-digit comps. Under Armor was very strong -- the brand Under Armor. The product is a tight-fitting moisture management material and it continues to be very strong for us. It's performance and fashion. Nike apparel in general was good in active wear also.

Equipment was the weakest point of our business. Equipment was down to low single-digits. Our team sports arena, where baseball is our number two largest category in the third quarter, it was down. We did have some -- couple good items in baseball. We had a training aid -- a hid-away training aid -- as TV item for 30 bucks that was good, but baseball was still down, I think primarily due to the negative atmosphere around the threat of a strike. Softball participation is down in general. We're not selling the high-price softball bats that we once did. And batters' gloves are down. One year ago and two years ago everybody from age 5 up had to have two batters gloves in order to play the game, it was a fashion item, and our sales are way off there. Football and soccer, however, were positive. Low single-digits. Football is our number one category in the third quarter. Fitness was probably the weakest peace of our equipment business. It was down high-single digits due to the lack of a hot TV item. We did get a new Olympic weight bench -- a special make-up weight bench -- late in the quarter, for $199. It is performing well.

Moving on to footwear, footwear is very important in the third quarter because of the important back-to-school period in August. We were up mid to high single-digits in footwear. I think our presentation at the store level has greatly improved over last year. Men's footwear was up double-digit. Basketball was the big driving force, and the brand was Nike. Tennis shoes -- pure tennis shoes -- more of a fashion item than function, tennis shoes by K-Swiss were excellent. In the boys' and ladies' category, we were up low single-digits. Ladies' New Balance were especially strong. Our cleated business was up mid single-digits led by Nike. Continuing on footwear, in general, men's and boys' were driven by basketball, ladies' by running and tennis. And in tennis, the ladies' was driven by K-Swiss. K-Swiss has become important to us and is selling across our markets. I guess, in the third quarter, really K-Swiss, Reebok, and New Balance, in footwear, led the way. If you compare this year versus last year, they were the top performers in terms of comp-store gains and margins.

One thing we're really proud of at Hibbett, we have made tremendous progress in distributing merchandise from our central warehouse in Burmingham, Alabama. As we spoke before, we installed a new warehouse system in our distribution center back in January. We did have some pain on the interface in March, April and May. It probably hurt our sales a little bit in the first quarter, but we still had good comps. This time last year, we probably had 25 to 30 trucks backed up in our truck yard. Not only could we not unload them, if with we did, we didn't have a place to put them, and we couldn't process the merchandise. I'm happy to report today that we have no trucks in our yard. If ten trucks show up today, they're all processed today. This new software has really made us a better company. It's also showing up in our cash usage. The buyers can bring in the merchandise more evenly throughout the quarter rather than front-end loading in the first month of a quarter because we couldn't get it through the warehouse previously. Now, we can bring it in more evenly, and it is showing up in our cash usage and our interest expense. Gary will speak more to that in just a few minutes. We expect some leverage on the warehouse expenses next year. We're confident we'll get it. We're a better company because of it.

New stores are performing well. We expect 50 new stores open by the end of the year. Seven stores that were supposed to be this year flipped into the first quarter of next year due to the properties not being turned over to us in time. We deal with a lot of small developers -- mom and pop developers in small towns -- I think the economy has slowed them down a bit; they were less willing to take a chance. We did lose seven stores to the first quarter of next year. Next year's goal is 60 new stores net of closings. We are adding to our real estate staff for next year. We're going to add at least one, probably two, more deal-chasers in order to have more new stores and have them on time. We still have identified on paper 400 additional markets that we could put stores in, in a 21-state area, continuing to stay tight geographically. Now for financial comments, I'll turn it over to Gary Smith.

Thank you. For the third quarter total sales increased 16.1% to 67 million, versus 57.7 million in the prior year. Comp-store sales grew a robust 5.3%. The company opened ten new stores in the 13-week period, and one store was closed. There were 356 stores in operation as of 11/2. Gross profit improved to 30.7% from 30.5%. This was due to additional discounts and incentives from our vendors; freight costs, which continue under last year's dollars; the positive leverage of occupancy; and warehouse cost, which came in at the same rate as last year. Store operating, selling, and administrative cost decreased 28 basis points to 20.46 from 20.74. The reduction in rate was due to the favorable leveraging of salaries, new store cost, advertising, bad checks, and inventory taking expense, which we took all of our stores in the second quarter. This improvement was made while the company's property in casualty insurance increased .33 versus last year. Interest expense was less than last year's dollars due to significantly reduced average borrowings. Net income for the quarter was 3.3 million versus last year's 2.5 million, and earnings per diluted share came in at 32 cents versus 25 cents in the previous year.

