Hibbett Inc (HIBB) 2010 Q4 法說會逐字稿

Good day, everyone. Welcome to the Hibbett Sports 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. We also have with us today our Senior CFO, Gary Smith. We have Jeffry Rosenthal, who will be our President and CEO as of Monday, March 15, and Cathy Pryor, who is our Senior Vice President of Store Operations. If you have any questions for anybody, they're available. We appreciate you being on the call today. We appreciate 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 Sfe 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.

For the fourth quarter, our same store sales were 9.6%, which are our best comps in over ten years. One-third of the 9.6% was Alabama National Championship and New Orleans Saints Super Bowl win. Without these two major events, our comps would have been approximately 6.5%, which is still a great comp store sales increase. The first 39 days of the first quarter, our same store sales are up approximately 14%. Alabama and New Orleans Saints are still continuing to help, but not nearly as much as in the fourth quarter. Without Alabama and Saints, we would be positive approximately 11% to 12% in the first 39 days.

All regions are up double digits, and all regions from not affected by Alabama and Saints. Bringing in spring product in January of this year, versus February in years past has greatly helped our second quarter start. We probably should have been doing this in years past.

Couple of other things. As you know, we had an outstanding fourth quarter. Our earnings per share were $0.40 versus $0.26 one year ago. We feel we are going to have a great first quarter this year.

Now, to speak with you, Jeff Rosenthal.

Sales by month for the comp stores were November was flat, December up 15%, January up high single digits. Our strip center stores out performed enclosed malls. Our average price points were slightly down, but our transactions were up very big.

Merchandise - our three areas of merchandise, apparel, equipment and footwear. First, apparel. Our two areas of business is our active wear business and our license business. Our active wear business was up high single digits, led by women's and kids'. Key vendors have performed well were Nike, Under Armour and the North Face. Fleece and outerwear performed well above plan for the quarter. Our licensed business is made up of college and pro products. One-third of our overall comp came from license led by Alabama and New Orleans Saints championship run. Our operations team, marketing team and merchant teams did an excellent job in leading the market for those events.

Our accessory business continues to perform very well, led by shoe care products and winter accessories. Our keys to success have been our E3 Replenishment System, items per transactions as we continue to increase that, and having the right products in our stores at the right time. Equipment is up mid-single digits, led by football, basketball and fitness. Footwear was up low single digits, led by women's and kids'. Key items for vendors were Reebok Toning, Asics, Jordan, and Nike. Our plan to bring inventory in early to help our February sales worked as planned. Our aged inventory is in good shape, and we are well-positioned to take advantage of that for spring.

Real estate and new store report. For the year, we opened 42 stores, closed 20 stores, and expanded 19. Our expansions have worked very well, and we look forward to growing that. For fiscal 2011, we will open approximately 30 new stores, close 10 to 15 and expand at least 20 new stores; hopefully we will do more. We hope that this is conservative, and this number can grow. New stores will be in second quarter, third quarter and fourth quarters. Our new store performance run rate has seen significant improvement. We also have seen some opportunity from the closings of the movie gallery stores. We still have identified 300 to 400 additional markets in our 24 states, to open new stores.

Thank you, Jeff. Now, Gary Smith will speak with you.

Fourth quarter sales were $166.8 million, a 12.8% increase from the previous year. Comps were up 9.6%. Gross profit rate increased 137 basis points, approximately a third of the gain is in improved product margin rate, the remainder is in the leveraging of warehouse and occupancy. SG&A improved 95 basis points, due to the positive leveraging and continued expense control.

Depreciation and amortization was under last year's dollars, due to declining leasehold improvements dollars as it cost us significantly less to get into a store. Operating income improved 287 basis points, to $18.9 million, and 11.4% versus last year's $12.7 million and 8.6%. Diluted EPS came in at $0.40, versus last year's $0.26, A 54% increase.

From a balance sheet perspective, the Company ended the quarter with $49.7 million in cash versus $20.7 million last year with no short-term bank debt. Inventories increased 11.6% over the previous year, and plus 8% on a store by store basis. As we pull forward February and March receipts for the important tax refund and baseball seasons, we expect first quarter and inventories to be back in line on a store by store basis. We spent approximately $10 million in CapEx for the year versus the $17 million budget.

Thank you, Gary. Operator, we are now ready for questions.

