Hibbett Inc (HIBB) 2007 Q1 法說會逐字稿

Good day and welcome to the Hibbett Sporting Goods Incorporated conference call. Today's call is being recorded.

At this time for opening remarks and introductions I would like to turn the call over to the Chairman and Chief Executive Officer, Mr. Mickey Newsome. Please go ahead, sir.

Good morning, everyone. This is Mickey Newsome.

I have with me also Gary Smith, our Chief Financial Officer, Brian Priddy, our President, and Jeff Rosenthal, our VP of Merchandise. They will all be available for questions later.

We appreciate your interest in Hibbett Sporting Goods and your participation on this call. Before we start, Gary Smith will cover the Safe Harbor language.

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 and 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 are described from time to time in our periodic reports with the SEC.

Thank you, Gary.

As you know from our first quarter press release late yesterday, Hibbett Sporting Goods had an earnings per share increase of 12.9% over last year and a 20.7% earnings per share increase on a pro forma basis over last year.

Net income increased 14.2% over pro forma last year. We were going against the first quarter last year where net income did increase 53.4%.

Total sales increased 10.5% and comparable store sales decreased .07%. Last year our comps were 8.2% and the year before they were 8.8%.

We opened 14 new stores and closed three late in the quarter and we believe we're on target to open 80 to 85 new stores this year. These new stores will be opened in the existing 22 states with the possible exception of southern Arizona.

Comments on first quarter sales. February was slightly down.

We felt our inventory was probably too low, so Nike marquis footwear that launched in February the year before was pushed into early March this year. And as expected, the first half of March we were up mid-single-digits, we were very strong.

The last two weeks of March, we were going against Easter of last year, and we were down as expected in the 10% range. We ended March flattish.

We still felt we would have a comp store sales increase for the quarter because of Easter in April this year and in late March last year, but April was only up about 1%.

So we are 64% strip centers and 36% enclosed malls and most of our future stores are going to be in strip centers. Our strip centers were up over 2% for the quarter and malls were down about 3% for the quarter.

Second quarter to date in May, we're down low single-digits but last year, we had a very successful Nike Air Jordan shoe launch in the first week of May and this year it does not launch until this weekend and we expect it to be very strong and successful and to make up our deficit. Remember that May is not nearly as important to the second quarter as the last two weeks of July when back-to-school becomes very strong in the Sunbelt.

Jeff Rosenthal, our VP of Merchandise will comment more specifically on our sales in the first quarter.

We have three major areas of business, apparel, footwear and equipment. Apparel is divided into two businesses, license and branded activewear.

Branded activewear was up low single-digits. Key drivers for the quarter were youth activewear, technical performance products from Nike and Under Armour, Urban brands, [Enechi] and Rocawear.

Our licensed apparel business, which is broken into college and pro were down double-digits. Key drivers in the collegewear products we youth and ladies, however, we had a difficult time in college [anniversarying] North Carolina, Illinois, and Kentucky basketball last year's run in the NCAA Tournament.

Pro apparel was down double-digits. However, there were some key drivers that were very good.

NFL was up double-digits and Major League Baseball up low single-digits. NBA product continues to struggle down double-digits.

Footwear was up slightly going against a comparison of 16% comp from a year ago. Key drivers were youth footwear business, which was up double-digits, and cleated footwear business, which was up high single-digits.

Key products were Nike marquis footwear, Jordan Air Force One, Shox and 360s, Asics, Kayanos and Croc sandals. Our classic footwear was down further than what we planned.

Equipment was slightly down. Key drivers, football and soccer were up double-digits. Baseball up high single-digits, key brands, Easton, Mizuno, Nike and Under Armour.

A couple of issues that we had in the equipment were anniversarying a couple key items. One was Baller Bands from a year ago and Abloungers in fitness.

However, moving into second quarter our aged inventory and overall inventory is in great shape. We feel that we have some great key launches from Nike, adidas, and Asics for back-to-school, which for us, back-to-school really starts in July.

Under Armour is launching their footwear cleated products which should add to our already good equipment business, which is running up double-digits. The World Cup starts with our soccer businesses already up double-digits in equipment, we think that would only help our business.

And the start of the NFL season. Two new draft picks, Reggie Busch, which is in one of our markets, and Vince Young, which is one of our markets, should help start our licensed products moving in the right direction.

And another business that we weren't in a year ago that we think is very key is DC and [Ebby] skateboard shoes. We think that can help our footwear sales.

