Hibbett Inc (HIBB) 2010 Q1 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 conference over to Chairman and Chief Executive Officer, Mr. Mickey Newsome. Please go ahead, sir.

Thank you, operator and good morning, everyone. This is Mickey Newsome. We have with us also, Gary Smith, our Chief Financial Officer; and Jeff Rosenthal, our President and Chief Operating Officer. We appreciate you being on our conference call today. We appreciate your interest in Hibbett sporting goods. Before we start, Gary Smith will cover the Safe Harbor language.

Thank you. In order for us to take advantage of the 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 $0.38, compared to $0.32 first quarter of last year. And we had a 16.4% increase in net income year-over-year. This is the best first quarter earnings per share ever at Hibbett. In very challenging times, we feel that we are effectively managing our business. For instance, our net cash is $34.6 million at the end of the quarter versus $20.7 million at the end of the fourth quarter. Inventory per store is down 5%.

From a real estate standpoint, we opened 14 new stores and closed six. We ended the quarter with 753 stores. We plan to open 65 to 70 stores this year and close 20 to 25. We deal with a lot of small landlords and we and they are experiencing a lot of uncertainty. Many new store deals are falling out because of lack of money on the landlord side and small landlords are having a great difficulty getting bank financing. But our real estate team is working very hard and smart and we feel that we can get our new stores this year.

More than 95% of our new stores will be in strip centers, very similar to last year. Mostly in small isolated markets where a sporting goods store is needed. We will also expand approximately 15 overperforming stores that need more square footage to continue their sales increase. When the retail environment improves, we will grow our store base at a faster rate. We've identified almost 400 additional small markets to Hibbett Sporting Goods stores in, in just our 24 state area. Now, for some further comments, we'll go to our President and Chief Operating Officer, Jeff Rosenthal.

Good morning. Overall sales for the quarter increased 8% and same store sales increased 2.4%. February sales were up 9.56% versus 1.9% last year. March was up 1.23% versus 8% down last year. April was minus 5.4% versus last year, up 9.8%. Our store personnel continues to improve on items per transaction. The number of items per transaction are up 1.88%. And the average selling price of items are up slightly.

From the merchandise, activewear was up slightly on a comp store basis. Women's was up mid single digits and youth was up mid single digits. Key vendors, Nike and Under Armour continue to perform well. Urban apparel, as planned, was off double digits. College and pro license apparel was down mid single digits. However, we had some key drivers during the quarter, such as income North Carolina winning the NCAA Championship and New Era 59fifty Major League Baseball headwear. Overall, apparel inventory is down and much cleaner than last year.

Accessories were up high double digits, socks, shoe care and sunglasses. Oakley and Nike and Under Armour performed well. Our new systems with replenishment, continued to make us be in stock more often. Our footwear was up mid single digits. Key performers were Nike Shox, Air Force Ones and Jordans. Under Armour trading and renting, ASICS technical running, Converse and DC shoes. Men's was up low single digits. Women's was off mid single digits. And kids was up double digits. Cleats, which continued to perform well, were up mid single digits, with kids' baseball cleats and women's softball cleats. Equipment was down mid single digits. However, volleyball, football, soccer and basketball were up low single digits. Fitness was off low single digits and baseball was off mid single digits.

We feel good about our first quarter performance, with well managed inventory and with our margin improvement. So far, Q2 has started off slow, off high single digits versus mid single digit gains last year. Going against the stimulus checks from one year ago. And the movement of going against tax free days will make second quarter a challenge. Last year, in second quarter there were 11 states with tax free holiday. And last year, in third quarter, there was one state. This year, there's going to be only two states in the second quarter, where all the -- where there are 11 states in the third quarter. With this shift in the tax free days, we expect our third quarter performance to be very good.

Thank you, Jeff. For additional some comments, Gary Smith, our Chief Financial Officer, will speak with you.

