Hibbett Inc (HIBB) 2009 Q1 法說會逐字稿

Good day, everyone. Welcome to the Hibbett Sports first quarter 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 Executive Officer, Mr. Mickey Newsome.

Thank you, Mary and good morning, everyone. This is Mickey Newsome, I have with me Nissan Joseph, our President and Chief Operating Officer, Gary Smith, our Chief Financial Officer, and Jeff Rosenthal, our Vice President of Merchandising. We appreciate each of you being on the call today and your interest in Hibbett Sporting Goods. 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 press release, late yesterday, our first quarter earnings per share were $0.32. Overall sales increased 9% and same-store sales increased 0.1%. 0.1% comp is not a big number, but we feel good about the number considering minus 7.3% comp decrease we had in the fourth quarter on a calendar basis.

February was positive, 2.3%. March was a tough month for Hibbett. We were minus 8%. We did lose one day because of the Easter shift but taking that into consideration, we were still down over 6% in March, but April we had a nice big comeback. We were up 10%. Without the extra day that we gained, we were up over 6%.

For the quarter, non-urban stores outperformed urban stores, which has been our trend in recent quarters. Non-urban were up approximately 1% and urban were negative approximately 1%, but the urbans did improve over recent quarters. Strip centers outperformed enclosed model stores, approximately minus 2 for enclosed models and approximately plus 1.5 for strip centers. The price of a unit sold in Hibbett decreased 3%, but we sold a lot more comp store units, which could indicate we're gaining some market share, but it does indicate that the big ticket items are probably a little softer than we would like, but it does indicate also that traffic did increase, especially in April. Now, we did sell a lot of high priced footwear. It did very well. The big ticket stuff, $500 and up is where we did suffer some.

Now the first 19 days of May, we have positive comps in the mid single digit range. Now, why have sales increased and improved in the last seven weeks? To tell you more about the why, our Chief Operating Officer and President, Nissan Joseph will speak to you.

Thank you, Mickey and good morning. Given the economic challenges facing the industry, we have spent a lot of time and energy in Q1 focusing on our internal processes. There have been improvements made in each of the functional areas, but it remains a process of continuous improvement. We are optimizing our utilization of technology in many areas to make more meaningful decisions. In the area of market intelligence, we are able to deliver and disseminate information from our field executives faster and more efficiently, thereby improving our reaction time to market needs. We've improved our ability to systemically segment our stores and customers to insure that product assortment and promotions are more rational, compelling, and relevant to that demographic. We also realized early in Q1 that ASP's were at risk and consequently tailored our promotions and field incentive programs to raise the average transaction price. We continue to leverage our growth opportunities in our footwear segment, which Jeff will speak to you shortly.

While we remain influenced by the consumer spending capability, our Q1 performance is a validation of our real estate strategy of going to small markets and offering leading brands at convenient locations. This has become more of a competitive advantage at a time when the cost of commuting to a bigger market to shop can dwarf the cost of purchases. We compete not on price but on convenience, selection, service, and product knowledge. Our premium high end footwear continues to perform well and we are less dependent on big ticket items to maintain and grow our business.

Looking ahead we expect to see ASP's inch up as increased prices are our suppliers flow through at retail. On the real estate side, we're increasingly challenged by the ability of retail developers to access credit, but are on pace to open between 80 to 90 stores and close approximately 8 to 12 stores. Although a little early to come to definitive conclusions, our new stores opened this year are currently performing about pro forma. While expecting the challenging business conditions to continue through the remainder of the year, we remain focused on capitalizing on the opportunities available to us. Back to you, Mickey.

Thank you, Nissan. Now to speak with you more specifically about merchandise, Jeff Rosenthal will speak.

We have three major areas of business. Apparel, footwear and equipment. We break our apparel into two areas: Branded active wear and license. Branded active wear up mid single digits with men's, women's, and youth all up. Urban lifestyle apparel still remained tough. The youth apparel, both boys and girls, were up double digits. Leading brands are Under Armor and Nike.

Our licensed business is broken into two areas, college and pro. College up single digits and pro down single digits. Going against tough comparison from Colts and Bears Super Bowl from a year ago. Our footwear business was up single digits. Men's, women's, and youth all up. Youth was up high single digits despite going against Heelys from a year ago. Cleats business was tough in February but has been up in April and May. Key drivers: Nike Shox, Air Force Ones, Jordans, Adidas Bounce, Asics Technical Running, DC Shoes, and Under Armor Cross Training Shoes.

Classic footwear remains soft. We're in very good shape in footwear going into the second quarter and feel very strong about it. Equipment was down double digits; however it has improved in April and early May. Football and the soccer business are off to good starts in May which is a big part of the hard goods business in second quarter. Inventory from an age standpoint is in excellent shape and we are in great position to take advantage of the opportunities to drive sales in the second quarter.