Thank you, Jeff. Gary Smith will comment more specifically on our financials.

For the first quarter, total sales increased 10.5% to 126.9 million while comp store sales were slightly negative.

The Company opened 14 new stores and closed three. There are now 560 stores open in operation as of quarter end.

Gross profit rate increased approximately 34 basis points, product margin improved 42 basis points due to lower markdowns and cleaner inventories and reduced inbound freight cost. Occupancy and warehouse costs increased lightly for the quarter mainly due to the flat comp sales.

For the period, selling and admin costs increased approximately 70 basis points.

The 123R stock option expense accounted for 54 basis points of this growth, while actual payroll growth in corporate accounted for the remainder. However, on a per-store basis excluding the 123R affect, actual SG&A dollar expense has actually declined year-over-year.

Operating income decreased 34 basis points, however, if you exclude 123R margins actually increased on a rate basis over last year's record amounts.

The Company's income tax rate increased over last year's annual rate, due to the permanent differences created by our incentive stock option program. Our effective tax rate will fluctuate as a result of this application.

The realization of this benefit is somewhat dependent upon the nature of the employee's exercise. We expect the second quarter rate to be approximately 38.5%, while the annualized rate would be in the 38.2 range.

Net income for the quarter was 11.5 million versus last year's 10.1 million on a pro forma basis. Earnings per diluted share came in at 35 versus 29 on a pro forma basis the previous year.

From a balance sheet perspective the Company ended the quarter with 26.7 million in cash versus 60.9 million last year. We spent approximately 15 million on the stock buyback in the quarter and 79.4 million since its inception, while buying back approximately half million and 3.6 million shares respectively.

At quarter end, we had approximately 20.6 million open on the stock buyback agreement.

Inventories increased 9.3% over the previous year on a total basis, which is under the 10.5 sales growth and under the 13.5 store growth.

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

Thank you, sir. [OPERATOR INSTRUCTIONS] We'll go first to Bob Buchanan with A.G. Edwards.

Good morning, Birmingham.

Just a question on the systems, Gary, I know that you're planning to put in a new JDA system in the core merchandising area and just wondered if you could update us on your progress there and any timetable you might have.

Sure, Bob. Good morning in St. Louis.

Thank you, sir.

Point in time, we have the conversion mostly done and the interface is basically done. And we think that we're on target to meet the 9/30 cutover date. So we feel pretty comfortable with that.

Okay.

Are you going to run the systems parallel at some point until you're comfortable with the JDA system, or what's the specific plan in terms of bringing it actually online by 9/30?

We'll be doing that starting in June up until 9/30.

Okay, June 'til 9/30. Okay. And then, so far you've said you've done a lot of conversion plus the interfaces?

Yes.

Okay. Sounds good. Thank you very much.

Thank you.

And we'll go next to Dan Wewer with Raymond James.

Mickey, you had talked about 36% of your stores and malls which I guess is about 200 locations. Do you have any sense of how many of those have a Foot Locker in the same mall?

I would say probably 95% of them do, most of them.

What's your sense of Foot Locker's assortment, if they're any better or worse, and if that could be impacting the performance in those mall stores?

Their presentation is certainly far superior this year over last year as it relates to Nike marquis product. There's no question. It's much better.

In terms of promotional activity, are they logoing more frequently than in the past?

I don't see a big difference there.

So if Foot Locker, let's say, is competitively stronger than a year ago, maybe having some impact on your mall stores, what is the Hibbett game plan to recapture some of that business?

Jeff, do you want to speak to that?

Well, part of it is we are getting into other businesses that we weren't in or we're expanding businesses that we're in to make them better. One is skateboard shoes, like Etnies and DC shoes, which they don't pay a very big presence in.

Our cleated footwear is growing where we have Under Armour cleats for back-to-school. They really don't play in the cleated business. So we are developing some other businesses to offset some of that.

Plus, we think we can probably do more in performance running. We've done a lot of things in performance running, but we can probably do more.

Are your customers, are they skateboarders? I never really thought of that being your customer.

Well, a lot of those, not necessarily because it says skateboard shoes, it's just really the look and it's just more of an everyday what kids wear. Even though we do sell to skateboarders, we sell the hardgood skateboards quite well.

Okay. One other question.

There's no change in the earnings guidance despite the same store sales forecast being lower. Would that imply that the Company's doing something in the way of SG&A reduction to ensure that you make that same level of profitability?

