Hibbett Inc (HIBB) 2009 Q3 法說會逐字稿

Good day, everyone, and welcome to the Hibbett Sports, Inc. 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.

Thank you. This is Mickey Newsom and with me also is Jeff Rosenthal, our Vice President of Merchandise, and Gary Smith, our Chief Financial Officer. We appreciate you being interested in Hibbett Sporting Goods today and thanks for being on that 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.

As you know from our press release late yesterday, our third-quarter earnings per share were $0.26 versus $0.25 one year ago. Also, we increased our annual guidance to $0.97 to $1.04 from $0.93 to $1.03. Comp store sales for the third quarter were plus 0.4%. Total sales increased 8.1%. Overall transactions were up 5.4% indicating slightly less traffic but items per transaction increased 3% to 4%. Our store operations team did a great job with selling each customer more products.

Comp store sales for August were plus 4%. We had a great month. And there's some reasons for it. First of all in August, footwear is a very large percent of the business and footwear is where our strength has been. Also in August, we feel that customers are waiting longer to time of need to buy. It did affect negatively late July but it certainly helped August. Also in August, we have the tax-free holidays as you know and we feel that in a soft economy, tax-free holidays are more meaningful. Of course the tax-free holidays were in August last year also.

September was a tougher month, minus 3.7%. As you know, most of our stores are in the Sun Belt. In the Sun Belt this year, we had two hurricanes and one tropical storm. We did not have any last year. It affected 78 stores for a total of 330 completely closed days and many partially closed days. Get shortages and the price of gas hurt traffic late in the month. And footwear becomes less important in September relative to August. And of course, the negative news in regard to the stock market was certainly a factor too in September.

In October, we did come back versus September, we were down 1%. The cooler weather helped us. It was cooler this October versus last October. We didn't have any storms of course. Which we still had gas prices very high early in the month but they came down late in the month and it helped and the gas shortage went away. Third quarter, our non-urban stores outperformed our urban stores which has been the trend for several quarters.

November, the first two weeks of November we are pretty positive about it actually. We are up 1% and that is unaudited but we feel good about that, that is the first two weeks.

Now for some comments on new stores. Third quarter, we opened 22 new stores and closed eight for a quarter ending total of 726. For the year, we expect to open 75 to 79 new stores and close approximately 12. That gives us a 9.5% store growth rate for the year, less than we had planned. Our landlords have delayed several deals until next year and several deals are delayed indefinitely. In fact, we had 22 deals that were going to be this year that got delayed to next year and another 20 that is put off indefinitely.

Now for some further comments on merchandise, Jeff Rosenthal will speak with you.

We have three major areas of business, apparel, footwear and equipment. Apparel is broken into two areas, pro and college licensed apparel and active wear. Active wear was up slightly led by Nike and Under Armour technical products. Kids and women's active wear continues to run up.

Urban apparel continues to be very challenging as planned. We expect active wear to be strong through the fourth quarter with the help from our new E3 replenishment system and our focus on key items. License was down mid-single digits. We are hoping the fourth quarter will improve with some of our key themes such as Alabama and the Tennessee Titans. Mixed martial arts apparel has performed very well and will continue through the fourth quarter.

Footwear was up single digits. All categories were up with the exception of women's. Key items or vendors were Nike Shox, Air Jordans, Air Force Ones, Under Armour Training, Adidas Bounce, DC Skate Shoes and ASICS Perfomance running shoes. Our footwear assortment is much fresher this year versus last year and more focused to our customer needs.

Equipment was down low single digits, however, key vendors that have performed well have been Nike, Under Armour, Shock Doctor, Wilson and Oakley. Our branded accessory and footwear accessories have been up high single digits throughout the quarter. We feel we are in position to take advantage of the opportunities and increase our margins in the fourth quarter.

Thank you, Jeff. Gary Smith, our Chief Financial Officer, will now speak with you.