First quarter total sales were $157.7 million, which was an 8.1% increase from the previous year. We opened 14 stores and closed six and had 753 stores at quarter end, a 7.7% increase. Gross profit increased 64 bips due to favorable leveraging of warehouse and occupancy costs and inbound freight. Warehouse costs were under last year's dollars, occupancy costs was down 1.6% on a store by store basis. While rent costs were down 3%. This was somewhat offset by higher charges in taxes and utilities. And inbound freight was down 16 basis points.

Store operating, selling and admin costs increased 26 basis points in the first quarter. This was due to the increased number of inventories taken in the first quarter this year versus last year and the expensing of certain equity award costs in the first quarter this year versus second quarter last year. On a per store basis, SG&A costs were up slightly at 1%. Excluding the timing issues mentioned above, per store costs would be down about 1%. Depreciation and amortization leveraged 18 basis points versus last year and was under last year's dollars. This was due to leasehold improvement costs, on a store by store basis, declining approximately 50% over the past few years and reduced fix asset spaces due to previous years' store impairment charges.

Operating income was at $17.6 million and 11.1% versus last year's $15.4 million and 10.6%. EPS came in at $0.38 versus last year's $0.32. From a balance sheet perspective, the Company ended the quarter with $34.6 million in cash versus $6.5 million last year and $10.7 million in short-term debt. As net cash provided by operating activities increased over $15 million for the quarter. Inventories increased 2.5% over the previous year but they were down approximately 5% on a store by store basis. And we 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 will come from the line of Rick Nelson with Stephens Inc. Please go ahead.

Thank you and good morning.

Good morning.

Can you perhaps the deceleration in comps during the quarter, what drove the strength in February and the subsequent slowdown, is it the comparisons or is it underlying demand, which is softening?

Yes, well, in February, some of the tax refunds seem to be a little bit later this year, coming from January into February. So there was a lot more money out in the marketplace. We also thought there was a little bit of pent up demand from holiday. And as we went through the quarter, there was tougher comparisons as we went on.

And was it specific categories, Jeff, that --?

In the first quarter, it was really early, was footwear was really the main driver. And I think a lot of people spent a lot of their tax refunds on footwear.

And has footwear slowed along with the comps?

Yes. And we expect it to because, I think, very similar to tax refund, the amount of stimulus money in the second quarter also affected footwear to some degree. But we expect to be having very good third quarter on footwear, when they have to get shoes for back to school.

Also, having finished with a very healthy cash position at the end of the quarter, where do you see cash at year end, if you hit your store opening targets and earnings estimates?

Anywhere up to $2 a share, probably $50 million to $60 million, Rick.

And are you contemplating stock buybacks or a dividend?

Stock buyback a little bit more than dividend but we really wouldn't feel comfortable going in to debt to buy our stock back at this point in time.

Thank you for that. And then also, if you could you provide any color on regional areas of strength or weakness?

We really seem to be doing better in the Midwest down, in Texas, Oklahoma, Kansas, Nebraska, a little bit in Kentucky. A little bit weaker on the East Coast, Florida, North Carolina, South Carolina, and Arizona, out West.

Thank you for that and good luck.

Thank you. We'll move to the next question from the line of Chris Horvers from J.P. Morgan. Please go ahead.

Good morning. Can you talk about how you think about new openings next year given the real estate environment? How many you're signed up and how many you think you can get done for the year? And also, on the 15 stores that you're expanding, could you provide some details, maybe what they have in common, what they've been comping? What the age of those stores are? Perhaps what the sales per foot level is versus the chain?

Well let me say this, there's a lot of uncertainty, for us to get our 70 deals done or so and new stores opened, we'll have to have 140 or 150 deals that we agree with to do. And we'll have that many fallouts from dealing with small landlords. It's just unbelievable how many fallouts we're having. But having said that, we're working very hard. We've got a lot of deals working. And we think we'll get our stores and it's going to be back end loaded, as it usually is. But we've been trying to go to Monroeville, Alabama with a store for three years. And we've had three different landlords try to do something and each time, we had an agreement and the deal fell through because he couldn't get financing.