Year to date results are as follows: total sales increased 17.3% to 203.7 million versus 173.7 million in the prior year year. Comp-store sales increased 4.45%. The company opened 29 stores in the 39-week period, and 2 stores were closed. Gross profit improved 46 basis points year-over-year. This, again, was due to additional discounts and incentives, reduced freight cost, and the positive leverage of both warehouse and occupancy cost on a 39 to 39-week basis. Store operating, selling, and admin costs increased 40 basis points as a rate to sale, and this was basically due to the increase in property casualty of 30 basis points. Net income for the year was 10.1 million versus last year's 8 million. Earnings per diluted share came in at 99 cents versus 79 cents the previous year, a 25% increase. From a balance sheet perspective, the company ended the quarter with 2 million in borrowings versus 14 million last year. Average inventories per store were down approximately 5% on a year-to-year comparison. The company feels that its inventories and its operation staff are well positioned for the upcoming holiday season.

Thank you, Gary. Cathy, we're now ready for questions.

Thank you, gentlemen. Today's question-and-answer session will be conducted electronically. To ask a question, please press the star key followed by the digit 1 on your touch-tone phone. We'll come to you in the order that you have signaled and pause for one moment to assemble a roster. Again, star 1 to ask a question. Our first question comes from Bobby Cannan with A.G. Edwards.

Yes, good morning. Congratulations, just a super performance.

Thank you.

Thanks, Bob.

Just a couple of questions, guys. First of all, I was wondering, Mickey, how Street is doing within your apparel assortment?

How Street is doing?

Yeah, urban looks, Street Looks, which I think you have in some of your stores.

Yes, we do have some urban product and brands, and it's performing well. Of course what's really performing in the urban community is our licensed products.

Right.

It is really performing. Now, some of the brands we're doing fair with, Echo and Sean John and Fat Farm, we do some of that business. It is not a major piece of what we do, but in the really urban stores, we do some of that. It's performing okay.

Okay. And then just secondly, turn to the competitive set that you face. I'm wondering if you can update us in terms of what you see out there in terms of Footlocker, Academy, Sports Authority, where they match up with you, just what's going on from your point of view in the competitive set.

Of course, we don't really compete with the big box guys. Out of 360 stores, we compete with them in maybe 15 markets. We don't pay a whole lot of attention to them. We compete with The Footlocker in 25% of our markets. They continue to be bo-go: buy one, get half off, very promotional.

Thank you.

We'll go next to Joseph Frazier with Steven's, Incorporated.

Hi, guys. This is Joe Frazier for Rick Nelson. Great quarter.

Thank you.

Quick question: On -- if you could comment on your non-comps store sales relative to the store model for the quarter.

Oh, new stores. New stores are on target, they're about on target. We just don't have quite enough of them. But the ones we have are doing fine.

Okay. And as far as looking into November, your comp-sales trends, can you comment on that?

Well, I don't think it would be appropriate to comment on that, because of the, you know, it's so early in the quarter and late Thanksgiving, we really can't tell yet.

Yeah.

Obviously every retailer in America is going to be down this week: you're going against Thanksgiving week last year.

Okay. And lastly, you commented on the warehouse system?

Yes.

And the benefits you're receiving. I know you had some issues earlier in the year, and I'm assuming that those are all ironed out?

Yes.

Okay.

Very much. We had -- we probably had the interface 99% correct. We thought we were fine in February and March. We started discovering in April the product was not going out properly. We figured we had a problem with the interface. It caused some store inventories to get inaccurate in some areas. We reinventoried all the stores and got it fixed. And I feel so much better about that DC than a year ago. A year ago, everybody in the company was down there trying to get product through, including myself. But we're doing a lot more with less people.

All right.

I think we've got some real opportunity there to be really good in distribution.

Nice. Great quarter, guys.

Thank you.

We'll take our next question from Dan Ruer from CIBC.