Thank you, Jeff. Gary Smith will speak with you more specifically about our financials.

First quarter total sales were $145.8 million, an 8.95% increase from the previous year while comps were slightly positive. We opened 14 stores and closed three and have 699 stores at quarter end, a 12.7% increase versus last year. Gross profit decreased 87 basis points due to increased markdowns and deleveraging of store occupancy. Store operating selling and administrative costs increased 50 basis points due to the deleveraging of store payroll; however, costs were down on a per store basis.

Operating income was $15.4 million and 10.6% versus last year's $16.1 million and 12%. EPS came in at $0.32 versus last year's $0.32. From a balance sheet perspective, the company ended the quarter with $6.8 million in cash versus $19 million last year. We spent approximately $17 million to buy back 1 million shares in the quarter and program to date we've repurchased 7.8 million shares for approximately $167 million. Inventories increased 13.4% over the previous year, but marginally on a store by store basis. Aged inventory as a percent of total and as a dollar amount is less than last year. We also spent $2.9 million in CapEx for the quarter.

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

Thank you, sir. (OPERATOR INSTRUCTIONS). Our first question comes from the line of Ralph Jean with Wachovia Securities. Please go ahead.

Great, thanks. Mickey, regarding the mid single digit same-store sales increase thus far this quarter, could you give me an idea of what the breadth of that is? Is it across all categories or isolated to just a few areas?

Ralph, this is Jeff. It has really been across a lot of areas where up in footwear and apparel and equipment is slightly down.

And you came into the quarter with inventories kind of high from the last quarter. Your gross margin was down about 90 basis points on top of a decline last year, so do you feel like you have a tougher comparison on the gross margin line in Q2 or should it be down year over year?

We're planning it to be up. Our inventory's in the best shape it's been in in over a year so from an age standpoint so we feel like we're going to increase our gross margins in the second quarter.

Great. Last question, can you just comment on the initial sell-through of the Under Armor Cross Trainers, please?

Yes. It hit our expectations and our sell-through were pretty satisfied with.

Is that something you can reorder? Do you feel confident you'll be able to reorder it as inventories diminish?

There isn't a lot of inventories to chase but really our biggest buy in that really comes at the back-to-school period in June and July, because that's when we think we'll sell the most of it.

Ralph, we get some new colors in in July also, which should help.

Okay, thanks, guys.

Thank you, Ralph.

Thank you. Your next question comes from the line of John Shanley with Susquehanna International Group.

Good morning, everybody.

Good morning.

Mickey, I wonder if you could comment in terms of when the company will eventually need that second DC center. I know you postponed it initially in terms of a DC center in Texas. When, with the store base expanding as rapidly as it is, when do you feel it will be necessary for you to bring a second facility online?

John, we feel like our existing dc can support 1100 stores, and it's going to take us six years to get to 1200. We should be okay in the next three to four years and then we'll have to start looking at something, but there's a lot of other things we can do.

Yeah, we've been looking, John, primarily at 3PL, third party logistic providers that are offering capabilities that minimize the need for us to own distribution centers in the United States. We would probably contract the 3PL it out on the West Coast to handle deconsolidation for us so we don't have to grow our investment in the distribution side of the business and we feel comfortable that in the foreseeable future, we really don't have the need for a second DC.

That's good to hear. And Nissan, while I've got you, what percent of the store base is now concerned urban stores and what is the game plan in terms of improving the performance of the urban stores specifically as it relates to merchandise needs?

John, it's a little over 300. It's really not growing significantly. It really has improved from a footwear standpoint. The apparel piece has been a little bit tougher but from a footwear standpoint we're just a little bit more focused on what we're putting in there and it seems like it's been working.

Okay. Is it markedly different, Jeff, from the merchandise mix that you have in your non-urban stores?

Yes. We definitely are more focused on some key brands and it's a lot less skewed than it was a year ago.

John, our merchandise presentation in the urban store is really different than a suburban stores and we think the new JDA software conversion we went through last year is going to really help us fine tune this and get it better and better based on the demographic needs. It's a big deal, and it's difficult to do but we think we're well on our way to getting it done.

Okay. That's great to hear also. Jeff, do you think the current weakness in the hard lines category might be macroeconomic related? In other words a lot of those products may be a little bit more postponable by consumers rather than footwear apparel. Is that something that you think could be affecting that side of your business?

John, I think there could be some of that, absolutely. You may use the same baseball glove again or you may use a bat again where footwear and apparel, it changes and it wears out where a baseball glove you may be able to get two seasons instead of one season out of it so I think there's a little bit of that.