Well, really the -- certainly we expect to expand our margins, increase gross margin and deal with gross margins. And we always have a plan here to be a low-cost operator as far as Hibbett was concerned.

As you recall, last year we had some growth in the corporate payroll, which we expect to anniversary and possibly turnaround from a rate basis in the second half of the year.

And then you have an extra week in the fourth.

We do. And if you understand, February is big for us.

Was that baked into the original estimate, that extra week, or was that a cushion or --?

It was in the original estimate.

Okay. Thanks and good luck.

Thank you.

And we'll go next to John Shanley with Susquehanna Financial.

Good morning, guys.

Jeff, you noted that the Company was up against pretty strong 16% comp gain in footwear from the first quarter of last year, but the press release said that it was footwear sales were below plan. Can you give us an idea of what product category specifically were less than plan, was it men's versus women's, was it cleated versus athletic footwear, maybe some specificity in terms of what caused it to be a little bit below plan?

We expected our youth footwear is very good and also our cleated footwear, which we planned it that way. Where we had a little bit of softness, we expected ladies to come back just a little bit, was really basically in running was the major factor. And our classic business slowed down much faster than what we thought, John.

Okay.

That's the same scenario we just heard this morning from Finish Line, so I guess it's just the women's side of the athletic business is kind of moving into other product categories that you guys may not be selling, like sandals and open-toed footwear or something.

Are you getting sufficient quantities of lifestyles or the low silhouette shoes that you want right now or is that going to be part of the merchandise plan going forward to add to that product category?

We're continuing to expand on some of those. We see more of the low profile more of a women's thing. But we are adding Sketchers and we are adding other brands as we speak.

Great.

Turning to Nike and specifically, I assume they were still your largest vendor in the first quarter. Are you seeing a ramp-up in the availability of Nike product on a per-door basis as you look at your merchandise mix for the back half of the year? Is that going to be a bigger part of your product line than it was in the back half of '05?

Nike continues to gain market share. We feel very strong about their product offerings, you know, both from a marquis level and performance so they will gain market share as we go throughout the year.

But more of your open buy is being devoted to that product and where are you pulling it away from? Is it other components of the footwear category or are you just taking some business away from apparel or something else that may not be resonating as well?

Part of it would be the down business in classics.

Okay.

The slight less, especially white footwear, white leather footwear, from some of those type brands.

Okay, all right. Fine.

And then looking at apparel, can you give us an approximate breakdown so we have an idea of how much business in your apparel is licensed and then either breaking it out between pro and collegiate versus branded apparel, and is that going to change dramatically based on what you just told us about the performance of licensed product in the first half, are you likely to see a shift as you going into the back half of the year in those apparel merchandise mix?

Well, we don't give out specifics, but our activewear is bigger than our licensed business and our college business is bigger than our pro business. And as we go in the year we'll see a little bit more into the activewear urban business. They'll be more open to buy into that.

And the NFL business, which we had a really strong fourth quarter is continue to first quarter, we see the NFL business being a big business for back-to-school.

Are you staying away, Jeff, still from private label?

Yes. If anything, it's even less than when we last spoke.

Okay. The last question I have is really for you, Mickey.

Any change in terms of the focus of the real estate when you go to the leasing convention next week? Are you looking primarily at Wal-Mart power centers or are you looking pretty much across the board in terms of new real estate that you're going to be looking at?

We're primarily looking at small markets in the number one center in a small market and most of the time that is in the Wal-Mart center, especially if it's a new Wal-Mart supercenter. That's our primarily focus.

We'll be looking to go on the outskirts of a larger market if we can get 30 miles out and get convenient to a large group of people that don't want to battle traffic to get to the mall that may be 30 minutes away, but it's still going to be primarily small markets.

As you get into these more densely populated markets, are your occupancy costs likely to change to any degree, are you still getting pretty good real estate deals?

Well no, it will cost you more to go 30 miles outside of Atlanta than it will in Hazard, Kentucky, it will definitely be a little more, but you do more business also, it's an offset.

Can you give us a general idea of what you anticipate your leases will be? Are you still staying in the 9, $10 cost basis or are you looking for something a little bit more dearer than that in terms of occupancy costs?

John, I think the square footage that, you know, for years, we were single- digit rent payors bit it's kicked up, we're in the 11 to $12 range now.

Is that likely to change this year?

I don't think it will change much from that, you know, we'll do something that's 7 or 8, we'll do something that's 14 or $15 a square foot. It should average in that 11 to $12 range.

Great. Thanks a lot. I really appreciate it.