So, we're running into a lot of that but we are getting very good deals on rents. And we're getting our stores built. So it's very favorable there but it's a challenge to get new stores in small markets. Because we deal with more than 300 landlords, we only have 700 and something stores. So, it's pretty complicated but we'll get our stores. And there's no shortage of markets to go to. It's just, we've got to have real estate in the market that we want to be in.

And then, on the 15 stores that you're expanding, maybe some details on the levels that they're up, of comp and sales per foot versus the chain?

Typically, we'll have a store between 4,000 and 5,000 square feet and it will be doing well over $1 million and it will be very crowded. And if we can expand it slightly, we see a big jump. And 95% of time, you'll see a big jump without even adding merchandise. You just represent what you have much more effectively. Now, we really like these expansions. They're really paying off. Now, we don't expand the underperformers, it's the overperformers that we expand. And every time we do, we get favorable results.

Okay. And then finally, on -- just want to clarify, did you say it's high single digits in May. And given that the comparisons really ramp up into the July time frame, do you think that perhaps you're down low double digits in comps in Q2?

Certainly, the stimulus picks up a little bit when you -- as you go through the quarter. However, June was up last year approximately 9%. A good chunk of that was due to the fact that the 4th of July fell into June last year versus July the year before. So, I think we're seeing in June and July, it would be a mid single digit comp increase last year, which would be attributable to mostly stimulus. Right now, I would think that we could be up high single digit or maybe a little bit higher than that. But we've seen some lessening of that trend lately.

Really the biggest thing is really the tax free days moving. Almost 73% of our stores are in tax free day. So, that is a really a big affect of the last week of July, is the big volume week for back-to-school.

Yes, let me explain on tax frees. Currently, there's only 17 states doing tax free weekend holidays in the July, August time frame. And we're in 13 of them, it's mainly a sunbelt thing. It is a big deal. You cannot believe how the consumer comes out, if he can buy stuff without paying sales tax. And it's going to shift a lot of sales from July to August, which means from the second to third quarter. We expect to have a big time start in our third quarter in August and we should have a good third quarter.

Okay. So just to clarify, you said, you think down high single digits in those months?

For the end of the quarter, that's where we should be.

Okay, alright, perfect. Thank you very much.

Thank you. We'll move to the next questions from the line of Dan Wewer with Raymond James. Please go ahead.

Thanks, good morning. Dick's, during their conference call this week, noted that they were seeing increased promotional activity. That they were initiating some of that. Are you seeing any overlap in your categories, specifically, apparel and footwear, where promotional intensity from Dick's or anyone else seems to be increasing?

I think it's very comparable to last year. I believe the overall marketplace, the inventory is a lot cleaner. I don't see anything really affecting us that much from that end.

So, there is no increase in promotional activity in your categories from a year ago?

We don't see it.

And then second, Jeff, what are your thoughts on the current trends in new active apparel and footwear? If there's anything new, exciting that may stimulate demand or are you concerned that it's just more of the same and not creating a reason for consumers to step up and buy another performance top or bottom?

I think from an apparel standpoint, we continue to see our athletic apparel business is pretty good. We see a lot of small, little niche things coming up, more regional type buys, which we feel pretty good about. As we get into footwear, I think from a technical running side, we're seeing a lot of demand there and we will continue to see that. I think really what we are seeing now and we've really noticed this in the last few years, it's just a lot of the shifts in the way consumers buy. I think we see a lot more peaks and valleys. And I think when it peaks, it really is high. And then, I think there are -- the way money is today, is they buy it when they need it. And I really think that's what we are going to see. It's going to be a little bit slow and then I think back-to-school is going to be very good. And then, slow down again until you get all the way out Christmas time again. So, I think we really see that shift in the consumer patterns on the way they buy. And we're adjusting our flow of inventory to hit those demands.

And then, the last question I had regarding North Face, if you have a better sense on the number of stores that will be given that product in the third and fourth quarter of this year? And how that would compare against last year?