Having said that though, john, we do have some internal efficiencies that we can look to to improve sales in that category.

Could you elaborate a little bit, Nissan, in terms of what they may be?

Space efficiencies and replenishment predominantly.

Good enough. Last question I have is for Gary. What were the inventory levels on a per store basis? You gave us total inventories were up 13% but maybe you can give us the details in terms of a store basis.

On a per store bases the inventories were up a little over 13, store growth was 12.7 but we're seeing inflation coming through from China so on a unit basis we're probably equal or a little bit down on a per store basis.

The other thing is our age is significantly better.

The age of the inventory?

Correct.

Do you have much inventory that's over a year in age?

Not really, John.

That's good to hear. Super. Thank you very much. Appreciate it.

Thanks, John.

Your next question comes from the line of Rick Nelson with Stephens, Inc. Please go ahead.

Thank you, good morning and congratulations. Wanted to follow-up on the May trends. How do you think rebates are playing into the sales and is there anything unusual from a comparison standpoint and how does the remainder of the quarter shake out from a comparison standpoint?

Rick, I'll comment briefly on that and I'll let the others comment. We didn't have those rebates in April and things got a lot better so things are pretty good in May, not as good as April but we're up mid single digits. It's hard to measure. I'm sure there have been some but it's really hard to measure. We're in a lot of areas where it's not real high income, so we're probably getting some help from it. It's just hard to measure.

It's anecdotal evidence that we have. One can't imagine that stimulus package like that does not flow through at retail at some point but equally on the other side you hear about a lot of people have not received it yet and when you look at the performance that we've been having and comps through early May, late April, there's actually drivers to that that we feel are beyond the stimulus package.

And on the comparison front, I know a year ago we had all kinds of of calendar shifts going on so it's more difficult to read but are the compares easier in the early going?

Well the comparison are exact this year. I mean last year, they were real tricky but it's pretty much on target this year as far as comparison.

Apples and apples. Okay. One of your peers yesterday was talking about irrational pricing in Texas and Georgia. Just curious if any of that is filling into your market?

I don't think it's been any worse than it has been. We're a full priced, full service, good presentation, go where you need it. We're not involved in that, but Jeff, have you seen any?

I really haven't seen that big a difference.

Okay, thank you for that and then finally, are you seeing resistance at all to high price points in the technical apparel area?

Not at all, Rick.

And we haven't seen any resistance in footwear for sure and if it is resistance, it's in the 3 and $400 baseball bats. If we have a big ticket item, that's probably it.

Got you and if I could just ask is one more, in terms of systems updates, Gary, maybe you can?

Yeah, Rick, we've gone full cycle on JDA, and I think the allocation piece has really started to pay dividends and our merchants are much more familiar and have a better grasp of the system. At the early fiscal part of the year, we moved into the enterprise planning piece and there's two pieces more of that to go, but more important, about four weeks ago, we turned on the more dynamic replenishment, E3, and we certainly think that will be a driver of the business moving forward so we're excited to see that because it manages SKUs by store. And that's what we need to help us with our allocations and being unique and stay in stock in those markets.

Got you. When does price optimization, when does that --

Well, we're still taking a look at that and that would probably be if we could go ahead and do it, it would be the back end of the year.

Got you, thank you. Good luck.

Thank you.

Thank you. Next question comes from the line of Dan Wewer with Raymond James. Please go ahead.

Thanks. Mickey a few months ago you noted that Hibbett has become a preferred customer of Nike, now that you have a few months under this arrangement, can you give us some sense to what the benefits have been and how that's comparing to your initial expectations some

I'll let Nissan comment on that. He has been heavily involved in it.

He's our Nike man.

Dan, good morning, how are you?

Good.

Good. Nike has been working with us as a strategic partner ongoing for over a year now and we're starting to see some of the benefits of that come from the attention and focus they're paying to our business and the help that they're providing in a sorting our stores in allocating product to us and we're definitely seeing advantages from that flow through and we hope to see it continue to not only continue through the year but also grow through the year.

Nissan, while I've got you on the line, the hard goods component of Hibbett, when you look at some of the bulky items, whether it's some of the fitness training products or things like soccer goals, when you start looking at the amount of space those products consume in your store, have you given any thoughts to maybe reallocating that into more productive categories?

Well I think we are going through a process based rationalization. It is important in the markets we serve. We want to be a store of the community and the community looks to us to be a sporting goods store so it's important to be relevant and also complete to that place. Equally, we have a responsibility to be profitable and effective with our space. We're looking at ways to minimize our investment in it without in any way deteriorating the selection of products for our consumers, Dan.