Good morning. Mickey, I want to follow up with you on the initiative to improve inventory turns. As I recall, last, I believe it was April or May you brought in consultants to help with you this. I was wonder to go you could give us an update on what they've been able to accomplish in terms of the editing out some of the slow-turning items and what the opportunities are going into the fourth quarter this year as well as next year.

Well, Dan, this is Gary. You can see by the fact that our inventories are only up 10% in the third quarter, they came in and -- in the second quarter and really had to get systems in place, get familiar with what we're doing, meet with the merchants. And I think it's not a coincidence that our warehouse system and our flow has improved just due to the fact that we've had these people here, and we've been able to, you know, improve our projections and start managing inventory the way it needs to be managed. We think that there's -- our turn is up, I guess, through the third quarter, and we think there's certainly improvement on that going forward, depending on how you measure it, but I would think we'd see our turn improve, you know, 5 to 10% year-over-year.

Would you is say that the improvement that's been achieved thus far is due to, you know, the warehouse efficiencies more than editing out some of the slow-turning items?

I think it's some of both. Because we have taken out some items. You know, we're barely in tennis, we took it out of a lot of stores. We probably don't need to be in it at all. But we've taken out some departments that weren't performing in some stores. But I think the warehouse has certainly helped too.

Can you give us any examples of categories that, you know, that you've been most aggressive in culling out?

I'd probably say tennis. Probably games. And probably more in closed malls than in strip centers. We have golf accessories in some stores that we probably shouldn't have it in. Water sports, we've taken that out of some of the urban stores. And there's, you know, there's more of this we can do.

You don't like tennis players or water skiers?

We like them. Tennis is not a growth area right now; it's not a hot sport. There's a lot of shops around. Things have changed since it was hot in the '70s, and there weren't as many pro shops around. We feel like, I don't want to be too aggressive, but we could probably increase sales in the 15, 16, 17% range. With probably an increased inventory, maybe 5 or 6%.

That would be great. One other quick question, if I could. And if you commented on this, I apologize, I may have missed it, but the demand in sales trends on your private label compared to branded items, any change there?

Not really, we're not big in private label. We have some private label apparel, Precise Point apparel; it's performing good. We don't want that to be big. We want the brands to be big because, you know, brands means something to these small towns, these small markets. And of course, the brands also have higher price points. We need to drive the consumer back towards higher price points. We're not going to encourage that private label stuff.

Exactly. Great. Good luck with the fourth quarter.

Thank you.

Next is John Shanley with Wells Fargo.

Good morning, and let me add my congratulations on a very impressive quarter.

Thanks, John.

You mentioned in your comments, Mickey, you're getting some pretty substantial margin gains in footwear. Can you give us a little bit more idea in terms of what kind of margin differentials you're now able to achieve from some of the brands you cited like K-Swiss, Reebok, and New Balance, versus what you may have been able to generate from some of your other brands in the past?

Yeah, John, we're seeing a trend in margin with K-Swiss and New Balance and Reebok. The margins have increased, it helped real well. That's our three big winners in the margin gains in footwear.

Is the spread, you know, 3- or 400 basis point or is it more modest than that?

It's probably at least 3- or 400 basis points. I'd say it's a little more than that.

Wow, that's impressive. Does that cause you to shift some of your open-to-buy dollars accordingly?

Did you mean shift in 3- to 400 bases points those brands versus other brands?

Yeah. Are you getting big margin differential on a K-Swiss versus Nike?

Yeah, it's pretty big.

Fair enough. Are you moving open-to-buy for '03 into some of these more productive or profitable brands?

We're -- we always want to move our open-to-buy into the brands that's producing the margin. That's a natural evolution, and we'll certainly be doing some of that.

Okay. I wonder if you can comment about -- a lot of the footwear companies that have reported this week have given high marks to their sales of retro or classic, it's probably one in the same. Are your stores, Mickey, also generating an increased business in that category? And are, again, the margins improved in those merchandise category versus more traditional athletic footwear product lines?

I think very definitely the margins in the retro have improved. And that's where the trend is. It's all about retro. There's no question. And the classics shoes, which are almost one in the same. There's very good margins there, no question bit.

Okay. Let me turn to apparel for a minute. Can you give me a rough idea of what percentage of your apparel business is in the pro or -- and college versus the Nike-type branded merchandise or Reebok branded merchandise.