Thank you. (Operator instructions). One moment please for our first question. And our first question comes from the line of David Magee with SunTrust. Please proceed with your question.

Good morning, guys. Terrific quarter.

Thank you.

If the guidance for 2010, the bottom part of the range assumes somewhat of a flat performance, which I'm just wondering is that just conservatism? It seems like given the start you had this year and the comparisons you have coming up that would be unrealistic to expect a flat number this year.

David, we hope that's conservative. But there is just a lot of uncertainty out there in front of all of us. You've got unemployment going full speed and the price of gas is beginning to rise, and is projected to be $3 this summer. We just hate to be that optimistic.

We feel like it is very conservative. We can beat it, good. It's not like having emergency press release is lowering our guidance. We want to make sure we are conservative and we'd rather up the guidance through the year.

This is the first time I can remember all three major categories working well at the same time. It seems like the sector itself has been doing pretty well also. What do you think is fueling that? Do you expect it to continue this year?

We hope to see that. Even for first quarter, both apparel and footwear are up double digits. And equipment is up.

So what we think is some of the investments we had in systems, and some of the initiatives that we have are starting to pay off, so we hope that this will continue.

Do you think consolidation is playing a role here at all?

It probably does some. We have seen some closings in some of our markets.

We have seen a lot of local mom and pops go out. And, of course, Foot Locker has announced some closings, that will help a little bit, so there has been some consolidation's that's helped.

Great. Thank you and good luck.

Thanks, David.

Thank you. Our next question comes from the line of Peter Benedict with Robert Baird. Please proceed with your question.

Hey, guys, a couple of questions. When you think about the unit growth outlook, I know you said you hope you could get maybe more stores done than you have got guided to here, but what is the holdup in terms of getting these stores to open?

And when do you think you could reaccelerate the growth? And who what level when you are able to do that?

We've got specifically on paper between 300 and 400, closer to 400 markets we want to have stores in. But in most of them, it is just no place to go and these landlords are having a hard time getting loans; if banks were starting to loan these small landlords some money we could accelerate. The markets are there to be done. There is no question. We will eventually accelerate to growth.

Now the movie gallery spots, we are going to look at three different deals in our real estate meeting. There must be three presentations about old movie gallery spots and they have good real estate. That may give us another avenue because they are in some small markets.

For instance, last year we have stated this before, we had 96 deals agreed upon for landlords for last year. And we had but 42 stores, that is how many fell out because they couldn't get it built or couldn't get a loan.

That will pass eventually and we'll accelerate the growth. When it is going to pass we are not sure. We hope this year's projections are very conservative on new stores.

Peter, I don't know if Mr. Newsome mentioned this, but store growth was up 3%, but with the expansion, are square footage growth was up closer to 4%. So while we are expanding highly productive stores and that is adding significantly to the comp base.

Okay great. Thanks for that, Gary. And then, can you just speak maybe quickly to the CapEx outlook for the year?

And when would you guys expect to get going again on the buy backs? Obviously, the financial condition of the Company is very good right now.

Certainly, we are going to be selective when it comes to the buy back of stocks. We think that we certainly don't want to put the Company at risk by going into debt. And we probably need anywhere from $25 million to $35 million on the balance sheet during our slow time, which would be the second quarter before we venture back into the marketplace.

Okay thanks. CapEx for the year, Gary?

$10 million.

Great. Thanks very much.

Thank you.

Thank you. And our next question comes from the line of Rick Nelson with Stephens. Please proceed with your question.

Thank you. My congratulations as well. A terrific quarter. How do you think the cold temperatures in your markets affected sales, particularly in the apparel area?

Well, it was the longer amount of cold weather, definitely helped fleece and outerwear sales, throughout the quarter. And, we really had a good run; and it was slightly colder than last year for, I think, about three degrees, we were looking on average for the quarter, but it definitely helped our fleece and outerwear sales.

Jeff, if you had excluded those categories from the comp, what growth would you have put up in apparel?

I didn't look at it just that way. We would have had significant growth in apparel. We did a really good job getting the right product this year.

The weather was not much of a factor either way. Probably more of a factor in the first quarter. It has been a little cooler than expected and a little more rainfall. It's probably affected our first quarter a little bit.

Thank you for that color. Wondering, also, if the opportunity does not present itself to open more than the 15 to 20 stores that you are guiding to, do you continue to accumulate cash? You are sitting on $15 million in cash now, how do you evaluate that versus alternatives like buy backs or potential dividend?