Thank you.

We'll go next to Next to Rick Nelson with Stephens, Inc.

Hi, guys. It's Paul for Rick, actually, Paul Swinhan. We got some of the questions answered already, but I wanted to ask.

In the women's business, is it more the fashion product that's soft and then is the running and technical product still strong, or are all women's really down? And then is that down on both the units and a price point basis?

Well, part of the women is there is a little bit of a shift just during the Summer months really on more sandals. We definitely see more sandals and platform-type shoes than per se athletic.

Our performance running shoes are doing very well but some of that has been just a little bit of a shift. And part of the -- where we are having some increases has been in the sandals. It just isn't making up for the dollar difference that we were having in running, per se.

So your units are up in some of the more fashion categories, like sandals? Your technical, athletic product is still selling well?

Well, from an overall standpoint, our comps -- our unit price is slightly up and our units are slightly down.

Okay. Across all footwear, that is?

Right.

And I imagine that would be --

Across all product categories, that's an overall.

Okay. But I imagine that the women's footwear would be a magnification of that?

Probably, yes.

And then, you had mentioned previously that some of your marquis vendors like Nike shifted some product from early February to March and now that, you just mentioned that there'd be a May event that would be a little later. Has that been consistent with all their retail customers, or is there some -- what was the cause of the change in the timing there from the marquis vendors?

It was just a production issue in getting it to us and getting to other customers, so it's really throughout the industry.

Okay. So it's not like somebody else got it before you, though?

No, no.

Okay.

And then, you did have a little bit -- obviously there's a change in the 123R expenses. Is there any reason for that? Just because you had previously raised them and now you've lowered them again. Is it just the way the accounting falls out?

If you look at our K on a pro forma basis, it was $0.11 for this year. I'm not going to say that I'm smarter now than I was two months ago, but I know a little bit more now than I did on 123R, and it's just a complicated calculation.

And we just made some assumptions, like in forfeiture rates which were a little difference in tax effect. That's it. That's all.

Okay.

And then final question would be just in the press release, you talked about using your open to buy opportunistically. It kind of sounded like you maybe had more open to buy than you expected, is that right on plan? And had you planned to have some holdback in your open to buy for opportunities, or are there, you said there were gaps, I think was the word you used in the press release.

Well, we feel that our aged inventory is in great shape and our inventories are right where we want them to be, but we're in a very good position to take advantage of any product or any trend that happens that we can take advantage of that situation.

Okay. Thank you very much.

Thank you.

And we'll go next to Nancy Hoch with JPMorgan.

Great, thanks.

I was just wondering, you called out a lot of new products that's coming out in Q2 and also you [saw] some excitement with the NFL licensed apparel. Is there any other, I guess, product launch from last year that you're cycling that would account for the 1 to 2% comp plan?

No. We feel there's nothing that isn't already in our plan numbers.

Okay. So really just a little -- is it some conservatism given that you're coming out, you're starting May a little slow?

Well, that's part of it, Nancy. But Tennessee and Alabama are instituting tax-free holidays this year and it looks like it will be at the beginning of third quarter instead of second quarter, so we think there may be some dilution of business in July moving into August.

Okay. That's helpful.

And then you guys have done a great job controlling inventory. Just wondering how you feel about your quantity of inventory in stores right now?

We feel like we're in great shape. We're really looking forward to moving forward.

Okay.

And then, I know Gary talked about before a bit of aversion to debt, but with the shares now down at a pretty attractive level, are you at a point where you'd consider levering up a bit to increase your buybacks?

That sort of goes against our grain, but we'll take a look at it on an accretive value and we're not going to rule that out.

Great.

Some of that leverage and borrowing, too.

Okay, great. Thank you.

Thank you.

We'll go next to Sam Poser with Mosaic Research.

Good morning.

Good morning, Sam.

How are you?

Jeff, I have a question, just to follow-up on the footwear situation. Was this a much more of a mall-based store, was this the cause of the decrease in the comps in the malls? Was that much more footwear driven relative to the strip center based stores?

We did see a little bit more in the mall-based than the strip centers, yes.

And when you're talking about technical running, if we, are you seeing the strength in the Shox shoes as well as -- I mean, are Shox still running strong or have they slowed down a little bit from last year?

Our Shox are still running pretty strong. The sell-throughs are not quite as good as they were a year ago. We're seeing -- some of it is just picking up on some of the technical footwear.

And that would be over like in Asics, Brooks and so on?