Third-quarter sales were $140.1 million, an 8.1% increase from the previous year. Fiscal comps were up 0.4%. Gross profit rate increased 55 basis points due to improvement in inbound freight and inventory shrinkage rates and the leveraging of occupancy and warehouse costs. In fact, occupancy costs per store is down about 5% on a year-over-year basis.

Selling and admin costs increased 140 basis points over the prior year due to incentive compensation and a deleveraging of store payroll plus an increase in medical insurance claims. The quarter tax rate of 35.6% benefited from Federal employment tax credits.

Operating income was $12 million and 8.6% versus last year's $12.5 million and 9.7%. EPS came in at $0.26 a diluted versus last year's $0.25. From a balance sheet perspective, the Company ended the quarter with $6.5 million in cash versus $10.8 million last year. Debt was at $14.9 million versus zero debt last year.

Inventories increased 9.3% over the previous year, and decreased 25% on a store-by-store basis. Aged inventory as a percent of total is approximately at the same rate as last year and we spent through the 39 weeks $9.1 million in CapEx for the year versus the a $24 million budget. We did not buy any stock back in the quarter, but year-to-date we have repurchased approximately one million shares at $16.9 million.

Thank you, Gary. Ves, we are ready for questions

(Operator Instructions) Rick Nelson, Stephens Inc.

Thank you very much and good morning. Mickey, how do you think about store growth next year? We're hearing from a lot of retailers are pulling back on [open-end plans].

Rick, we are going to pull back slightly. Our goal is 60 new stores net but we think that is a conservative goal. We are going to do our best to beat it. There are plenty of small markets that need a Hibbett Sports Store but getting the real estate is getting to be a little bit of a challenge. I don't know if that will ease next year or not but we think we can certainly get 60 because we have a lot of them already done for next year.

How about rents, are they starting to come down now with turmoil in the real estate market?

On existing space, it is certainly softening on rent. You can get a far better rent today than you could three years ago. On new construction, you can't necessarily do that because it is more expensive to build. But rents are softening and of course we leveraged occupancy expense in the third quarter with only [4 of 1%] comp store sales gain. We are getting better rants.

Thank you for that. I'm wondering if you could also discuss regional areas of strength and weakness and are you seeing any slowing in Texas with the lower oil prices?

Yes, Rick, we are seeing a lot of our gains coming out of Texas, Arizona, New Mexico, Oklahoma, Missouri, Kansas, a little bit weaker really on the East Coast Florida, a little bit in Georgia, North Carolina and South Carolina. But out west that way it seems to be a little bit better.

Thank you for that, Jeff. One final question for Mickey. How is the search coming for a new president?

Rick, we are looking very seriously internally. You have to remember now we've got a management team that has been here -- the top 14 people in the Company have been here on average more than 12 years and we have got Jeff and Kathy and Gary and they have been here since we had less than 100 stores. We are looking seriously internally. We are going to keep our eyes open though and we are going to do what's best for the Company and for the stockholders. So we have not made a decision. We certainly hope to have that decision made before next March, probably a lot before next March.

That is great, thank you.

John Shanley, Susquehanna International Group.

This is actually [Tom Haggerty] for John. Good quarter. I was wondering on the comp side, it's nice to see you stay in positive territory and it looks like November is trending well. But with what is coming out of the rest of the retail world, do you see any risk to that number? And I guess with your easier comparison conversely, is there upside if you are feeling pretty good about it?

There is so much uncertainty out there, we don't know how good or how bad it might be. We are a much better company today than we were a year ago and we are positive quarter to date. And I think our merchandise is a lot fresher, especially in footwear but you just don't ever know. There is so much uncertainty. So I guess only time will tell.

Okay. You didn't give any next year's guidance. That is fine, but with things trending the way they are, can you give a high-level view of what you are seeing moving into the first half of next year?

We give next year's guidance in March and we are not really prepared to address that today.

