Hibbett Inc (HIBB) 2012 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Hibbett Sports third-quarter 2012 conference call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded Friday, November 18, 2011.

I would now like conference over to Mickey Newsome, Executive Chairman of Hibbett Sports. You may proceed sir.

Thank you operator. With us also is our CEO, Jeff Rosenthal, our Senior VP of Finance Gary Smith, our Senior VP of Merchandise and Marketing Becky Jones, and our Senior VP of Store Operations, Cathy Pryor. We will all be available for questions. We appreciate you being on our call today and 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 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.

Now our President and CEO, Jeff Rosenthal, will speak with you.

Good morning. As you know from our press release this morning, our third-quarter earnings per share was up $0.59 versus $0.44 a year ago, a 34.41%(Sic-see press release) improvement. Overall sales for the quarter increased 10.6% to $185.2 million. Comparable store sales increased 7% on top of a 12.5% one year ago.

For the quarter by month, sales were up 7.51% in August, 2.6% in September, 11.61% in October. The first 19 days of November, we are up 8% on top of 18% for the three weeks over last year. We are encouraged by those results and trend. However, the biggest volume is still ahead of us. One-third of our sales gain is coming from price and two-thirds from increase in transactions or traffic.

From a real estate perspective, we opened 16 new stores and expanded four high-performing stores and closed three underperforming stores, bringing the store base to 815 in 26 states. In the fourth quarter, Hibbett expects to open 19 to 21 new stores and close one to three underperforming stores. For the physical 2012, the Company expects to open 51 to 53 new stores and expand 16 high-performing stores and close 16 to 18 stores. We still have identified 400 additional markets in our 26 state area where we can open stores in and we can grow to over 1200 stores in just those 26 states. We will continue to invest in our people and technology to enhance our growth for the future. We look forward to having a good holiday season and we appreciate the hard work of all the Hibbett associates.

Next, our Senior VP of Merchandise and Marketing will speak with you, Becky Jones.

Good morning. We are quite pleased with our sales results in the third quarter. The apparel and footwear business continued to be the drivers of our strong results. Joint efforts of the buying, planning, allocation and replenishment team as well as the good store execution, continues to ensure our success.

Apparel had strong double-digit comp growth in the quarter. Branded businesses drove results across all genders. The men's and boys' business was the highlight of the quarter with focused assortments of compression, fleece, and cold gear driving results. Women's and girls' results were also very positive with fleece and jackets performing above expectation. Key supplier success was Under Armour, NIKE, and The North

Face. The license apparel business produced low single-digit comps. The Rangers/Cardinal World Series had a positive impact on the license sales at the end of the quarter and we expect the Cardinal World Series product to sell through the holiday time period.

Our headwear category is very healthy and we can expect that trend to continue into the next year. Top suppliers were Vanity Fair and [Mitchell and Man].

The accessory business performed well with high single-digit comps. Our stock business continues to grow and we were happy with the back-to-school backpack business. Top suppliers were NIKE and Under Armour.

Footwear had mid single-digit comps with the kids business experiencing strong growth. Running platforms across all genders were very healthy. Lifestyle footwear has been more challenging with the shift in business to performance footwear. Basketball footwear is showing promise the season as well. NIKE and Reebok were our top-performing suppliers.

The equipment business was flat comp in the third quarter. Football was low single-digit comps, basketball was high single-digit comps, and soccer was slightly below expectation.

The fitness category continues to be challenging with a lack of innovation to drive interest.

Product mix and allocation going forward is favorable and gives us confidence of sustained sales growth in the fourth quarter. The team has developed a strong product plan with the support of our supplier partners. Their discipline, along with focused marketing efforts, support our optimism for continued positive results.

Next, our Senior VP of Finance will speak with you, Gary Smith.

Good morning.

Third-quarter sales were $185.2 million, a 10.6% increase versus a 14.8% increase last year. Fiscal comps were up 7%. This is a 12.5% increase for the comparable time in the previous period.

Gross profit rate increased 135 basis points on top of a 125 basis point improvement in the previous year. More than half of this improvement was in product margin, as age and shrinkage rates improved and we were less promotional. The remainder was due to the favorable leveraging of occupancy in warehouse.