We're not real big in that, Dan, to begin with.

Yeah. I just thought with the small stores and space at a premium, I was suspecting that categories like footwear or more athletic apparel could better use that space.

Yeah, one thing that we do, 5,000 square feet is very typical, but when we got an over performing store, we love to expand it to 6500 or 7,000 and we usually see a huge jump, and I think it's part of what you're talking about we can present that stuff much better. We don't really have to add inventory we just present it better.

And the last question I had is relating to inflation and how that might be impacting the value of your inventory and then also if you are seeing inflation in your cost of goods sold, how easy or difficult is that to pass it through to your customer?

Well, Dan, we're seeing on average 3-5% increase coming from china, especially in footwear, and since there's new models and styles of footwear that come out on a regular basis, it's not like it's a like kind product where the consumer can say, well it's a up $5 this year versus what it was last year, so from that standpoint, it's fairly reasonable for us to pass that on and maintain our markup, so we should be able to maintain rate and get more dollars from that.

And again, it's about a 5% rate of inflation you're seeing on the imported --

Yes.

Okay, great. Thank you.

Thank you.

Thank you. Our next question comes from the line of Sean McGowan with Needham & Company.

Good morning, guys, a couple questions. Gary, can you talk about quickly how important May is to the quarter? I seem to remember from prior years that it isn't particularly important but maybe I've got that backwards.

No, you're right, Sean. May is the smallest quarter or smallest month in the quarter and it just gets increasingly important as you move through the quarter on a per week basis.

Okay, and kind of along those lines, could you maybe talk a little bit about what weather factors may have been present a year ago during this period of rather sudden improvement in sales, did you suddenly go up against lousy weather a year ago and might that explain part of it?

Well, you know, as the Empire is spread from almost sea to shining sea now, the weather in one area is pretty much offset by the weather in other areas and last year, we had a drought in the southeast, we've got a little bit more rain this year, but then the weather in the midwest has been terrible, so we we're not, we don't think that's either a hindrance or a plus to the business.

Doesn't look like a big factor. Okay, final question then. Regarding the shift in the sales mix and how that might be affecting margins, if we see equipment now weak for a bit and then a big pick up in footwear and apparel that would seem to suggest some positive impact and positive implications for gross margin and yet you're still calling out some pressure so is there some additional pressure on initial markups going on?

Some time there's a shift in footwear, there is a little bit from an initial standpoint, but our footwear is performing well at the high end so we really don't see as that being a factor and apparel of course we have a little bit better margin so we feel that that will continue to be pretty good.

So then your comments regarding gross margin performance in this quarter is really all about leverage, there's nothing else going to on? In the first quarter I meant?

Yes.

Okay, so you're expecting improvement in the second. Thank you.

Sean, just to reiterate on that weather thing, in may, we're seeing particular strengthen the midwest and the southwest, and the other parts of the country are a little bit lagging behind but are at least flat.

Yeah, and last year if I remember it was more, was it more the early part of the third quarter where it was unusually warm like everywhere and you're having a little bit of trouble selling the cold weather stuff?

Last year the first quarter we had a big drought in the south. I don't think we got any rain at all and we had a tough first quarter. This year we get a lot of rain and it's better. So with Hibbett, the weather don't really mean that much we don't think. It evens out.

Okay, thank you.

Thank you. Our next question comes from the line of Sam Poser with Stern Agee. Please go ahead.

Good morning. A couple questions on the gross margin expansion and on the guidance. First of all, what is your share count assumption for the guidance that you've given?

Less than, about 28.8.

For each quarter in the remainder of the year?

Yes.

Okay. And then when we look at this, you've maintained, the comps are easier as you get to the back half, should we, we should be looking at some margin expansion and then deleveraging on the SG&A, is that how we should be looking at this?

Sam, the guidance is conservative.

Sam, there's so much uncertainty out there for the balance of the year, we've had a good run at about seven weeks, but it just don't make a year. We got to be conservative. We may be fine and you're right, the numbers do get weaker in the third and fourth quarter. Surely we can beat last year's fourth quarter, but I guess you never know.

Just a follow-up. We've got JDA, you've lapped the JDA, you're rolling out enterprise planning and E3 right now. How much and I don't know who Nissan or Jeff, how much did JDA working contribute to the better than expected quarter on the year-over-year basis, considering --

Well first of all, sam, to say that JDA has lapped, really I think JDA is an ongoing process, it's a continuous improvement and a continuous incremental leveraging of the system, so we're not finished with the leveraging yet but by no means are we capitalizing on it totally, so on that, we still have ways to go. How much has that helped? I think that was a part of it. I think there were a lot of moving parts to our performance in Q1 and to say that one was distinctly more than anything else would be a little premature at this time, but to say that JDA is not going to be an important part of our growth as we continue to grow in the next few years, I think the best company will be the one with good systems and great people.