Okay, fair enough. And then just one more, on the systems, can you give a little update on where you are? I know you had said the E3 was going well. Kind of what impact that is giving and if you have any more enhancements coming to [JDS] and maybe any kind of margin benefit you might expect next year?

Certainly some of the double-digit improvement we have seen in accessories has come as we put a number of those SKUs on E3 and it has been frankly amazing some of the sellthroughs we have got with that. We have got approximately I guess 50% to 20% of our inventory up on that which would be converting from the old and we plan to double that going into next year. So with the rates some of those are running, I would think we could get a couple of points in comp just in that when we have that system fully up and fully running.

Sounds good. Do you know when -- timing of next year when you think you would be at full capacity?

We are going to be putting items on and off as we go through that year but I would think we would probably be 50% ahead of where we are now by the second quarter next year and then we will tend to move the rest on throughout the year.

Sounds good. Thanks, guys and good luck.

Oliver Wintermantel, Morgan Stanley.

Good morning, guys. Gary, could you maybe break down the gross margin performance in a little bit more detail, please? Your comp was almost flat but your gross margin improved by 55 basis points. So maybe you could give us some more details about the merchandise margins in footwear and apparel. What drove the margin increase there?

We continued to -- as we continue to grow, we see margin hopefully margin improvement as we get more important with the vendors. We look to increase our margins every quarter and we from a margin standpoint, got a little bit stronger in apparel in the third quarter and kind of maintained where we were in footwear.

Three quarters of our gross profit improvement came in leveraging inbound freight and reduction in shrinkage and the other quarter was in the leveraging of occupancy and warehouse costs. But it looks like going into the fourth quarter, we should see improved product of margin rates from all categories of the business.

Okay, great. That is very helpful. Thank you.

Sean McGowan, Needham & Company.

Couple of questions if I can. One is have you seen -- what can you say you have seen regarding consumer behavior and the fluctuations in the price of gas? Earlier in the year you thought you were an odd beneficiary of higher gas prices. Are you seeing a reversal of that now?

We had slightly less traffic in the third quarter but we sold each consumer on average more items. Going through that gas shortage and it went to $4 I think it affected everybody. You can't hide from that. But as it came down, our business started improving. We think overall long-term when we were out in these rural markets people are going to take less trips into the big mall in the big city than they would have ordinarily.

So even with gas prices lower, you still expect them to be shopping closer to home?

Probably.

Okay, thanks.

Sean, another part on that, three quarters of what we do is cash and cash related as part of our business. So our customers are very sensitive to having cash in their pockets. And we saw that certainly during the stimulus checks and we have seen a pickup in sales when gas prices have gone down also.

Okay, that is helpful. Can you be more specific about the accessories that you are seeing that sales strength in?

Really the accessories would be like socks, shoe care type products, shoelaces, those type items of being in stock in a much better way just because of our systems are allowing us not to be as many stock outs as we may have had in the past.

Okay, thanks. Then again on the footwear, Jeff, is it your expectation at this point that the Under Armour running shoe, will that provide incremental sales for you guys next spring or is that going to be largely substitution?

I think it will help the industry just because it will bring a lot of awareness towards the running market. I think it will help the overall business. I believe maybe a little bit maybe incremental but the majority of it would come from somewhere else.

Okay, do you expect that the average price will be helpful to you?

I think so. I think that would drive up the average price a little bit.

All right, thank you very much, guys.

Sam Poser, Sterne Agee.

Good morning. Can you talk a little bit about the SG&A and that has been growing pretty healthy this year so far in pure dollars. Can you talk about what is driving that increase and if we can expect to see some moderation?

As we talked about through the previous quarters the fact that the incentive compensation part of it where in the third and fourth quarters last year as the Company tended to slow down a bit, we didn't have -- weren't meeting our bonus goals. So this year we are and that is worth a big chunk of that growth on a quarter-over-quarter basis. When we get into next year, it will be more comparable but we will have to look at some ways of cutting that SG&A growth going forward.