Yes, it will be significantly higher than it was last year and for competitive reasons, we really can't give that out.

And what was the number of stores last year that had the product?

It was in about 50 doors.

Okay. Great, thank you.

Thank you. We'll move to the next question from the line of Sean McGowan with Needham & Company. Please go ahead.

Thank you, a couple of questions. Mickey, can you talk about -- or whoever, can you talk about the pattern of openings of the balance of the year and closings, will it be similar to last year or very different?

It will be similar to last year. It's going to be third and fourth quarter loaded. And the expansions will be the same way.

Okay. On the expansions, it doesn't matter, with the number of smalls we've talked about but just conceptually, would those stores same in the same store sales base or would you remove them and treat them like new stores?

Well, if it expands say from 5,000 to 6,500, it would stay in the same store base. But if it goes from a -- say we got -- in Oxford, Mississippi, we had 4,000 square feet in an enclosed mall and we moved down the street into about 7,000 square feet, in a Wal-Mart Supercenter. That's a store closed and a store opened. So, that was [the comp base].

Okay, thanks, that's helpful. And Gary, is the tax rate that's shown in the quarter a good rate to use for the whole year?

That's correct.

Thank you very much.

Thank you. We'll move to the next question from the line of Mitch Kaiser with Piper Jaffray. Please go ahead.

Thank you guys, good morning. Gary, I don't know if you mentioned merchandise margins. Could you let us know how they trended in the quarter? And if I missed it, I apologize.

They were flat.

Okay. And then, on the real estate side, I was down at ICSC and noticed you had a booth down there. And I know, Jeff, Gary and team were down there. And you mentioned the difficulty in getting things up and running. But could you just give us some color on what you're seeing in terms of real estate rates?

The rates are coming down. We're paying lower rents now than we were three years ago. There's no question. And we're a very desirable tenant because we've got cash on our balance sheet. But having said that, we're dealing with so many of the little mom and pop landlords, financing is a real issue. They may get halfway through finishing our store and then they don't finish it. So, we're running into some of that but eventually, we'll get them but it just makes it more difficult in the meanwhile.

Got you. And I know it was -- occupancy costs, I think you mentioned, were down 3%. Have you seen some of that already this year?

Yes, that was in the first quarter, Mitch.

Yes, in the first quarter, right. Okay.

Rents were down 3%, occupancy was down about 1.6%, 1.7%. Some of these savings were offset by higher utility and taxes. But we would expect to see that trend continue throughout the year.

Okay. And if I heard Chris' questioning correctly, you think comps, potentially down negative high singles in the second quarter. But could you give us -- I know you've maintained the low single digit comp estimate for the full year. Could you give us the magnitude on what you think the shift of the tax free holidays might be in terms of comp for the third quarter then?

It could equal or be as much as the stimulus, which could probably be anywhere from 4% to 5%.

Okay. So, thinking about a 4% to 5% comp for the third quarter then? Is that what you're saying?

Well, I think it could be more than that. I think the shift in tax free is going to amount to somewhere in that range.

Got you. Okay. Very helpful, got it. Thank you.

Thank you. We'll move to the next question from the line of Anthony Lebiedzinski, with Sidoti & Company. Please go ahead.

Yes, good morning, a couple of questions here. You guys did a pretty good job reducing your inventories. Do you see further reductions on a per store basis? Maybe you guys could give us some quantification for that? And also, how much of your product mix is now on auto replenishment and where do you see that at the end of the year?

Yes, we expect to continue to reduce inventory by year end. And it will be interesting because a lot of the second quarter will shift for back to school. So, we will have some inventory there but as we go and in the year, we'll have lower inventory. So, we expect that to continue.

Okay. And as far as how much your product mix is on auto replenishment?

We're over 20%.

And what's the year end target?

We would hope to be over 25%.

Got you. Okay. Also, I think, Gary, you had mentioned that some of the SG&A, you had equity incentives moving from second quarter of last year, to the first quarter this year. How much was that?