Well with JDA being a part of the success in q1, what were the other pieces that from sort of back of the house that contributed to that?

Sure. I think there's a lot of pieces. When you look at it from a store environment it was our focus on the consumer experience, increasing the basket, increasing the frequency, tailoring the promotions by segment, when you look at it from a merchandise standpoint, it was our focus of making sure that we were maybe a little more focused on our assortment that we were offering by store, by segment. It was about speed to market on a lot of reactionary issues, it was about how we positioned our exit of aged inventory and consequently came out of the quarter cleaner with it so there's a lot of moving parts to this. We can even talk about the fact that gas prices may have helped consumers shop locally which is what Hibbett strategically is known for and it's our competitive advantage and I could rattle off a lot of other things but I think they're being encompassed by those factors and as you heard there are a lot of factors for me to say JDA was the significant one, it's a little hard to read that totally.

Sorry to follow-up on this but it sounds like the promotions by segment assortments, speed to market and planning exits for aged inventory, all of those sort of in their core, you have the foundation of a much better system than you did a year ago.

Right. The driver would be the fact that we have better visibility and as we pull levers we're able to better assess the effectiveness of those actions.

And that should only improve as we go forward and add-on enterprise planning and all of the other various things you're working with?

Yeah, absolutely, Sam.

And Sam, let's talk about the human side just a minute. We have really put an emphasis which we always do but we re emphasized customer service and in our items per transaction are up. We won't give out exact number on that. But they're up an we're proud of that and we think they can be up even more. We got to sell more to the customers coming in.

What are you doing to do that?

Well we have incentive programs at the store base, we're offering training, data, feedback, measuring, the adage, that which gets measured gets done. I know it sounds very cliche but it works. A lot of those things are in place, Sam.

Okay. Thanks so much.

Thanks, Sam.

Thank you. Our next question comes from the line of Anthony Lebiedzinski with Sidoti & Company. Please go ahead.

Good morning. I wanted to follow-up on the earlier question that the first quarter benefit from any calendar shifts?

There was none, Anthony.

Okay, and also are there any calendar shifts in the second quarter that might help or hurt your performance?

We're 13-13 and 52-52, so it's like throughout the year.

So we're already past it so just wanted to clarify that.

You got a shift in the fourth quarter that's not good for retail in general. It's not big, but that Thanksgiving coming is it later? It's still in the quarter, but it condenses the buying period between Thanksgiving and Christmas, so to me, that's a little bit of a negative but it's not big.

In the first quarter, okay, got you. And then also regarding Heelys are you still facing tough comps in the second quarter and maybe you could just talk to us about the progression of your comparison that you'll be facing regarding Heelys as the year progresses.

It pretty much evens out throughout the year, anthony, and I feel very confident we're really comping it right now and the numbers don't get any, they get even a little bit smaller, but we're comping it very well in our kids footwear and we feel like we can comp kids footwear the rest of the year.

Also in the first quarter, you did have a little bit of short-term debt when you closed out the quarter. Would you be willing to actually borrow some more to buy back stock or what's your thoughts on that?

You know, Anthony, just my feeling right now, I'm not quite sure we'll be as aggressive going forward as we have been.

Yes.

Anthony, it's a subject at every Board meeting, I'll assure you and it will be in a couple of weeks.

Okay. All right, thank you.

Thank you.

Thank you. Our next question comes from the line of Adam Finler with Deutsche Bank.

Actually all my questions have been answered, thank you.

Thank you.

Thank you our next question comes from Jeff Feinberg with JLF Asset Management. Please go ahead.

Thank you very much, a couple questions. Our research at your store speaking to your customers seem to indicate that high gas prices has actually improved your traffic because folks might have been traveling to other locations have been coming to yours. I'm curious if that's something that is your perception or your own store research might have indicated also?

Well that is one of the moving factors that we talked about, the moving parts that we think is driving our comps, our retail strategy of convenience and availability makes it much more attractive given the high cost of commuting these days and the fact that we predominantly drove from a much smaller radius around our stores, our store that designed to draw from a small radius, not a large radius because we don't build big stores, that gives the consumers the convenience to shop more locally and it's very critical to consumers today to do so.

Thank you and then a couple quick questions. The second thing is I understand you're not giving quarterly guidance but just to make sure we can understand the drivers of the business and the balance between top line and margins , is it fair to say that you would expect earnings and EPS to improve versus last year in the second quarter just as we saw in the first given the

I would think so. If things continue the way they have been, Jeff, we would expect that certainly.