To offset --. Okay.

Correct.

All right. I think that is what I had. Thank you.

Dan Wewer, Raymond James.

Mickey, I wanted to follow up on the reduction in rent expense that you are alluding to. I certainly understand how you are able to reduce rent expense on your new stores going into existing strips. But how do you go about reducing your rent expense on stores that you are already maybe have three years left on a lease and if those stores are generating acceptable sales volumes? Are you going back to those landlords and asking for a reduction in rent and they are acquiescing?

Absolutely. Typically we sign a five-year lease with five-year options and when we come up on that fifth year, for us to renew that option we are negotiating for a better price than we had and we are getting that. And then of course when we come up on three-year kick outs when we have one of those, we are doing the same thing. I think in regard to both of those, we've probably saved over $500,000 this year in renegotiated leases.

If you are on average reducing your rent expense 5% in your existing stores does that really imply that you are getting 20% or 25% rent reductions in maybe 1/5 of the stores?

That would be a little high, wouldn't it?

I would think that it would be. I was just trying to make the math work.

Some of that, Dan, is the fact that we probably have 10% to 15% of our stores now with the retail turmoil out there in some sort of a favorable rent to us because of [co-] tenancy violations or didn't turn it over on a prescribed amount of time. So we pay a lot of diligence on the front end making sure we get the best deal we can and then our leases are capped a lot of times for common area. We don't just take the net -- the normal escalatory parts of contracts. And we really do a pretty good job in making our store managers aware of what that co-tenancy is like in their existing center. So if there is a violation of any sort, if anybody closes, then we normally go to a favorable percentage rent.

So in the past, Gary, you talked about needing about a 2% increase in your comp sales to stay even on your occupancy rate. It sounds like going forward that is going to be maybe zero percent or maybe even slightly negative.

It was interesting -- going forward I wouldn't bet the farm on that but this year on a fairly minimal comp, we have been able to on a year-to-date basis leverage both warehouse and occupancies. So I don't think we need as much sales to leverage those two line items. They are just getting more -- they just seem to be getting more productive and especially in the rent area, it seems to be we are able to get a little bit better, more favorable deals.

And then just a different question regarding promotional intensity. Yesterday Dick's was indicating that in the Texas market where it is so competitive where they operate that they had to come a little bit sharper in pricing to improve their sales productivity. I know in Dallas-Fort Worth your stores are a bit further away than the Dick's locations. But are you seeing any evidence of promotional intensity increasing either in those markets or elsewhere?

Not really. We do see what the other people are doing but most of our stores are pretty isolated from there and like Texas is one of our best comping areas. No more than we are seeing around the rest of the country, we are seeing some more promotional but not anything that really affects us that much.

Okay, great. Thanks.

David Cumberland, Robert W. Baird.

Thank you. Jeff, you mentioned taking advantage of opportunities. Were you referring to buying on more attractive terms or something else?

Yes, with the toughness on the retail environment, we are seeing a lot more opportunity type buys. We are taking a favorable look towards those where we can increase our margins.

Can those benefit you as soon as the current quarter?

Yes, there is some inventory that we have seen out there that is available.

Thanks. Gary, do you have an updated CapEx plan for the year? It looks like you will come in well under your budget there.

Yes, I would expect us to come in under $15 million gross.

Thank you.

David Magee, SunTrust Robinson Humphrey.

Good morning. A couple of questions. One, Gary, can you tell us what the bonus accrual was in the third quarter?

The year-over-year difference is about $1 million, David.

Would the fourth quarter be roughly the same?

It would.

And in the second quarter, I recall you all having some unique experiences in the healthcare area that were expensive. What was the trend -- what happened in the third quarter to cause that number to be --?