Kayano, or, Brooks, yes.

Okay.

And then, can you talk about how big the Under Armour, you know, you mentioned football and you've got the cleats coming in, how big -- when that starts and what the potential is there going forward?

It launched June 3rd and we think even though it's still a football cleat, but we think it's going to add to our average price and we think the kids are going to be on it and we'll see really a lot of that throughout June and July.

Okay, great. Thank you very much.

Thanks, Sam.

And we'll go next to David Magee with SunTrust Robinson Humphrey.

Hi. Good morning.

David.

Hi. A couple of things.

One is, would you care to quantify the difference maybe in round terms between the footwear performance in the mall versus non-mall stores. Was it a couple of points, was it bigger than that?

It was probably a little bigger than that, David. It was definitely soft during the malls and we think it relates directly back to the better selection in some of our mall competitors.

Do you anticipate that Nike is going to ramp up advertising on the 360 product as we get closer to back-to-school?

Yeah, David. They are -- they're putting a lot more effort towards the next back-to-school launch and they're really launching three products, they have a 90, a 180, and a 360, which they're putting a lot more effort towards it. And we're doing a lot more in store and on the windows and feature products during back-to-school.

Okay. And then on the classics business, about what percent of your footwear would that be?

I don't really have that number right on the top of my head. I can get that, I don't know.

We don't have that number, David, we can get it for you.

Is that category losing shares to the brown shoe and do you expect that to stabilize at some point, or how do you feel about that?

David, I don't think it's really necessarily going to brown shoe. It was really a 50 to $65 footwear. Some of it is going to low profile, some of it has changed a little bit.

I don't think it would -- I think it will continue for a little while. There's a lot more people in this type business. You've got a lot of mass merchant -- not mass merchants, but --

Self service shoe operators.

A lot of family footwears, the Kohl's, Penny's, those types of people play more in that realm than we do.

And then lastly, Gary, on the options expenses this year as you recalibrated the impact, did that help first quarter as well relative to your initial expectations?

Yes, it was, I think initial guidance was 2 to 3 and it came in 1 to 2 range.

Okay, greet. Thank you.

Thank you.

We'll go next to Anthony Lebiedzinski with Sidoti & Company.

Good morning.

I apologize if I missed your earlier comments with regards to the shift and the product launch and I think you said there was one product that was, or shifted from May of last year to June. What was that again?

It was a Jordan launch that was the first week in May last year, very successful. It's not going to launch until this weekend, this year.

Got it. Okay.

Now because of the lower than expected, the footwear sales, is there any chance that you could see some margin pressure because of that?

We feel very good where we're positioned and we expect to grow our margin.

Okay. And other than the Sketchers, what other brands are you currently planning to add?

Right now we have [Etnie], we're also adding Ecco for back-to-school. So those are two or three of the brands we're adding. We're looking at other brands as we speak.

There is a skate brand, another one called Heely and we expect that to be, as we get later in the year, to be part of our business.

Okay. Any comments on the LaCrosse, how that did in the first quarter?

It did well. We had some stores that not so successful and some stores that were successful. I think it's a sport that's going to continue to grow and as we move and as that sport grows, we'll continue to add to it.

So how many stores have LaCrosse now, and what are your plans by the year-end?

Okay. It's in 100 and really the LaCrosse season is really in the Spring, so we will be adding stores and we'll get to that later in the year.

Got it. Also a question probably for Mickey or Gary.

As far as the share buyback program, you have 19 left, do you anticipate perhaps increasing that number a little later in the year?

Most likely, we will, Anthony.

Okay. All right. Thanks a lot.

Thank you.

And we'll go next to Sean McGowan with Harris Nesbitt.

Hi, guys. A couple of questions.

Jeff, I'm a little confused. Are cleats, like the upcoming Click-Clacks, is that equipment or footwear?

Footwear.

I'm sorry, it's footwear?

Yeah, and I mentioned football equipment because football equipment is also performing at a very big level and I think it all goes together.

Okay. So it's in footwear.

Second question, traffic versus ticket, can you give us an approximate contributions to the performance there?

Well, traffic is down some. There's no question. Our price points were up and the items were down, so we don't have an exact number on that, but it was definitely off slightly.

Okay. And a final question.

What -- and people have kind of danced around this, but what upcoming anniversary launch of lauches from last year do you have on a product side? What things were there during the Summer of last year that might cause a year-over-year comparison shift?