Okay, terrific. And then finally I just wanted to understand a little bit. I know there was a little bit of dialog but I want to make sure I understood. The guidance for the year is 0 to negative 3 comps, you're running positive year-to-date, probably 1 or 2ish, and your comparisons go from flat in the first half to down 5 in the second half. Why would you expect comps to get worse?

Well, I think we're taking a conservative approach. We're not expecting comps to get worse as a focus but we maintain our conservative approach given the macroeconomic headwinds that all of us retailers are facing right now.

Yeah, we're just afraid to try to read that Crystal ball. It's just a lot of uncertainty out there.

Okay, and just so we can have a balance perspective here, would you say that this is more macro concerned or conservatism, please?

Conservatism, Jeff.

Okay, thank you very much.

Thank you.

Thank you. Our next question comes from the line of David Magee with SunTrust Robinson. Please go ahead.

Yeah, hi. Good morning, guys. Just some quick questions. One is you mentioned the ASP decline in the first quarter. Can you remind us what that was roughly in the second half of last year and what the trend might be there?

David, I wasn't --

I'm not sure about that one.

But we had declining ASP's last year, to give you an exact rate I don't have it available, David, but we did see the ASPs probably continue to decline but not as significantly as in the Fourth Quarter.

Yeah, we could get that number, but it was down some.

Just a rough number, so you think that the trend line has improved a bit?

Correct and the first quarter it did improve on the trend line.

Just so I understand the gross margin to belabor the point a little bit, distribution costs were higher year to year as a percent of sales?

Distribution costs were actually down as a percent of sales year-over-year, David. We saw some decrease or increase in rate in store occupancy and then the product margin rate, we had a little bit more promotion than we had the year before.

So pricing was at least a small factor year to year?

At this point, yes.

And which category would that be in?

Basically footwear.

Just another clarification question on the weather. Did the Midwestern stores improve during the month of April or was that more recent in May?

No, they improved in April.

Okay, so despite the poor weather they still had a better month?

Yes.

And then lastly, do you know of any differences this year with regard to state tax holidays?

David, they're pretty much in line with last year.

The only one that hasn't announced is Florida but they are always late to announce.

Okay. So but it sounds like it's about apples-to-apples then?

Correct.

Great. Thank you, good luck.

Thank you, David.

Thank you. Our next question comes from the line of [Joel Rivel with Standard Pacific Capital]. Please go ahead.

All right, thanks for taking my questions. Actually I have a couple just clarifying questions, please. The first, could you repeat again what the comp store sales progression was? I know you said it earlier by month?

Yes, so February was just over two. March was about minus 8, and April up 10.

Okay, and how did you deal with the leap year? Did that, is that accounted for in that plus 2?

That's last year and that's old news.

It doesn't affect this year.

Leap year doesn't affect this year?

Correct.

Okay, and did you quantify the Easter shift?

Yes. We were down about 8 in March, but if you took out the one lost day, we were still down about 6.6, and in April, we were up 10 but if you took out that extra day that we gained in April, we were still up 6.4.

Okay. And I'm sorry, I'm just a little confused about the earlier comment about leap year being last year.

Well last year was a 52 week year and the comparison was thrown off because the year before that was 53 so this year is 52 to 52 and a comparable quarter ending calendar.

I understand the extra week, I'm sorry, I was asking about the extra day of February.

It was a four week month.

Right.

It didn't change the number of days or weeks in this quarter.

Every five to six years we go to a 53 week year and that's how we make up for the extra day in February.

Oh, I got you okay, thank you for clarifying that. And then also, could you remind me what the comps were last year in Q2, the progression through the months?

It was low single digits.

Yeah.

Positive.

Yeah, I think May was a little stronger than June --

July was down negative.

Yeah. So we have easier comparison going through the quarter.

May was the strongest month?

Yes.

And then --

That's our understanding.

We'll get it to you.

Okay, great. And then my final question was on the, you mentioned earlier that your your inventory per store or inventory per square foot were up a couple of points, is that right on a year-over-year basis?

A little less than 1.

And what, on the same basis, what were revenues per square foot or revenues per store?

Well the comp was --

0.1.

Up 0.1 and the total was about 9. But the store growth was 12.7.

Thank you. Our next question comes from the line of Mitch Kaiser with Piper Jaffrey. Please go ahead.

Thanks, guys, good morning.

Good morning.

I'm trying to reconcile just the pick up in the business relative to easier comps and if I look at, you said, last year you're up against -4 plus 8, -4 and this year you did a plus 2.3 and plus 6 if you adjust for the Easter shift so it looks like it's a negative two plus two plus two on a two year basis and then I go through and I look at the transcript from the second quarter and I know you just said that May was your best month of the quarter but and I know the calendar shift skews this a little bit but if you look at the transcript, it shows it was -26, -3 and then plus 14 so I'm trying to reconcile a pick up in the business relative to easier compares if you could.