Between inventory taking and stock option expense, it was about 40 basis points.

Okay. And also, how many of your stores were in percentage rent in the quarter.

Probably 130.

Okay. Thanks a lot.

Thank you. We'll move to the next question from the line of John Lawrence with Morgan Keegan. Please go ahead.

Good morning, guys.

Good morning.

Just real quick. Jeff, on the equipment side, was there anything last year really strong on the baseball side? Baseball being a little slow, is it economy or is there anything else there that you think causes that?

There really wasn't anything that we were up against last year. Really, where we saw some increases were more on the depletable type things like baseball pants and that. Where we saw a little bit of a struggle is on some of the things like, kids might not have bought a baseball bat preseason. So, that's where we saw some decreases but when you saw like helmets and baseball pants, we did have increases.

Okay, so across the category it was better than that?

Yes.

Secondly, on real estate, Gary, how many stores come up for lease renewals next couple of years?

Our leases, John, are usually five year with a five year option. And we have kickouts at three and seven years if we don't hit agreed upon sales. So, I would say, on a minimum basis, it would be 20% of our stores and it could be upwards of that based on kickouts.

Okay. Great, thanks, guys, good luck.

Thank you. We'll move to next question from the line of Seth [Cohen] with [Valinore]. Please go ahead.

Hi, guys. Thanks very much. Just had a quick question for you. Hearing a little bit in the marketplace, you guys have put your stores next to Wal-Mart, for a good portion of the stores. And it sounds like Wal-Mart has become a little bit more aggressive, both with their men's and women's athletic apparel, with their Starter brand and Danskin brand. Are you familiar with these deals that they've set up? And how do you think about it and how do you think it will impact you going forward?

I really don't think it will affect us. They've had the Starter brand and they've had -- the brands we carry, they do not carry. And our price points are much higher and much more technical. So, I really don't think it has an effect.

My question is more along the lines of, they were a private label focused athletic category, with Athletic Works. And now, they're basically replaced those private label with two branded, well recognized brands. And they're promoting them in all their circulars. And they hired Tony Romo on the Starter side. And they're doubling the rack count in their stores. So, none of this concerns you?

I really believe with Nike and Under Armour and North Face and Oakley and Adidas, it's just a much higher demand product. And that's just going to be perceived as being a lower price brands. So, it's not a concern.

Okay. And then, the second question was just in terms of SG&A, top line was up 8.1%, SG&A was up 9.5%. Could you give a little bit more color in terms of what kind of happened to margins there?

There were two items, which were basically timing issues that fell in to the second quarter last year and were into the first quarter this year, they accounted for about 40 basis points. One, was we took more inventories this year first quarter than last year. And there were certain stock option-related, 123R-related expenses that fell into the first quarter this year versus the second quarter of last year. If you exclude those, on a per store basis, the SG&A dollars were down about 1%.

In regard to Wal-Mart, in a small market, we just about will not go if Wal-Mart is not there. We want to be as close to them as possible. The more people they put in that parking lot, the more customers we'll get in our stores. So, they're our ally, they're not our enemy. We want to be as close to them as possible.

(Operator Instructions) Our next question will come from the line of David Turner with Avondale Partners. Please go ahead.

Thanks, good morning. Just a few questions really. I noticed that guys have pretty tightly correlated with Wal-Mart, historically, from a traffic standpoint. And it seems like in April there was a pretty significant departure, in Wal-Mart still had some fairly favorable things to say. And it looks like that's when things kind of turned negative for you. Was there any calendar items or any other outliers or anomalies that might describe the differentiation between the traffic trends?

Business tailed off for us in April. No question. But we were going against a big time April one year ago, with a high comp mark. So I think those two things.

Just a tough comparison?

Yes, we had a tough comparison but our traffic was off in April versus last year.