Well, certainly, we could expand almost exponentially the number of stores we have before even putting a drain on cash, even if we were up to mid-single digit or stores, because they start generating cash within the first six to nine months.

We've talked about other ways to improve shareholder value, whether or not it would be the buy back, or somewhere down in our life cycle, probably dividends out there someplace. But, we are going to be fairly conservative this year, until the environment picks up somewhat.

Rick, one other thing on the new stores. We opened 42 new stores last year. That sounds pretty good until you have to say you closed 20. About half of those 20 we closed was because of the shopping center or the enclosed mall caved in, it just became vacant, but the rest of them was us.

We need to do something about that, and we've got a real good program going now to help underperforming stores, and we think, going forward, we won't be closing as many for the wrong reasons. That's the wrong reason to have to close one. We understand a mall caving in, but we are working hard on that and we are really making progress.

And like Jeff mentioned just a minute ago, new stores last year, we are doing the same thing on new stores. They are running ahead of pro forma. And we think that's another big factor in this. It's not just opening stores, it is don't close as many either.

Gary made a good point too about expansions. How many expansions do you plan for the new year?

We want to do at least 20 or more. And, that's a huge opportunity for us. Every single one of them has worked, and we have seen a lot of good results from it, Rick.

Great. Thanks a lot. Good luck.

Thank you.

Thank you. And our next question comes from the line of Dan Wewer with Raymond James.

Thanks. Well, first, I thought we could talk about the announcement from Wednesday night. Jeff, congratulations on your promotion.

Thank you.

Mickey, I was curious as Executive Chairman, how are your responsibilities changing? Could you also talk about if Jeff changes in your direct reports to you and also is there a time frame for when you are joining the Board?

Well, of course most everybody in the Company's been answering to Jeff for the last year. Now, we'll expand that. I'm going to try to get out of his way and not be here quite as much. I'm here 50 plus hours a week and I'm going to probably cut back to 40 or something and try to get out of his way.

But I'm going to spend more time probably in real estate. I think that's an area I could probably really help in and I'll stay involved in anything big going on and in the big meetings and I'll certainly be here day-to-day. But, Jeff has done a great job and he is well respected within Hibbett and within the vendor community and the landlord community, so he'll do a great job and I'm just going to back off a little bit and try to get out of his way. It's been a real smooth transition the last year.

As far as that, Jeff, will you go on the board now as CEO? What happens with that?

He's not going to do it immediately. He probably will this time next year.

Okay. Second question I had. Regarding at addition of North Face and some of the other mountain brands.

I wanted to clarify something. I think you have noted that the stores that have had North Face both years comped double digits. Was that in the North Face product that was comping double digits year-over-year? Or the entire store?

It was the entire store, but North Face performed at those type of levels.

Do you think it was North Face that led to the stores', those --

That really helped bring traffic to our stores, and it helped over overall sales quite a bit. And, as we continue to grow and look for other categories to expand or do differently than what we've done, we think the outdoor space, which is apparel and footwear, and winter accessories, we think that we have a lot of opportunity. We are adding Columbia next year, to that mix. And we hope to have it in over half our stores going forward, an outdoor presence, especially in our stores like in Ohio and Wisconsin and Nebraska.

It really helps those stores, especially from November probably until about March; especially with a little bit heavier gear, we think there is a huge opportunity in boots, which we really haven't done a lot of business in there, and we really have a pretty good program planned for next fall. So we think there is some incremental business, not that all of it is incremental, but we think it gives us another avenue to grow some business, or at least grow some top line.

When you call out Columbia, does that include mountain hardware?

We will do some mountain hardware, also.

And I think the last question I have now, Gary, obviously the second quarter of the year just ended, wasn't very good. What we are down about 10% in comps and the fourth quarter incredibly robust. When you think about the 1% to 4% guidance for FY 10, what kind of variability are you seeing, particularly in those two quarters?

Well, basically we have a pretty easy runway in front of us until December, so there should be some upside in second and third quarters. We are pretty optimistic about that.

Fourth quarter is certainly going to be a challenge for us. But some of the things Jeff mentioned, hopefully, will help us overcome the Alabama and the Saints run.

Yes. Okay great. Thanks.

Thank you.