SG&A grew slightly as a rate to sales as we continue to invest in the business, the acceleration of certain stock equity awards and the favorable reserve adjustment in business insurance last year.

Depreciation and amortization was slightly under last year's dollars due to declining leasehold improvement dollars as it costs us less to get into a store.

Operating income improved 148 basis points to 13.48% and $25 million versus last year's 12% and $20.1 million. This was on top of a 244 basis point improvement in the prior year.

Diluted EPS came in at $0.59 versus last year's $0.44, a plus 34% improvement versus last year's 40% EPS growth.

We had a beneficial quarter tax rate due to the favorable settlement of a state tax issue.

A couple of important points on a year-to-date basis -- comp store sales were up 6.6% this year versus a gain of 13% last year. Total sales up 10.2% versus last year's 15.3%, gross profit up 128 basis points versus last year's 195 basis point improvement. Operating income was up over 161 basis points versus last year's 320 basis points, and EPS is up over 34% and $0.40 this year versus 60% gain and $0.44 last year.

From a balance sheet perspective, the Company ended the quarter with $53 million in cash versus $52.5 million last year with no bank debt. Inventories increased 10.7% over the previous year, up 7% on a per-store basis with cost increases accounting for about half of the dollar increase.

We spent $9.6 million in CapEx for the year versus $14 million budget, and the Company purchased approximately 700,000 shares of its own stock for $25.4 million. For the year, the Company has purchased over 1.7 million shares at $57 million. We have approximately $155 million left under the remaining purchase authorization.

Operator, we are now ready for questions.

(Operator Instructions). Peter Benedict, Robert W. Baird.

Thanks for taking the questions. Just I want to talk a little bit about the expansions of your high-performing stores. By our count, you'll probably have done maybe 49 in this cycle by the end of this year. How many more do you think you can do? I think you might've said 100 earlier this year. What's your latest thought in terms of the number of stores that you could expand and then a time frame over which you think you can get that accomplished.

Then secondly, can you help us understand the cost benefit equation here? How much does it cost to do these expansions and what's been the lift in sales in year one, and even year two because I believe you do have some that have been in place for a couple of years? Thanks.

We have identified at least another 100 that we could expand, and the stores have been performing way above pro forma. We expect I guess the second year to have it completely paid back and to have the same operating percent that we had with the smaller store. A lot of times it's just on the available of the real estate that holds us back, but we look at that as a very positive as we continue to grow.

It probably cost us approximately $100,000 or so to outfit the new space and bring the old space up to par. We'll usually increase a store's footprint by 50%, go from 5000 to 2500 (sic), and we usually expect a double-digit comp in that 12 months after the stores open. As Jeff said, we paid for it, it's short-term, and we get back to the same operating margin that the store had prior to the expansion.

We usually go from 5000 to 7500 depending on what real estate is available.

Gary, that's helpful. Any view on how those stores that are in year two, are they outperforming the rest of the chain, or did they move back in? It's probably hard to say just because the chain is doing so well. But any interesting insights there?

Many times in the second year is when you get your big bump in sales. In the first year, typically the old store that was over performing is really crowded. We move into the larger space and we don't really have any merchandise to speak of. We just present it much more effectively, but in the second year, as they start selling more, the automatic system is giving them more merchandise, and many times you'll have a larger increase the second year.

That's very helpful, thank you. One other follow-up question. The average ticket in the third quarter, would you guys be able to maybe break that down in terms of items per transaction and price per item? Because I know that was a -- I think you said it drove about a third of the comp.

That was per transaction. It was around a little over 1.9%, 1.91%, and we've really seen that improve over the last year.

And the ticket is up about 4%.

Great, thanks very much.

Sean Naughton, Piper Jaffray.

Thanks for taking my question. This is actually Mark stepping in for Sean. A couple of quick questions. First, you again saw continued strength in the quarter in the footwear trend; that's been going on for a while now. Just curious what your thoughts are on where we are in that cycle. Are we in the later innings, where this might play out in 2012, 2013, or is this more of a 2014, 2015 and beyond story? Secondly, just curious how ASPs are shaping up in Q4. Thanks.