We feel that we're more in our favor this year versus last year on the launches going forward in May, June and July. Just if you put footwear against what we have this year, we feel like we're in better shape than we were a year ago.

And one other advantage we have, Baller Bands becomes less of an obstacle in the second quarter than they were in the first quarter. They become even less in the third and fourth quarter, of course.

Okay. Is there anything like Baller Bands, kind of a fad that's on the horizon for this year?

Not that we see right now.

Okay. All right, thank you.

Thank you.

We'll go next to Peter Benedict with CIBC World Markets.

Thanks, guys. Most of my questions have been answered.

Just was wondering with the women's business, have you seen any shift in spending, maybe away from some of these footwear products over into the apparel side of the store and where are you in terms of introducing more women's apparel into the store? Thanks.

Our women's apparel business has been good and we'll continue to expand Nike and Under Armour and we expect that to continue to be pretty good.

And we see it as an opportunity in our stores, just women in general because most of the time they're buying for their kids. We think it's an opportunity for growth as we go forward, especially in apparel.

Okay. Thanks, Jeff. Good luck.

And we'll go next to Jonathan Cramer with Cowen.

Good morning. Just a quick question on the macroenvironment.

What are you seeing in terms of the consumer and your expectations for the rest of the year?

Ask that question again.

Just what you're seeing in terms of the consumer? And your expectations for the rest of year.

Well, we see a little less traffic, not much less, but there is some less traffic. Now, we see our price points continue to go up because our inventory is very clean.

In fact, our comp store inventory was down over 3% on a comp store basis and we think we can sell more and more product at a higher price point without having to mark it down. But we think traffic is going to be down a little bit.

And we see -- our average price points are actually selling better than our lower price points. So as we continue to get better product in, we see that that's really driving our sales. We don't see any resistance at the higher price points.

Okay. And any impact from rising fuel costs?

It's hard to tell. I mean, sooner or later, if it keeps going up, it's going to affect everybody in every market.

But we probably got some advantages there, being in small markets. We may can prevent someone from taking that trip 30 or 40 miles into a larger market to save gas, but it's going to affect everybody if it continues to escalate and there's no way around it.

Jonathan, from an internal standpoint, like I said, we mentioned inbound freight. A lot of that is we're getting more containers from our vendors and we're backhauling more vendors.

On the other side, though, with our trucks and distributing to our stores once a week on our own trucks and going well over 2 million miles, we're seeing some pressure on the fuel cost on that other side, so from inbound versus outbound, it's probably a net plus for the Company.

Okay. Thanks a lot.

Thank you.

And once again, ladies and gentlemen, it is star one for questions today. We'll go next to Ralph Jean with Wachovia.

Thanks. I have a real estate-related question, maybe if Brian's there, he could answer it.

Dick's put up a 6.5% comp in Q1, Big 5, 5.3, so you've guys, your trends are a little different than what's going on in the industry. And historically, what's been a cushion for Hibbett is that because you've been a unit expansion store, you're opening 15% more stores each year.

As new stores come into the base, it's been, provided a nice floor for the comps. So I'm wondering, was the softness across all class of store openings or was it isolated to certain areas or certain years of opening?

I think it was pretty consistent. Now the difference between us and Dick's and Big 5 probably is footwear's more important to Hibbett's and especially the marquis footwear is more important. That's where we got hurt a little bit.

We had that hot item from last year. We did almost $1 million in comp store sales just in Baller Bands and it was not there this year.

Okay. Thank you, Mickey.

Thank you.

Just a reminder once again, star one for questions today. We'll go next to Jim Gallagher with A.G. Edwards. Jim, your line is open. Please go ahead.

I don't believe they're there, Operator.

Looks like we've lost that one. Just once again, star one for questions today. It appears at this time we have no further questions. I'd like to turn it back to Mr. Newsome for any closing remarks.

Thank you, Operator.

We certainly ended the quarter with a lot less comp store inventory. We continue to improve turns. Our inventory is very clean, our product margins were up 42 basis points, we think we can continue some improvement in the future.

We're a much improved company year-over year especially in the systems area. We feel that we are prepared for the future. The new stores are above plan, we know that they're in the 400 additional markets that we could put stores in in a 22-state area and we'll continue to stay tight geographically and stay with markets that we understand.

Thanks for being on the call today. We'll look forward to speaking with you on August 18th at 9:00 Central time with our second quarter results. Thanks for being on the call.

And ladies and gentlemen, this does conclude our teleconference for today. We thank you for your participation once again and you may disconnect at this time.