Our next question comes from the line of Sean McGowan with Needham & Co. Please proceed with your question.

I have a couple of questions as well. I'm a little surprised by the -- when you broke out the months that January wasn't stronger. So when did you see most of the benefit of the Alabama and Saints sales?

Well, really, they won the championship in early January. That was mostly Alabama. The Saints, really it was the last -- really most of it really started the first of the quarter, but they won the national -- the NFC I believe, it was the second week of January, so it continued for about that six or eight week period.

So does that suggest then that the rest of the business in January wasn't that strong? I just figured that January would be the one of the best months of the quarter.

Yes. Some of the others weren't quite as strong as they were in December, but they went back to being stronger in February.

Okay. Thanks for that clarity. Second, regarding the closings, and it is following up on what Mickey was saying earlier, to what degree are some of these closings simply try to get a better lease in the market that you are already in? To what we are moving to a nearby location that you got a better deal on?

They are not included. Moves don't count. If we move to a better center, we don't count that as a closing; they are not counted as a close and opening.

Okay. So these just closed because they are not working out?

Right.

Okay. To fall on the commentary on expanded stores, how are teleperforming relative to expectations? And can you measure how much of the comp in the quarter came from expanded stores?

Expanded stores, we usually expand a store when they are doing $225 a square foot or better and they come on at a little less than that incrementally, but they certainly come on higher than a new store would, so the square footage is very, very productive. And 20 stores over the whole thing, it moves it 25 to 50 bips or so.

It is real interesting. The first year it is expanded, sometimes that is not when you get the big jump. You get the big jump the second year, for whatever reason. But in the big scheme of things, as a percent of our stores, it is not that big.

Okay. Then the final question just to clarify, I think Jeff was talking about the pattern for openings, did you say there would be no new stores in the first quarter?

That's pretty much the way it looks on paper.

Yes.

Okay and how many of the closings would be in the first quarter?

Maybe one.

Okay. Not a big delta. Thank you very much, gentlemen.

Thank you.

Thank you our next question comes from the line of Anthony Lebiedzinski with Sidoti & Co. Please proceed with your question.

Good morning. Wanted to follow-up on the expanded stores.

Can you just tell us what the cost of doing an expansion is? And also when you look at your store base, potentially how many could we see of your stores now being expanded?

Well, it all depends on the cost, but I would say anywhere from $50,000 to $100,000 to expand the store. And I would think we'll see stores really starting taking off in the second and third year after we open a new store, so we think there is 20 to 25 out there for the foreseeable future that we would expand on a regular basis every year.

Okay. And when you expand the stores, are you increasing the product mix across-the-board? Is there any one category? Are you focusing on more than others?

What's interesting for us is for the most part, we don't put more product in there we just be able to present it better and a lot easier for the customer to shop.

And for the most part, we are not adding categories. Once in a while, we'll put in some categories that they may not have had, but overall, the majority of them, it is really with the product they already have.

Keep in mind they are over-performing stores relative to their square footage and they are real crowded when you get them expanded the merchandise presentation is much more effective.

Okay and you also mentioned the movie gallery locations as potentially as a place to expand, and you mentioned, actually, today you are going to look a couple of those locations.

When you look at your markets versus move have I gallery, how many potentially locations could you see actually you guys taking over?

I would probably want to get an estimate from real estate. There is a lot of them. They are in small to mid-size markets. There is a lot of real estate to be available. We just got to get the landlord thinking right on the rent.

Okay. And also, I think, Jeff, you had said that Q1, comps, in apparel and footwear are trending up double digits. Equipment, is it up single digits? Or what is the breakdown there?

Yes, it is up high single digits and it is still performing pretty well.

I think the weather has affected equipment sales early in the spring.

Yes. It was awful cold in February and --

And wet.

-- and wet. And baseball is such a big percentage of equipment in February and March, so the days that it was warm and we didn't have a lot of rain, we were up positive. When it's been cold and rainy, kids just can't get on fields to practice. But when we have warm days, which we only had, I think about five in February, they were positive.

Okay. Thank you for the color.

Thank you.

Thank you and our next question comes from the line of Eric Tracy with FBR Capital Markets. Please proceed with your question.

Thanks. Good morning. And I'll add my congratulations to the quarter and Jeff as well in the new role.