We think the footwear trend is going to continue forward for some time. We don't see it slowing down at this point. The running platforms, the lightweight platform really has some momentum behind it. We've got opportunity to be able to deliver product to more doors in a better way than we've had in the past, and that's favorable for us in the future. From what we can tell going forward, from a product perspective, it -- everybody is looking pretty decent with what they're showing for the next back-to-school fall time period. Can't really say what the innovation will be after that because we really don't have privy to seeing what suppliers have onboard and in their plans. But at this point in time, at least for the next year, it looks pretty decent.

I would think the average selling were price low to mid single price increases we will see going forward.

Great, thank you very much. Best of luck.

Dan Wewer, Raymond James.

Thanks. I just wanted to make sure I've got the numbers correct on the price increases. So Jeff, did you say one -third of the third-quarter pickup in same-store sales was price and two-thirds was transactions?

Yes.

Okay. But then I think, Gary, you noted that about half of the 7% increase in inventory was due to higher cost?

That's correct.

When you just kind of pencil through those numbers, that would imply the price increases were last than the impact on the inventory levels, but yet your gross margins are higher.

Aged inventory is much improved.

Right, but I was thinking, Mickey, if the average price per unit in your inventory is up 3.5%, but the price increase during the third quarter was around 2% to 2.5%, it looks like the price at retail didn't increase as much as your ending cost per unit.

We got more of our comp in additional traffic and additional transactions than did price increase. But I hear what you're saying.

You know, some could be mix.

Some of that could be mix, okay. We're looking for a 3% to 5% increase in cost of goods sold per unit in FY '12.

Yes.

Yes.

Then also, just a different question. Gary, you talked about the SG&A not leveraging even though the same-store sales are so strong. You called out one item that you had a higher investment rate in the business. What was that investment tied to? What kind of (multiple speakers)

Data processing costs, rolling out broadband to all the stores, and the [spade] work for markdown optimization.

I guess the last question I had on pricing optimization, are you at the point where you're beginning to see any benefits of that (multiple speakers)?

No, we haven't implemented it at this point.

It will be implemented late spring next year. We're just in the process of putting it together at this point. We really probably won't see huge impactful benefit from it until a year from then because you've got to ramp it up. We'll take it cautiously, going into it a little bit carefully to begin with to ensure that we really understand what the impact will be, and then also what the benefits will be and learn that system well. But we'll probably see something at the back half of next year, some benefit, and then maybe ramping up after that.

Great, thank you.

Joseph Edelstein, Stephens Inc.

Good morning everyone. I just want to follow-up on Dan's question on the SG&A line and the investments there. Can you quantify what that spending is that could potentially come out next year?

We had -- the three items that I mentioned were worth over 30 basis points in the quarter. Each one of them was at least 10 basis points or a little bit more, so we would expect the spend in data processing next year probably to lever a little bit.

Great, thank you. Your second question, you mentioned the benefit of the state tax rates. I'm just trying to get a sense for what the appropriate rate is going forward for the rest of this year and next.

Yes, fourth quarter, it should be 37.2%, give or take and approximately that next year also.

Okay. Then last question, I just want to come back to mention on the real estate side. The store openings I guess were slightly lower than what we were expecting for this year. Are you seeing anything that's causing a delay in that? Is it more difficult to find real estate today, or can you just generally talk about what that situation looks like?

We are opening more stores than we did a year ago. We expect to open more stores next year than we did this year,. We're still seeing -- when we were growing a little bit faster, we were still seeing a lot more new store construction. Back when we were growing a little bit, it was about 40% to 50% of our growth was coming out of new store construction. This year it's less than 10% of our things. But we still have plenty of opportunities, still see lots of openings in the future.

Great, thanks for taking my questions.

Sam Poser, Sterne Agee.

Good morning everybody. I just missed the very beginning. What are you trending to date in November?

We're doing 8% on top of 18%.

And it eases through the quarter, correct, quite a bit?

It does.

Okay. Then I just have to ask that NBA basketball question. So how do you view that going -- how do you view your basketball business as it relates to the NBA?

It's really not a big deal for us. Right now, it's not really going to affect our fourth quarter. We feel fine where we're at, and it's not a big deal.

High school kids are still playing basketball; the college kids are still playing basketball. Our basketball footwear business is healthy right now. We just really don't anticipate any kind of impact.

We just don't want the University of Alabama to go on strike.

I hope they don't for your sake.

Then lastly, you're putting in price optimization or markdown op next spring. I just want to confirm, Becky, that that's what you said, that's what you're planning to do.