Well, this time of year, certainly the licensed products is substantially larger than the active wear. Now, when you get into that active wear, Nike's performed very well there. And Nike equipment has performed well.

I was going to ask you about equipment, but just to finish on the apparel, do you see the, you know, getting into the spring assortments, will this pro product line and college product line continue or is that just really a factor of the strength now because we're in both the back-to-school and holiday selling season?

Of course pro and college, especially college is always larger in the fourth quarter. And it starts down in the first quarter and active wear starts becoming more important in the first quarter.

Okay. So you feel as though that trend may continue next year?

I think so. I think very definitely. And we like Nike apparel for the spring.

Okay. On equipment, you know, you mentioned in your breakdown of your merchandise mix that that was one of the only category that was down, I think you said in the single-digit decline, where apparel and footwear was both up. Will that cause you to make any kind of shift in terms of where you place your merchandise mix going forward? Are you going to deemphasize equipment or do you think this was just a temporary aberration.

I think it's a temporary thing. Equipment has been positive for us for years and years. This year -- all year long it's been a bit tough. I don't see us having a major shift. We may cull some things out like water sports in select stores, and we'll take tennis out of select stores and games out of select stores. But that team equipment, we're committed to that. That's what we stand for, I don't see us deviating there at all.

Does that occupy the majority of your square footage within your store: the equipment category, or is apparel larger?

I think apparel's a little larger.

Okay. All right. That's it. I really appreciate it. Again, congratulations on a very impressive quarter.

Thank you, John.

We'll go now to David McGee with SunTrust Robinson-Humphrey.

Good morning, guys. I apologize --

Mr. McGee?

Hello. How's that?

Better.

Good morning, I apologize, I hopped on late, but I don't think you covered these issues. One is, as you assess next year's real estate activity, what do you see in terms of lease rates, I guess taking into account both the economy and the Wal-Mart issue of a couple years ago?

You mean like the price per square foot?

Yes.

I think it softened. It looks pretty good to me. And I see some softening in enclosed malls more than strip centers. They're building hundreds of these strip centers: Target centers, Wal-Mart center, et cetera, Home Depot. They're not building very many enclosed malls. We're making really good deals inside enclosed malls relative to what we were doing three or four years ago. I think prices have softened.

What about in Wal-Mart centers?

I think they've softened a little bit over two to three years ago, for sure. We're making better deals. The second question is, as I calculate it, it looks like the average age of the chain is creeping up a bit, given the moderation in growth rate. How meaningful is that in terms of operating margin expansion and visibility there?

Say the last part of that question again, David?

Gary, with regard to the average age of the chain creeping up a little bit for the first time in several years, does that help, in your mind, meaningfully the operating margin and the expansion potential of that operating margin?

Yeah, I think so. You can see by as the stores maturing we're throwing off more cash, along with some other things that we've done. But, you know, I think we're on track if you look at our difference in our operating margins through 39 weeks this year versus last year. We're on track to have one of our better years than we've had, you know, in the historical past. And I would just see expansion of that operating margin line going forward.

Great. Thanks.

Okay.

Our next question comes from Anthony Lavazinski with the Zodian Company.

Good morning, good job in the quarter.

Thanks.

A couple of questions, I think, Mickey, you mentioned in your opening remarks that you've made some customer service changes in your stores and also the presentation is also better in the stores. Could you just comment on that, please?

Yes, thank you. That's a good question. We just put a tremendous emphasis on customer service. We always do, but we really emphasized it this year. Items per transaction, customer service, especially in the footwear area. You know, if you think about it, a customer could come in, and he could almost help himself in apparel, but that don't need to happen. He could almost help himself in equipment because everything's on the sales floor, but in footwear, it's all in the back room with samples on the sales floor. We have emphasized 100% customer service in footwear because you have to have it in order to sell shoes. We have made -- we've done a better job of presenting footwear. Our signage is much better. Two new guys we hired three years ago with -- had a lot of years experience with Just for Feet and Footlocker and Foot Action, they have helped us in presenting footwear. The way we're doing it is using different colors for ladies', kids', and men's. I think it's clearer to the consumer that we do present all three categories and exactly where they are. It's just a much better presentation than a year ago.