If I could, just on the guidance for Q1 again, obviously quarter-to-date very strong trends here. Could maybe Gary remind us on a monthly basis how the comparisons look year-over-year, February, March, April?

Last year February is the strongest. It was high single digits. Then March was, I think, low single and April was negative high single. So we've got easier compares, mainly due through the stimulus, April through August, so we think there is some upside in those months.

Okay. And then again, just any more specific color on a category basis to date?

I know the February piece and the Saints and that driving it, but just at the core of business If I could focus on the footwear category, in particular, the trends you are seeing there, and thoughts, color, around the toning category and how you all are playing that?

Yes, footwear is up double digits so far. We made a huge turn around; most of last year, we were in the negatives until fourth quarter, so we have made some huge strides on trying to right size that business. A lot of the strategy on going to be a little bit more in performance type product has worked. We should continue to see that.

With tax refunds being really heavy in February, we've seen a lot of the urban markets and those type footwear improve a lot, especially Jordan, Air Force one, some of those type products. And our women's technical piece and toning, Reebok Toning, the Easy Tones, is really where it's at. We just got in more pairs this week. We have been flying them in. We see that as a huge growth vehicle for this year.

When we travel stores, this's probably one of the most requested items we have and, hopefully, that will continue. We did a really good job on marketing that product and the demand is definitely out there. But we can, we will continue to see some shifts in footwear, as we get into second quarter and we think we've got it going in the right direction, finally.

And from just an ASP perspective and overall they were down, but in footwear, do those tend to be trending up?

They were slightly down.

Okay. And then just on the E3 Replenishment Systems, an update to where you are today? I know accessories has been the key driver there, but overall where you are tracking on that?

Yes. Approximately, we are up to close to 28% of our skews, somewhere in there.

Yes, we have more footwear on there, as we speak; for it to grow significantly higher we need to get more footwear on there. We are working with our vendors hopefully to continue to expand that.

But we have seen lots of positive really building a good core for us. Most of those items are not susceptible to markdowns, so it is a very profitable business. Our vendors hold our inventory and we still think that we have lots of opportunity from that.

Okay. Great, thanks, guys. Best of luck.

Thank you.

Thank you. Our next question comes from the line of Kristine Koerber with JMP Securities. Please proceed with your question.

Hi. A couple of questions.

First, can you quantify the tax refund impact that it's had your business? I know you mentioned February is the biggest month. How about March?

Yes, it's pretty hard to quantify. We know that there is a lot of that out there. When we talked to our managers, they say that, but March we are still running up double digits.

I would think pulling inventory forward has had more of an effect on the first quarter business than the tax refund part of it.

Okay. And then, you mentioned expanding outdoor categories going forward. Where is the floor space going to come from? Are you going to downsize any particular category to gain some floor space?

We always look at our assortments and we know about how many pieces we can fit on a store, so we are always editing and taking away from least -- things that aren't quite as productive, so we know outerwear and fleece takes up a lot of space. We look at that, and we will continue to analyze that.

Of course, when we say outdoor, now we are talking apparel and accessories and footwear. Footwear is in the back room. We are not talking equipment. That is what takes up the space.

Okay. And then, as far as North Face, obviously, it's doing pretty well for you. Are you still expanding it into new stores? Or are you done rolling the North Face out?

No. We still have growth with North Face, and we are expanding doors. And, we're not near where we need to be, and we'll continue to grow that.

And where is it that you are now? And where do you want to be?

We really don't want to give that out, but it will be continuing to grow quite a bit.

Is it in over half of your planned stores at this point?

It is not.

No it's not? Okay great. Thank you.

Thank you. Our next question comes from the line of Sam Poser with Sterne, Agee. Please

Good morning and congratulations, Mickey --

Thank you.

-- in only working 40 hours a week from now on.

Couple questions. I missed -- can you walk through the merchandise margin and the occupancy and give us a little more detail there?

Gary?

What do you want, Sam?

What's the gross margin impact there? I missed what you said.

It was due to improvement in shrinkage, reduction of inbound freight, less markdowns, higher markups.

And what was -- and how much did the merchandise margin grow?

About one-third. About 50 basis points.

And how should we look at gross margin looking ahead into 2011?

We would expect it to improve from a rate basis.

And how are you, from an SG&A basis then? Based on your comp? Still got some leverage there?

Yes, we would expect that to improve, also.