Okay. And then secondly, in my model, I had depreciation a little higher than what you reported. And it looks like you got -- well, it doesn't look like it. You do have more stores than you did a year ago. And I know there's some new systems you're depreciating. Has there been any change to how D&A is calculated or is it --? And then, to follow-up on that. Is that going to be -- is this the current D&A a good proxy for how it's going to be for the year?

Pretty much, if you multiply it by four, you'll come out close to what the year will be. But certainly, our leasehold improvements are tracking 60% last than they were a few years ago. We're probably getting more turnkey and the landlords are doing a little bit. And we've taken our impairment charges as a normal operating expense as we go forward. If you looked at the fixed assets, the basis is less than it was a year ago. So therefore, the depreciation will be less.

I got you. Okay, thanks.

Thank you. We'll move to the next question from the line of David Magee with Suntrust Robinson Humphrey. Please go ahead.

Hi, good morning, guys. Just a couple of questions. One, when you see your business decelerate the way it did during the first quarter and kind of coming into the second quarter. What expenses do you -- were you able to ratchet back quickly to offset that? And at the same time, are you doing anything different, as far as advertising to try to pump up the top line a little bit?

On the expense side, certainly, the first quarter was above our plans. The second quarter is tracking little bit below our plans. If you follow EBIT over time, on the upside, since we don't add much expenses, we could really convert very well. As we went into this year, we went through line item by line item and took out about 2%. So, we should be in a little bit better favorable position. But for a one or two month trend, I don't think we're going to start tearing the guts of the Company apart.

The bonus accrual, was that flat on a year to year basis in the first quarter?

It was a little bit higher, I think, in the first quarter this year.

As a percent of sales?

The comparisons going forward won't be as skewed as much as they were last year.

Which means it will be less as a percent of sales going forward?

That would be right.

Okay. The population of states doing the tax free, is that the same as last year? You mentioned 13 states. Did Mississippi ever decide to do that?

I believe they are. And I believe it's the second quarter for Mississippi.

But they're new this year, right?

They're new, yes.

Anybody else that would be new?

There's a few states that still are finalizing. I know Arkansas is looking to maybe to do something but they aren't finalized. And there's still a few states that we haven't heard yes or no but if they will, it probably would be in the third quarter.

Yes, Mississippi is a new state. That will be big.

And then lastly, the baseball comments notwithstanding, I sort of thought equipment was showing some maybe lesser declines or some less negative trends there. Am I --?

You're right David, baseball is such a big part of the first quarter being off. But really, I have seen a lot of improvement, especially, I mentioned some of the categories that were up. And we're starting to see that business stabilize. I think our systems are helping us stay in stock better. And we expect to get closer to being flat or even running up in equipment, which, even like our fitness, was just barely off. And that's the best it's been in quite awhile. So, even though we're a little disappointed on where we ended up, we feel like our equipment business is starting to turn around.

Great, thanks a lot, guys.

Thank you. We'll move to the next question from the line of Sam Poser with Sterne, Agee. Please go ahead.

Good morning, everyone. This is Ken [Stamphauser] from Sam Poser's team. Just a couple of quick questions for you. As far as merchandise margins go, you guys said that they were flat for the quarter, correct, year-over-year?

Yes.

Previously, they had been trending up with the implementation of the different systems and moving things towards replenishment and quicker towards moving to markdowns and slower moving products. Do you think that for the duration of the year, you might be able to get merchandise margins to inch up year-over-year again?

We would think so.

And what do you think caused them to be flat versus trending up in this quarter? Was it the promotional environment or product mix?

It was really a little bit more on the mix.

Okay. And then, on the stores in which you have North Face currently, if you kind of look at it from a comp basis, how much do you guys think that that contributes incrementally to the performance of those stores with North Face?

The majority of our stores in the fourth quarter had double digit comps because of the add-on of North Face.

And you think that's a good proxy for the incremental doors that get it in 2009 or is that reasonable to assume?

Maybe mid to high single.

Okay. Alright, that's all the question I have. Thank you and good luck.

Thank you. Our next question will come from the line of Chris Svezia with Susquehanna Financial Group. Please go ahead.