It got a little worse but our first draws in November are in fact under what we would have had last year. So it was interesting, first quarter this year our healthcare expense was about the same dollar as it was the year before. Then we saw a significant increase second and third quarter and now fourth quarter is going -- seems to be the first couple of weeks draws is about half of what it was last year. So hopefully we have had five or six stop loss cases of this year which is very unusual for us. We only have maybe one or two but it looks like we may be past those for the time being.

How much flexibility do you all have on the expense side? If things really get ugly over the next several months, do you feel like you've got the flexibility and the capability to really bring down the expense number? Do you have a plan in place -- a go-to plan if that became the case, if traffic were to go say down 5%?

Well, we have a Draconian plan in place, yes.

David, we've got a big list of things we are doing. One of our Board members challenged me about two months ago, what are you going to do to be prepared if things get tougher? There are a lot of expenses we are going to cut back on. We are going to hire less district managers next year than we ordinarily would have. But we are doing some pretty good cuts. We are prepared to do it. We don't waste money, I can tell you that.

My perception is you are pretty lean already. I'm just curious -- how much --

You know already, but we can probably get a little leaner.

Last question maybe for you, Jeff. Are you -- do you see opportunity to lean more toward the functional side of apparel in this environment that is maybe less discretionary in nature? That may be more steady? Is there an opportunity to do that?

Yes, one of the things that we really have become with like an Under Armour or Nike, a lot of our inventory and stuff has really become more replenishable. So we rely a lot less on some of the fashions that we have in the past like Urban Apparel and some of that. I think we are more traditional athletic based than we were before. So the exposure probably isn't as high.

Great, thank you, guys.

Jeff Mintz, Wedbush.

Thanks very much. Gary, can you talk a little bit about where the reduced CapEx is coming from? Obviously some is store openings but it seems like a pretty big cut from the budget.

Right. A good chunk is because we are not opening as many stores. The other part is, the biggest part we had in there was in IT spending, both from PCI compliance and some more systems enhancement. And some of those are going to be pushed into next year's budget. With that being said, our budget for next year is $19 million gross, net $13 million. We will probably spend about what we spent this year. Our CapEx spending is going to come down a little bit next year too.

Okay, great, thanks. That is helpful. I just wanted to make sure I understood an answer you gave earlier to Sean's question. Are you saying only 25% roughly of your business is credit card business and 75% is actually cash sales?

Cash, check, debit card.

So that is only 25% credit card?

Right, Visa, MasterCard, American Express and Discover, correct.

Okay, great, that is very helpful. And then in terms of -- Jeff, I was a little surprised the athletic, the college football type product wasn't doing better given what you cited about who is doing well this year. Is that a tough comparison issue or do you think something else is going on with that licensed product?

I think it's a little tough out in the market place. For every good team you have now that we are a little bit further spread out for like Alabama is doing well but you see like a Georgia or an Auburn not doing quite as well or Tennessee. But if Alabama goes farther, that could turn and also some of the games are a lot later like this week was rivalry week like Georgia, Georgia Tech and Alabama, Auburn and this year it is next week. So we will see once we get through the next two weeks on where we will be.

Okay, great. Thanks. And then finally, I don't know if Mickey you want to take this, but what is kind of the thinking on stock buybacks here? I mean obviously the stock has come way down and at the same time there is a need in a tough environment to hold on to your cash. What are you thinking about that going forward?

Jeff, we are being very conservative. There's just a lot of uncertainty today and in front of us and we had this discussion at our Board meeting two days ago. We are holding off today but we could change. We are going to keep our options open and conserve cash and be very conservative in this environment.

Okay, great. Thanks. Just I wanted to make sure I heard correctly. Were transactions for the quarter up or down 5.4%?

Transactions were slightly down but items per transactions were up.

Transaction slightly down, got it. Thank you very much and good luck.

Anthony Lebiedzinski, Sidoti & Company.

Good morning. I was wondering if in the third quarter there were any severance costs with your COO departure? If you could just comment on that.

Not really, very little, Anthony. It was not enough to even -- it is very little.