Yeah, Mitch, I think last year in that second quarter, we erred on that negative 26. We weren't down 26 in the quarter.

Yeah, it doesn't seem --

Yeah, it was 2.6 I believe.

Yeah, I said that wrong, last year, Mitch. They got on me about it.

Okay, but I mean, I guess the point not negative 26?

That's correct.

So negative 2.6 and negative 3 plus 14 is how that plays out?

Right.

So May and June are roughly consistent and then July was a big pick up, but that is calendar shift, right?

Yes. That's correct.

Okay. Sounds good. That's helpful, thanks.

Thanks, Mitch.

Thank you. Our next question comes from the line of Reed Anderson with DA Davidson. Please go ahead.

Good morning. Jeff, you had said that I think you talked about margins will be up probably in the second quarter gross margins and then if I look at the last two quarters, the markdowns a bit higher in both those quarters, I don't know about the third quarter but the last two have been higher so was that just an issue of clearing out inventory that goes away now as a margin pressure is starting in Q2 or how should we think about that?

Business of course we had a tough fourth quarter so we had to clean up and then March was tough so we cleaned up a little bit but our inventory from an age standpoint now is in the best shape it's been in in over a year, so that should go away.

Okay, and so that's why then we look at Q2, you basically remove that markdown pressure you seen the last couple quarters and we should see margins hopefully up from year ago levels?

Yes. And then the comment on the high end footwear doing well, I was just curious. Are you doing something different specifically with your higher end product featuring it differently, advertising it differently, that would account for that? I'm just trying to get a little more color why you're doing well there, where maybe everyone else isn't?

I think of course our inventory assortment is a lot more focused. We're not as broad in assortment and also we're making a bigger emphasis to sell it in stores, so I think between the two, it's definitely getting better.

And part of the JDA help is we're able to initially allocate it more correctly to the right and appropriate stores that helps you sell-through on the back end, Reed.

Okay and Jeff, Do you mean from a person standpoint or do you mean just from a featuring or putting the product on the shelves?

From a product knowledge training service standpoint.

Okay, got it. And then Gary, curious. What would be kind of the inflection point where you would get or at least be breakeven in terms of store occupancy or payroll in terms of comps? Would it be 1 or 2% somewhere in there?

Yeah, that level since we sort of delayed and postponed hiring has come down a little bit, so probably in the 2 range.

Great. Thank you.

Thank you. Our next question comes from the line of Jeff Mintz with Wedbush Morgan. Please go ahead.

Thank you. Just a couple questions. On the Under Armour performance trainers, how many doors was that in for you?

It was around 300, just a little bit above 300, right around that number.

And do you expect to add more doors as we go into the back-to-school part of that business?

Yes.

Okay, any sense of where you might be for back-to-school?

It's closer to 400.

Okay, great. And then going back to the comps in the quarter and the comp progression, can you give us some sense of kind of how the comps went from negative 8 to plus 10? Was it greater traffic, more units per transaction, kind of what drove that swing?

More units per transaction for sure, and March was tough, but it just turned around in April, and we don't have the entire answer. I think the merchandise assortment got cleaner and better and we probably did a better job of customer service. We certainly put an emphasis on it and there was more items per transaction.

Was it more transactions as well?

Yes.

Okay. Great. Thanks very much.

Thank you. Your next question comes from the line of Rob Wilson with Tiburon Research. Please go ahead.

Yes, thank you. I want to get some color on your mix shift apparel versus equipment versus footwear, and what impact that may have had in Q1 on your gross profit margin and what you expect that impact might be going forward.

Well, our footwear has researched, it's become the predominant leader as far as comps are concerned. Equipment has moved up and apparel still continues to be strong, so as far as our gross product margin is concerned, footwear is in the low 40s which is below the apparel and the equipment, so as we increase, as footwear increases share, our product margins may decrease as rate, but we should get more dollars, and from a footwear standpoint, we think footwear drives other traffic in the stores, so when footwear is good, we would expect to be low to mid single digit comps.

But our footwear inventory is much cleaner this year so is we're certainly hopeful we'll sell more at regular price rather than the markdown price, so that could come back and add to gross margin percent.

Okay. Also, you mentioned comps by month. When you refer to a particular month, how do you calculate that? Is that on a calendar month like let's say April 1 to April 30 or is that on a retail calendar?

It's on a retail fiscal calendar.