Good morning, everyone. Just a point of clarification, just in terms of the shifts that are going on, the two pieces -- well actually, the tax free holiday is one. But the other piece is that rebate check. I think the past rebate check piece was probably a couple million dollars. Just a point of clarification, the tax holiday, you threw out a $4 million to $5 million shift, is that what you were trying to clarify?

We were talking a percentage of comps. We feel that they may have had equal weight throughout last year.

Okay. So the 4% to 5% is a percentage?

Correct.

Okay. That's helpful. And then, as you guys look to -- could you tell me, by any chance, what percentage of your business now is done with Nike?

Over 50%.

Okay. And how -- I know you guys' relationship with Nike, I think back in October, became a strategic relationship with you guys. And I know that's something you probably have done on the product side, allocations, things of that nature. At what point do you anticipate maybe that helping a little bit on the margin, more so on product flow, things of that nature?

I think it's always an ongoing discussion that we have with them. And as we get better product and as we become more important, we've gotten a lot of return privileges and other things from Nike. That we have -- hopefully, we'll get margin increase coming from that.

Of course, we're always asking for bigger discounts with all of our major vendors, almost at every meeting.

Right, okay. And the last thing, out of curiosity, just on consumers that come to your store shopping for team sports, apparel, whatever the case might be; do you get a sense that they're either trading down or delaying a purchase or just kind of -- I know pricing has been pretty good in key categories for you guys. So, I'm just trying to get a sense of, are consumers just coming in and just maybe deferring some purchases more recently or are they just trading down a bit, whether it's in cleats or in some type of product?

We still see the better goods performing very well. For instance, we just delivered the College World Series new bats and they're very expensive bats, in the $300 range and they're performing very well. I think the only thing that you do see is sometimes, they may delay on some of the higher purchases like a baseball bat. Instead of going every season for one, they may have -- they may make it last two seasons. So, some of those type items but like pants and apparel, we see them coming back for, mouthpieces, those type things, we don't see a decrease.

The price per item was not down.

Right. Okay. All right, thank you very helpful, appreciate it.

Thank you.

Thank you. We do have a follow-up question from the line of Mitch Kaiser. Please go ahead.

Thanks, guys. Gary, just a quick question. Could you explain the sequential decline in depreciation, what happened there? And then, if you could give us an estimate for the full year?

Certainly, the decline was due to two reasons. One was the total costs were about 50% less than they were a few years ago. We're probably getting more turnkey and landlords doing a little bit more. Our equipment is down a little bit also in the stores. And then, we impair stores as we go on, when they meet the rules with -- they don't meet on the cash flow basis. So, that's reduced our basis going forward. So, the $3.2 million times four, ought to give you pretty close to what the annual depreciation should be.

Okay, got you. Thank you.

Thank you. Management, at this time, there are no additional questions in the queue. I'd like to turn the conference back over to you Mr. Newsome for any closing remarks.

Thank you. While we have a solid first quarter, we know the current second quarter will be a challenge because of the lack of stimulus checks versus last year and because of the huge shift of the tax free days to the third quarter this year, that were in the second quarter last year. But we feel really good about the third quarter. There's a lot of positives. The tax free shift, obviously, is the big one. Last year, in the third quarter, we had $4 gas, hopefully, we won't have that this year. We won't have the negative Presidential election this year in the third quarter, like we did last year.

We've got an improved merchandise selection versus last year. We improved the systems, the automatic replenishment is really paying off. We're getting greater vendor and landlord support because we are growing our store base and we have cash on our balance sheet. We are not a credit risk. Both vendors and landlords love that. We have a great future at Hibbett. We appreciate you being on the call today. And we'll look forward to speaking with you in August, where we will discuss our second quarter results. Thank you.

Thank you, sir. Ladies and gentlemen, at this time, we will conclude today's teleconference presentation. We do thank you for your participation on the program. At this time, you may now disconnect and please have a wonderful day.