Probably the end of spring.

That got pushed back a little bit, if I'm not mistaken.

No, it was on track. We launched -- launch got started this fall on it but it won't be ready to go until later in spring. We [haven't lived that day].

When you think about the benefit of that going forward once it gets established, is that -- what is the length of the benefit? How long will that get to be fully ramped?

Probably by the third year. We expect to increase gross margin dollars 3% to 5%.

I would expect we would gradually bring it on throughout the second half of next year. I would think at least the first year we would be learning, and then hopefully getting some benefit but I would say year two and three we would see a lot more benefit.

Okay. Then lastly, you talked about the gross margin in Q3. How are you looking at gross margin in the fourth quarter?

It should be up on a rate basis versus last year.

Similar to the kind of lift we saw in Q3?

We certainly didn't plan the rate of increase that we had in Q3. We tended to execute a little bit better, so we are not planning it to be up as much as it was in Q3, but this year has certainly surprised most of us.

The other thing I would say is that you never know what's going to happen with the holiday sales in the fourth quarter and --

Weather.

-- we're going into that time of year, so there's always something out there that you may not see coming in that respect. But our age is in great shape, we feel good about our inventory position, and we are ready for the holiday. So we should be okay.

Thank you very much, and continued success.

Sean McGowan, Needham & Co.

I remember last year at the end of the fourth quarter you had some unexpected shift in the timing of some checks going out that had an adverse impact. You picked it all back up early part of the first quarter. Is there anything like that that you've got visibility on that happened last year in the fourth quarter, other than that, which we're aware of. Were there any unusual team performances or weather stuff that we ought to be reminded of?

Really, we expect January from the revenue and the tax refunds and stuff to be very similar to last year. Last year in January, we had some pretty difficult time with ice storms throughout the Southeast. That could happen again, but last year it really affected inbound and outbound merchandise flow, which really affected sales.

You never know about the weather, but that ice storm, we typically don't get that but every six or eight years maybe. But it could happen again this year, but the odds are it won't.

I recall it really screwed up Atlanta and you had a lot of stuff going through Atlanta. Is that right?

That's right. A lot of our containers come from Atlanta.

Thanks. Could you remind us too what the status is now of the North Face rollout? Is that now in all the stores that it's going to be in?

I wouldn't say it's in all the stores it's going to be in. We really haven't nailed down if we're going to expand that next year or not. But our outdoor program from an outerwear perspective is probably about half of our doors at this point in time, North Face and Columbia included.

Are there any other kind of big brands like that that could be impact that will have a year-over-year impact in the next couple of quarters?

Not at this time, no.

Thank you very much.

Chris Svezia, Susquehanna Financial Group.

Good morning everyone. Nice job on the quarter. I guess, first, just in the quarter itself, fourth quarter, what's the percentage of business roughly by month, ball park? Do you have that?

November is bigger than January, and December is probably more than 50%.

Okay. Okay. Then I guess just one I guess theoretical observation. In the fourth quarter, you guys have always had higher earnings relative to the third quarter. I think there's been one exception in the past ten years. Any reason -- obviously weather and how the consumer reacts -- any reason why that couldn't potentially happen?

A couple of things that happen, usually the fourth quarter is a little bit more promotional. The other reason is we spent a little bit more on advertising during the fourth quarter, and that's what throws it off a little bit.

But from an advertising perspective, from the SG&A spend rate, the delta, is it going to be that much different Q3 year-over-year going into Q4 year-over-year?

I would expect historical trends to hold between third and fourth quarter.

Okay. All right. Then, on systems, when you guys step back and just think about what -- all of the systems that you're putting in place, what that potentially could drive in terms of comp, any thought? I vaguely remember the replenishment piece was driving, I don't know, a point or two or something along those lines of comp. Any thought as we kind of go forward and what you're putting in from a price perspective, what that could do? I know the first year is going to be a little tough, but any thoughts about that?

Yes, we ought to be in mid-single digits comp on a regular basis. Certainly, the systems have helped us with our gross margin rate improvement in managing our inventory and making sure that we have the right products in the right stores. Our in-stock rates right now are significantly more than they were a couple of years ago, and like Becky said on the sock business, we just can't seem to find the top on that.