Okay. Now you did a good job with your long-term debt. Do you think you can bring that down to zero by the year-end?

I'm betting on it.

Okay. All right. And also, could you just, guys, give us an update on the shelf registration that was filed by Saunders Corp back in May, whether they're looking to get out at this point?

You know, we really haven't had any conversations with them. Of course we do have a board meeting next week. We haven't had any conversations about it, and we're not sure where we're going with that. It may be a long time before they come out, or it could be a short term. We just really don't know.

It seems like it's been an overhang on your stock. So -- okay. All right, well thank you.

Thank you.

We'll go next to Roger Lipton with Lipton Financial Services.

Hi. This is Quinton Spectre with Roger. Got a couple of questions --. Good morning. Good morning all.

You tried to fool us. [laughter]

First of all on the debt, that's quite remarkable that it's come down so much; it looks like your on track to have zero debt by the end of the year?

Yes.

Okay. And going back to Dan's questions on the DC initiatives, I wondered when he was asking about specific examples, it would seem to me if last year you had 10 to 25 trucks backed up at the warehouse and now you don't have any, you must have reduced your reserve stock, reserve inventory to some extent. Is that a correct inference?

Yes.

And that's part of the down 5% per store?

Yes.

Okay. Secondly, or thirdly, your payables are up quite a bit this quarter relative to inventories. Are you getting better terms or is that just a fluke in time?

We're probably getting a little better terms, maybe being a little bit tougher.

A little more conservative.

Yeah.

Well, it looks like it's about a third of your inventories are represented by payables where last year it was around -- somewhere north of 25%. So is that something that we can count on going forward in the future?

We always, you know, we always set our -- when we do our budgets, we look at, you know, 30% or so.

Okay. What are you budgeting for inventory year-end?

Gosh, I don't have that in front of me, but --

I wouldn't think it would be up anymore than 10%.

Yeah, and I think it's probably only up less than that.

Okay. Over last year?

Yes.

Okay. Terrific. What about guidance for next year? Are you prepared to provide any other than the store count?

Not at this time, Quinton.

Okay. And what about the actual opening of the stores? Do you -- what about that? I mean, the timing of that by quarter? Would it be about the same pattern as this year?

No, I think we're going to accelerate more in the first half of the year because, you know, we're looking at right now I think we opened ten in the first quarter last year. We're looking 17 to 20 right now.

In the first quarter?

Yes.

And what about store closings. It looks like you might close two stores this quarter?

We might close two this quarter, yes. And next year --

But that would be after Christmas? Be in January or --

Yes.

Okay. And next year, are you -- do you have any plans to close stores?

We do. Next year is when we start anniversarying -- not anniversarying but we get to the kick-out and some of the smaller underperforming stores. You may see us close more stores next year than we have historically in the last couple.

Okay. Can you give us, you know, just a ballpark?

Probably north of five. Five to ten, maybe.

Our goal is a net of 60 new stores next year.

Right. Okay. So then if I'm understanding you right, then, you would open 70 -- if you close 10, you would open 70 new ones? To get a net 60?

Right.

Gotcha. Okay. I guess that's it. Thank you very much. Great quarter.

Thank you.

Thank you, Quinton.

We'll go next to Michael Weissberg with ING.

Yeah, the -- how does the new store openings work out in terms of square footage growth for '02 and '03?

Well, it would be 5,000 times the number and it's approximately mid teens, increase in square footage.

Okay. Great. The pushout of the stores, how much would that probably cost you in revenues fourth quarter? I assume it wouldn't cost you anything in earnings?

I think it's about a million and a half.

Okay. Great. And in terms of leveraging your top line, as you look into next year, you -- the SG&A leverage would get easier because I think after March you anniversary the big increase in your insurance costs; is that right?

That's correct.

What kind of comps do you think you'd need in '03 to get SG&A leverage?

Probably closer 3% than 4%.

Okay. Great. Thanks a lot.

Thank you.

We'll go now to Kevin Foley with Constitution Research.

Hey, guys.

Hey, again.

Congratulations on a great quarter.

Thanks.

Just a couple quick questions. Of the 60 new stores, Mickey, you mentioned 100 locations you identified within the existing footprint.

It's actually 400.

That you -- okay. Additional locations. So it's 400, not 100.

400 additional markets in our 21 State area.