Okay. And then, the phone went blank when you were talking about the licensed apparel business. How much did that grow again, Jeff, in the quarter?

It was a third of our comps.

So that was up in the doubles, I assume, right?

Correct.

Everything's driving business, right? As you said, everything's up, high singles to double digits at the moment. Can you call out any specific products within footwear and apparel and equipment that really, or categories within those areas that really seemed to be driving really being the main drivers?

Well really, in footwear, Easy Tone is making a difference; we see Jordan business, Nike business, Asics business being pretty strong, and we are seeing it pretty much across-the-board in footwear, as we speak.

Apparel, not just Alabama and Saints, have been good, but we have seen in our Nike and Under Armour business being pretty good. And we will for spring, so far, most of the things that we brought in so far have done pretty well. We don't have issues right now.

Last question. Looking at the more urban business and the mall based businesses, you said that you saw some pickups there, is this an inflection point? Or is this just those tax checks getting back to people?

We planned that business, especially in apparel, down, and we are going more toward performance, and it seems to be working. I think from an apparel standpoint, I think we have the right plan. We set that back significantly and stand a lot more for basics, and core type products.

I think a lot of some of the footwear is being driven by tax refunds, but I don't -- I think since we are going against such soft numbers, that we have a chance to be up going forward.

Okay. Thank you. Good luck.

Thanks, Sam.

Thank you. Our next question comes from the line of Chris Horvers with JPMorgan. Please proceed with your question.

It is Aaron Goldstein in for Chris. Could you maybe talk or quantify how much you think bringing inventory in earlier has helped so far this year?

Well, it is interesting. Last year, when we had the call, we were up high single digits. Now we are up almost twice that. So I think that a good bit of the increase, maybe half of the increase is due to bringing it in early.

And do you expect any of that, you see those are incremental sales? Or do you think that you are taking out some of the sales from March and April?

Incremental.

Great.

We have been losing in February because we weren't in stock. We think it was more of an opportunity here again next year to bring even more in because February is getting to be a great month.

Yes.

We have really seen a big shift in consumers and when they buy in certain months, and we just have to be better prepared for that. We really have seen it coming forever, but it seems like it is even more so, today. And even when people shop for back to school and when they shop for holiday, we've definitely seen a shift in the way the consumer shops.

Could you talk about on the margin side, how much of that would be mix versus maybe discounting or increased full price selling?

Well, certainly in the fourth quarter, comps were led by apparel and accessories, which has a higher margin rate than the footwear does, so it was beneficial that we had, certainly, higher apparel accessory sales in the fourth quarter.

Great. Thank you.

Thank you. And our next question comes from the line of Chris Svezia with Susquehanna Financial Group. Please proceed with your question.

Good morning, everyone. Congratulations and congratulations to you, Jeff, as well.

A couple of questions. First, just on the comp outlook, up one to four; any thoughts by category? Is it pretty consistent between the footwear and apparel hard lines?

Well, we think that, certainly, we are pleased by the strength that we've seen in footwear. Apparel's got a great start in the quarter, but I would think apparel would lead the way, and followed by footwear, which we have finally gotten it out of the hole and it's positive. Equipment should be strong again this year.

Okay. And then I guess Jeff, how should we look at when you look at footwear ASPs, given the transition you are making there, we've got the towing business going on, just curious how we should look at that, this year?

I would think overall it may be flat to slightly down, as we adjust some of it, but overall, I don't think it's going to move that much.

We are seeing a lot more traffic in the stores and items per transaction to make up for that, Chris.

All right. That's helpful.

Then in the toning business, is that -- what you are doing with Reebok, are you guys getting enough product to put that in all doors? Or where do you stand on that from a door count perspective?

We bought it originally when I bought it or we bought it last summer thinking that we would sell that type of product, that that kind of rates, I would have thought we were crazy. We are chasing it. We aren't near where we want to be from a door count, and there is not that many pairs out in the marketplace. We are flying pairs in and I know some of our competitors are flying pairs in.

I don't know when we'll be at maximum inventory levels. So far, we are selling it faster than we can get it. It's a nice problem to have. And hopefully that will continue.

And Sketchers and what they are doing, is that just not your customer? Just doesn't work as well for you guys? What is your thoughts there?