Okay, and finally you've mentioned success here in April and May, of course a lot of retailers have mentioned that they've had top line success in April and May, so how do you discern how much of this success is a function of your company's initiatives versus some macro level benefit that a lot of retailers have reported in April and May?

It's really hard to tell. I mean, I know we're an improved Company internally because of improved systems, improved Customer Service emphasis, but you never know. It's hard to tell. I think our product is certainly much better than it was a year ago, more precise to the demographics but I don't have a good answer for you on that. It's just hard to tell. You all got an opinion here?

Well it's hard to disaggregate the success drivers or the drivers of any business and quantify it on a numerical basis , but we continue to know that is a lot of systemic improvement, people improvement, process improvements at Hibbett that are sustainable with what's going on today

Okay, and one final question. You've mentioned positive mid single digits here, the first 19 days. Can you give us some sense what the comps were those first 19 days last year? Just roughly?

We don't have that available, but at the moment, but for the month though, we know we were negative 2?

Yeah, I think we were coming off a slightly down first 19 days, comparable to comparable.

Okay. Well thanks for taking my call.

Thank you.

Thank you. Your next question is a follow-up from the line of Sam Poser with Sterne, Agee.

Hi. I just wanted to follow-up, last year you had a big launch with the Crocs business and wanted to get some idea what you were seeing there and what kind of growth was going on.

Sam, Crocs has slowed down for us, but from a comp standpoint, it's nothing that we don't think we can overcome.

All right, any kind of quantification on how much slowing you're seeing?

It's just the rate of sales has just slowed down.

Are you down on a year-over-year basis?

Slightly, yes.

It's not a big category for us today.

No, it's not a huge category for us.

All right, thank you very much. Continued success.

Thank you.

Thank you. Your next question is a follow-up from the line of Dan Wewer with Raymond James.

Jeff, you had noted that gross margin rate should be up during the second quarter because of the clean inventory levels. Will that be enough to offset the higher distribution and occupancy expenses? I'm assuming you're alluding to merchandise margin to be up, not total gross margin?

That's correct, Dan. We would expect the rate on product margin to improve throughout the year. We just need to get to a two or three comp to leverage occupancy and warehouse.

Okay, so we need, okay. Second question, on incentive compensation, can you remind me how that was adjusted last year and how that will track in 2008 compared to 2007?

Dan, I recollect and we were at full accrual through the First Quarter last year and started pairing it back, second, third, and fourth.

And then how would, say in the first quarter how would the incentive comp accrual compare to the year ago?

About the same on the dollars.

If the Company were to make the high end of your range, let's say $1 a share, and the current fiscal year, would that imply a higher incentive comp?

Absolutely.

Okay, great. And last question I had was on the new store volumes. Nissan, you alluded to the new stores this year are running above pro forma. Is that due to better site selection or a better job in selecting managers and marketing the new stores?

Yeah, this is my opinion. We all probably got a different opinion here. I think we got better merchandise this year than we had a year ago. I think the site selection is pretty consistent with what we've been doing over the years. I think our managers are reasonably consistent and maybe a little better trained but I think the merchandise is better and it gets back to that improvement in systems.

So in terms of looking at the demographics of the store and you're getting the correct mix in the store from Day 1?

Yes, and less outages, more in stock.

Okay, thank you.

Thank you. Our next question comes from the line of Vivian Ma with Oppenheimer.

Good morning. Just wanted to follow-up on Dan's question on the gross margin. By the fourth quarter in the overall, you should see gross margin up year-over-year, because it was the comparison last year was unusually low?

Yes, we would expect that; however we haven't really shown that in our guidance.

Okay. And then just one more quick question. How should I think about the modeling for the debt levels and the rest of year, you commented maybe you're not going to be as aggressive with the share buyback. Should I assume debt levels more or less of where we are?

Of course, it's going to swing month by month, but I would expect to be anywhere from 10 to $20 million in debt by the end of the year.

Okay, great. Thank you very much.

Thank you. Mr. Newsome, at this time I'll turn the call back over for closing comments.

Thank you. As we said on our Conference Call on March 14, we believe we're conservative with our annual guidance of $0.88 to $1. Comps have improved the last seven weeks but seven weeks does not make a year so we are encouraged. We strongly believe we're an improved company versus this time last year but we realize there's a lot of uncertainty in the marketplace, so we're keeping our conservative guidance. We continue to open stores in small markets in the Sun Belt primarily and we'll be full priced, full service and go where we're needed. We're confident we can have 1200 stores in the next six years in small markets. Thanks for being on the call today. We look forward to talking with you on August 22, at 9:00 Central Standard Time. Thanks for being on the call.

Thank you. Ladies and gentlemen, that will conclude today's teleconference. We do thank you again for your participation and at this time, you may disconnect.