I think there's many other things that we've put in that we still have a lot of benefit to grow from it. Assortment planning, we are very much in the infant stages of the learnings. We expect that to pay big dividends going forward. We've got it up and running this year, but we really think it's down the road where we will start seeing the bigger benefits.

And the last question just on real estate. I might've missed this, so I apologize. But just thinking about next year, number of stores roughly as you're looking at right now opening, closing, and any thoughts, Movie Gallery/Blockbuster, how that plays into the fold?

We're not giving out next year but we expect it to be larger than this year.

On a net basis.

On a net basis.

This year is larger than last year on a net basis.

Okay. Well, best of luck. Thanks.

David Magee, SunTrust Robinson Humphrey.

Hi guys, good quarter. Just a couple of questions. One is regarding the promotional environment for the fourth quarter, are you assuming that is sort of the same as last year, or any uptick? In that regard, knowing that you're competing for the gift-giving dollar, who do you watch the closest with regard to promotions out there?

We do think it's going to be basically similar to what we did a year ago. We don't see any reason that we need to go more promotional at this point in time. As far as watching anyone in particular, because of where we are and we're basically isolated, it's not that we need to worry so much about the price points from that competitive perspective, because we're the only game in town that brings the branded product to the consumer. At this point in time, we don't really go after pricing by door, so the majority of our stores rule, and that means that our isolated markets rule that decision-making.

Thank you Becky. Secondly, more retailers seem to be calling out the Internet or e-commerce having some impact on their traffic in the stores. I know it's hard to see that in your numbers given how strong they have done. Are your customers showing any interest in that channel though with regard to how much they're shopping your site or talking about it in the stores?

We're not seeing that. Obviously there's traffic that's going to e-commerce sites. We're looking at it for long-term strategic plan, but right now, being isolated and bringing product to these markets that they don't normally have is really what's driving our business.

Do you anticipate that your site will change next year?

Our website? The face of the website?

Just in terms of getting more into the direct selling of product as opposed to sort of pass-throughs --?

It will not happen next year.

Okay. Thanks a lot guys.

John Lawrence, Morgan Keegan.

Good morning. Could you comment just a little bit, Jeff or Becky, on, when you look at the basket, when you look at the attach rates for different products as you've moved up the transaction count, what are you seeing as far as the different segments of customers as far as are they adding an accessory or what's driving that and what are you learning from I guess being better in stock on the accessory side?

Our E3 business, E3 being our replenishment program, really has driven a lot of our comps from an accessory perspective. We find that we're in better stock in the stores. Therefore, it's obviously going to impact the consumer in picking up more than one item when they're in the stores. But I will also say that it's not only a matter being in stock but it's a matter of our salespeople are highly trained to ensure that they're offering as to just selling to ensure that we are getting that extra sell.

What's very interesting to me is, as we put assortments in, the better higher-quality products is what we sell. The better the product is, the better off our sales are.

That's right.

Secondly, is there a comp number on E3 product?

Becky Jones; We don't break that down.

But it's probably outpacing the Company comp.

It continues to grow each year. It's not a one-year thing. We're getting better and better being in stock on basic items.

Mickey, a second question on real estate. As far as small markets, what are you seeing? Obviously the Movie Gallery, etc. Having said that, but what are you seeing with that small market developer, banks turning loose a little bit and helping in that process?

Maybe a little bit, but not very much. There's just not new much new construction happening. We're seeing some old abandoned Walmarts, where they went and built a supercenter, we're seeing some of those chopped up. We're still getting some Movie Galleries, and they're some other vacancies. But like Jeff said earlier, this year, about 10% of our stores are new construction. Four years ago, it was probably 40% or 50% were new construction. So it's just not much happening.

Lastly, some of the boundaries of some of the new markets, now some of those that you've been in two or three years, what are you seeing with those stores on sort of the outer edges of the footprint?

We're doing very good. We continue to grow and they're comping.

Great. Congrats guys.

Mark Mandel, ThinkEquity.

Thanks. Good morning and congratulations everyone. A couple of questions. First, I just wanted a clarification. Becky, I didn't quite hear you when you said -- gave the footwear comp number.

The footwear comp was mid-single digits.

Mid-single digits, great. Thank you.