A lot of Sketcher business -- we are doing a little bit. For some reason, we don't sell it quite as well. We do have it in some stores. A lot of that is really done more on the family footwear than specialty, even though I know some specialty has it, but it seems like the request in our stores have been for Reebok Easy Toning.

Then, one quick question here. On everything that you guys are doing on systems, replenishment, and now the store growth has slowed down somewhat, what do you really need to leverage this business?

I know you have got into 1% to 4% positive comp and that's flat to up 15% in earnings, but realistically, at this point, where is that leverage point for you guys?

Probably zero to one.

Okay great. Thank you very much and best of luck.

Thank you.

Thank you. Our next question comes from the line of Camilo Lyon with Wedbush. Please proceed with your question.

Thank you. Good morning.

I would like to focus on the expense if I could here in the quarter. Can you talk about what -- shed a little bit more light on the inner workings of the expense rate, there. I'm surprised you didn't leverage SG&A a little bit more given the 9.6% comp.

We had a big bump in the bonus accrual.

And can you quantify that?

It was -- no, I can't right now.

Okay. Was there any other additional labor that you needed to add to the stores for an increase in traffic?

Yes, we had a little bit more labor in the stores. Maybe our medical was up a little bit in some of the accruals. But, for the most part, it was. It was okay. Probably did a little more advertising in the fourth quarter, but I'll take a 100-point improvement in SG&A rates.

Sure, of course. How shall we think about SG&A dollar growth before 2010?

I think we try to keep it flattish on the per store growth basis.

That is helpful. Thank you. Going back to the real estate, you mentioned the movie gallery opportunity. I would think that there were plenty of similar type of vacancies that you could occupy. Is that not the case?

When you operate primarily in small markets, it is a little bit different than around larger markets. In smaller markets, there is going to be a lot less vacancy. Around the larger market, like greater Atlanta, you can find a ton of vacancy. If you go down to Hazard, Kentucky, you may not find any.

It is just a little bit different. I wish it was not that way, but big vacancies in the mid- to larger size markets.

Got it. So there is not going to be any strategic shift to go into larger markets? You are content waiting to see if the smaller markets open up?

Yes. We'll just be patient and not change our model, and we'll do an occasional midsized or larger market if it's a great opportunity and a no-brainer deal from a real estate standpoint; we might do a couple, but we are primarily going to stay with exactly what we do.

Got it.

The final question on that topic is how would you characterize the mix of stores? Of your new stores that are planned that are going into existing strips versus new developments?

Probably, most of them are existing strips, because there is not a lot of new development. There will be a handful, but mostly existing space.

Okay. Great. Thank you very much.

Most of our expansion, also, will be some strip centers. I think we may have one enclosed mall this year. That is just not where we are going.

Got it. Thank you.

Our final question comes from the line of Jim Chartier with Monness, Crespi, Hardt & Co.

Good morning. Just to follow-up on a toning category. Can you compare your first quarter inventory relative to what you had in fourth quarter? Is it meaningfully improved?

On toning? Not yet. I wish it was. No, it moved the needle a little bit, but not near what it could if we had the product.

Okay. And then on the shift of spring product, did that drive more clearance inventory into January -- clearance sales into January and out of February? Versus last year?

Not really.

Okay. Thanks a lot.

Thank you.

Mr. Newsome, there are no further questions at this time. I'll now turn the call back you. Please continue with your presentation or closing remarks.

Thank you.

In summary, we had an outstanding fourth quarter. We expect to have a very good first quarter this year. We continue to improve as a Company, year-over-year. We are excited about some great people who have joined our Company in the last year. It is very important.

Our store operations team had a great year in areas such as loss prevention, items per transaction, selling product to a larger percent of customers, our distribution center continues to operate a very high level, merchandise information systems teams continue to improve our in-store presentation and our in-store stock position, which is very important.

We are excited about Jeff Rosenthal being our new CEO. Keep in mind Jeff's been in the business the last 29 years. He has been in Hibbett, 12. He has been here since we had 100 stores. He's been through tremendous growth; he has great respect from all angles. We have a sound, solid store model and we feel we have a great future of growth in front of us at Hibbett Sporting Goods.

Thanks for being on the call, today. We look forward to speaking with you on May 21, at 9:00 central standard time after our press release earlier that morning. Thanks for being on the call. Thank you for everything.

Ladies and gentlemen, that does conclude the conference call for today. we thank you for your participation and ask that you please disconnect your lines.