Okay. As far as the November trends that you cited with the positive comps, how is the traffic versus ticket trend now going?

It is about even.

So you are seeing actually a slight improvement in traffic?

It is maybe slightly but it's pretty close, it might be off just a tick, but it's not bad.

Also given the challenging environment, I was wondering if you guys have seen any competitors actually close up their stores and then what is your sort of outlook on that? I think Steve & Barry's is one that comes to my mind. If you could just comment on that?

Steve & Barry's closing, that probably will help college apparel because they had a lot of college apparel. That may clean up distribution a little bit but we are seeing a few locals close. One, we just got word yesterday one in Mt. Airy, North Carolina is closing. So we've got to get on the Hibbett product presentation up there and probably beef it up some to take advantage. But we are seeing some closers.

There's probably going to be more. I know there is going to be more because we keep hearing vendors say that a lot of locals are on credit hold and there's going to be more closings.

Okay, thanks so much.

Reid Anderson, D.A. Davidson.

Thank you. Gary, on the stores you close, I was just curious, how long on average were those stores have been open?

Hold on just a minute. He is going to give you the exact number (multiple speakers)

5.42 years.

Basically they got to the end of their first release cycle and it just didn't make sense, right?

We had a store that was closed in Nashville that was open for 13.5 years. T The mall was demolished and we had a number -- a 12-year store that in Oxford, Mississippi that we ended up -- the mall was demolished there also. So the number of malls that we are in this year versus last year is actually down, 200 this year to 205 last year. So what we are seeing is the demalling of America.

Really if you just take out those, there was a handful of stores that more or less didn't hit the hurdle or the local benchmark sort of thing?

Yes, a lot of them were three years. We had a kick out in the third year and the landlord wouldn't get cheap enough on the rent to where we could make it and we closed. Of course, we don't be behind and a lot of leasehold improvements because we don't build castles on the front end.

As you think about your store base today based on what you are seeing, is there any reason to think that your captive pool of potential closures or whatever would spike up dramatically or is that still going to be kind of what we saw this year?

I think it will be kind of like what we have this year.

And back to the comp, I just want to clarify too, because I must have not caught it right. When I heard you say, Mickey, you said that the -- I thought you said that the basket essentially was up 5.4% but the items in the basket were up 3.4%. Is that right?

Yes.

And then what was the August comp? I missed that part.

Plus 4.

Plus 4. All right, thanks very much. Good luck.

Rob Wilson, Tiburon Research.

Thank you. I look back in my notes and I seem to recall every quarter you tend to say that you expect merchandise margins to improve yet also in my notes I am not seeing merchandise margins improve I think in any quarter the last two years. Why would we expect merchandise margins to improve going forward?

They improved third quarter.

Merchandise margin?

Yes.

Okay, I didn't hear that when you were explaining the change in gross profit margin. Maybe I missed that. So you expect meaningful improvement going forward?

We certainly do in the fourth quarter.

Okay. Is that related to systems or is that related to product shift mix or something other?

It's related to systems.

Okay, thanks for taking my call.

Mitch Kaiser, Piper Jaffray.

Good morning, everyone, it's Peter Keith calling in for Mitch. Thanks for taking the question. We have been hearing some discussion about the use of third parties for your distribution efforts. I was hoping you might be able to provide some insight. If that is true how, how that might roll out and whether that would be more beneficial to inventory levels or to reducing transit costs?

What we are doing is we are using a third party to deliver to some of our remote stores. We are fluid loading those trucks and sending those to a drop point where they then break it down and deliver to our stores. What that does for us is we don't have to common carrier it but it also gives more to life to this building. So this building can last 1100 to 1200 stores, it could probably last longer than that. And we are seeing being able to leverage those cost and that is what we have done throughout the year with the warehouse piece being able to offset some of those more distant stores by using somebody else to deliver and not having to stage the product here.