That clarifies a lot. Of the 60 new, how many leases have been signed on those, at this point.

We're between 25 and 30, and we're working on a lot of others.

25 to 30 of the 60 for next year have been signed up. All right, that is it.

Thanks.

Thank you, guys.

We'll go now to Theresa Meyer with DA Davidson.

Yes, I was wanting to ask also about the equipment area of the store and wanted to clarify in your earlier comment regarding the football segment of business. Did you say that was also down in the quarter?

No, football was actually up for the quarter.

Okay. That was up low single-digits; is that right?

Yes, low single-digits. We had a pretty good year in football.

That makes more sense. I thought I'd heard that wrong. And then in terms of the pro licensed apparel, did you say the NFL category was flat?

Yes, it was flat.

Okay. Thank you very much.

Thank you.

We'll go now to Roger Lipton with Lipton Financial Services.

It's Quinton Spectre again. I forgot to ask, we never talk about the group sales, you know, the schools and those two larger format stores. I wondered how those are doing and whether you have any particular ideas about what happens to those going out in the future?

Of course, the team and school division, which we've been in for 40 years, we only in that business in the state of Alabama. We operate that -- we break that out separately from Hibbett Sporting Goods retail. And they're pretty consistent, it's about a $5 million business, it makes money, but it's a real small piece of our sales now. It is our background and it helps us to understand the equipment side of the business at the retail level, but we don't do any group and school business out of retail store. We don't see that business growing a lot. It may grow maybe 2 or 3% a year, but it's around $5 million. It's up 3% this year. Gary says it's up 3% this year. We're only in the state of Alabama. The state of Alabama high schools, and this could be a tough business in Florida, although you can still be very successful in it, it's a separate business, a whole different way of thinking. Our growth is a 5,000 square foot Hibbett store, that's our model, that's what we concentrate on as far as growth. Now, the four large format stores we have, they're 25,000 square feet, we've had them for more than six years, I guess, and as a group, they're still profitable. We do not give them any special emphasis. And that's what they would need to grow that chain. But we're just not going to grow that concept. We're coming up on our leases in the next couple of years, and we'll have to make a decision on what we're going to do. But that's just not what we're doing. We're 5,000 square feet Hibbett stores and plenty of places to put them.

Uhm-hmm. So I guess that was what I was getting at with those larger format stores. When the leases come up, there's a possibility that you just won't renew and concentrate your resources in 5,000 square foot format?

Absolutely. If the lease comes up and we want to stay month-to-month, our landlord don't mind, we may do that, as long as it's profitable. But if it gets anywhere near not being profitable, we're out of there.

Okay. And going back to the lease rates, I think traditionally you've said that they were around $9 a square foot, maybe a little higher. Is that still the level that you're signing leases at?

Yes, we're still just under $10 for rent per square foot, which is a really good rate. It just proves that we're needed by the landlords who we deal with. If we weren't needed, we would not be getting those prices.

Okay. And the increased investment in your real estate staff, is that primarily to accommodate a larger number of store openings or is it more to bird-dog the stores that you're opening that sometimes take a little longer than you expect?

Well, it's largely -- we need to look at more deals more often and sooner, rather than later. So we need to -- you know, we got four deal chasers, and they each have about five states. We probably need six deal-chasers and each of those guys need three to four states and I think they can bring more deals to the table. It's surprising in these small markets, many times we have to initiate -- we are the customer, but you would think they would be coming to us more than us going to them. But it doesn't happen always. We have to initiate it because we deal with a lot of small mom and pop developers. Many times, they only have one or two developments, it's not like they have them all across the southeast. You can't sit down with one developer and do five deals, in other words; you do one deal per developer. It take as lot more people to chase them.

I see. Thank you very much.

Thank you.

Thank you.

Gentlemen, at this time, there are no further questions. I'll turn the call back over to you for any additional or closing remarks.

Thank you. In closing, I would have to say we feel very positive about our future and our opportunity and our ability to continue to increase sales and profits. We're going to stay in small markets; nobody else is doing it. We're going to stay tight geographically, so we can understand our markets. You know, we've been given this same message for over 30 years. We've really not had to change. It works. We appreciate everybody being with us today. I look forward to talking to you in late March about our fourth quarter results. The date will be available later. Thanks for participating.