So we win in both regards by not having to look at another distribution center which we did last year and also it gets us really out of the delivery business in those remote markets. And their systems integrate with our system so we have terrific control over our inventory.

It sounds like you guys are up and running with that now. Is that something that just started recently or should we (multiple speakers)

It just started. We are up with 22 stores and it is working very well.

Okay, probably more expansion of stores as we get into next year?

Yes, I would think so that the circle around Birmingham would probably tighten to the point where we are delivering ourselves. And as this proves to be successful, we would extend it to more of the outlying areas.

Okay, would that turn up in the gross profit line? Is it a benefit to gross margin? Is that the way to think about?

Yes, that cost would be captured in warehouse cost.

Okay. And then just sticking with the gross margin a specific question, I note last year there was an unfavorable inventory shrinkage adjustment in the quarter. Just for helping us model out Q4, could you quantify what that was for last year or what type of benefit you might get this year as you anniversary that?

Are you talking about in the fourth quarter?

Yes, fourth-quarter last year.

It was $1.2 million.

Okay, that was the entire adjustment. But that should now swing favorably for you this year?

Absolutely.

All right, thank you very much, guys.

Camilo Lyon, Banc of America Securities.

Good morning. I just had a quick question on the traffic if we could dissect that a little bit. Could you talk about how your stores are performing those that are closer to Wal-Mart locations versus the ones that are maybe in mall locations? Is there a major difference in the traffic trends between those stores?

Yes, our strip center stores are up low single digits and our enclosed mall stores are negative low single digits. 90% of our strip center stores are in Wal-Mart influenced centers so being around Wal-Mart is certainly an advantage.

So you still continue to see that benefit from that traffic spillover?

Yes, and that has been going on for several quarters.

Has that at all decelerated or has that stayed fairly even?

It has stayed fairly even, it has been consistent. Strips are outperforming enclosed malls and we are like 72% strips now and most of our new stores are strip centers. I think we are doing maybe one or two enclosed malls this year and all our others are strip centers.

Got you. And then on the ticket side, are those stores that are within the Wal-Mart locations also holding up well on the basket side of the equation?

Yes.

Great, thanks very much. Good luck.

(Operator Instructions) Sam Poser, Sterne, Agee.

Hi, I just wanted to follow up one more time. You mentioned it was about $1 million for bonus accruals. The remaining money increase on the SG&A, could you just walk through that in more specifics on the increase?

We had deleveraging of store payrolls, Sam, that's probably 40 basis points and then the medical cost was about 20 basis points.

Can you break that out into dollars of that or is that just --?

20 basis points on $140 million is about $300,000 and 40 basis points is like $560,000.

But that still is like 200 -- it's about $2 million -- you said that $2 million more in absolute dollars spend.

(inaudible) right now.

I'm sorry?

That is all I am prepared to talk about right now.

We could get you more detail, we just don't have it here.

Okay, thanks very much.

Thank you. At this time, we have no additional questions. I would like to turn it back to Mr. Newsome for any closer remarks.

Thank you. In summary, we realize that all retailers are faced with a lot of uncertainty in the fourth quarter. We don't know how good or bad it might be but we do know we are a much improved company over fourth quarter last year. Our systems investments are helping us to please a larger percent of our customers by having the correct product in stock in the correct store.

We are doing a better job by selling each customer more items, our merchandise team is performing at a very high level with their new systems tools. Fourth quarter last year we were going with our newly installed systems and it was hurting us. Remember fourth quarter last year, we were minus seven so we are not going against tough numbers. We are going to continue to grow. We've identified over 400 additional markets, small markets, that would need a Hibbett Sports Store in our 24-state area. We believe we will have at least 1000 stores by the end of calendar 2011.

Thanks for being on that call today. We look forward to speaking with you on March 13, 2009 at 9 o'clock Central time. Thank you for being on the call.

Thank you, sir. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Teleconferencing. You may now disconnect.