In terms of looking at the expenses again, up 11% in the quarter. Can you give us any kind of guidelines? Should we see some deceleration in Q4 hold steady? I know there's a number of buckets that you might have some flexibility on.

Two-thirds of that, of the items that I point out being over on an SG&A, we won't see that happen in the fourth quarter.

Okay. So in terms of a total dollar growth --

It will be less than it was this quarter.

A little less. All right.

In terms of -- I just wanted to clarify. On your outerwear, pardon the pun, but your outerwear exposure year-over-year, I think you said about half -- they're in about half the doors currently. How does that compare with a year ago?

It's up slightly.

Okay. Where do you guys stand with your due diligence on the new distribution center?

We're looking at right now and we should have a decision hopefully by close to year-end.

You'll start to maybe spend some money next year at some point?

Probably the year after, maybe a little bit next year.

Still down the road. Then one final question -- I usually don't ask this. But what are you guys sensing in terms of overall economic activity in your trade area? Would you classify it as stable, stable to slightly improving, or perhaps even better than that?

It's really hard to tell. We look at unemployment by area, we look at it by state, and some of the highest unemployment, it may be very high in some of our best comping states. So it's really kind of hard to tell.

I can give you a personal opinion. It just seems to me like when you go eat out like on a Friday or Saturday night, it is so many more people out there than there was two years ago. We took our Board of Directors out I guess it was Tuesday night, a nice restaurant. The place was packed on Tuesday night. It just feels better out there to me.

Better than a year ago?

Yes. Some better than a year ago but a lot better than two and three years ago.

That's all I have. Thanks a lot and good luck and have a nice holiday season.

Anthony Lebiedzinski, Sidoti & Co.

Good morning. I have a couple of questions here. Could you just remind us what the same-store sales were by month in the fourth quarter of last year?

We were down double-digit in January.

We were down 11% in January. We were up 2% or 3% in December and we were probably up 15% in November.

So as the quarter progresses, you are facing easy comps. You're off to a strong start over here, so it sounds like to me the mid single-digit comp guidance for the fourth quarter that you had in the press release is conservative.

Yes.

So just to follow-up on the previous questions in regards to expenses, so it sounds like the rate of growth in expenses will be less, so you should be easily able to leverage SG&A costs in the fourth quarter, right?

We would hope so.

Okay. All right. Then last year, I think there were some issues with NIKE delivering products; they weren't able to deliver products on time. Do you foresee any issues this quarter, or is that a nonissue?

It should be a nonissue.

Yes, it's getting much better.

Great. Thank you.

Mark Smith, Feltl.

Can you talk a little bit about distribution costs and what you're seeing in fuel and (technical difficulty) positive impact there?

Yes. Fuel is affecting us about 5 to 10 basis points. Certainly that's in our gross margin line, and it's affecting us a little bit.

Sure. Then just a reminder on your gift card business and any impact from that maybe historical breakage.

It's interesting. We'll take that breakage in the fourth quarter. It's really not anything to move the EPS needle. We're pretty conservative when it comes to that.

All right. Thank you.

Jonathon Grassi, Longbow Research.

Good morning guy. Thanks for taking my questions. You guys increased the number of expected store closings from the year. It looks like from 10 to 15 to 16 to 18. I guess was there anything behind the increase in the store closings?

Not really. We have, from time to time, leases that come up or sometimes we're month-to-month. Sometimes we just couldn't work out a deal with the real estate person and so we decided to leave, but sometimes that just happens.

There wasn't anything regional specific then?

No, not at all.

Then can you talk about the performance of your strip-based stores versus the mall-based stores?

Yes. Malls have lagged behind strip-based in the last three or four years, but this year malls are performing right there with the strip centers. That's a change from 30 years ago.

So that continued into the third quarter?

Yes.

Then you had mentioned you feel pretty comfortable with your inventory levels, but obviously we've seen inventory per square foot, it's been trailing revenue here for the past few quarters. Now some part of the increase that we've see, this quarter is because of the higher product costs. Is there any concern that you could be missing some demand, or could you give us some color on what product categories you've been able to clear out without risking a loss of profitable sales?

We've actually been pretty successful across the board in all product categories with being able to turn the product. Our age is down in all of the categories, and I really think that part of that has to do with the fact that the way that we've assorted ensured the way we've allocated it down the out the doors, and we are getting it into doors that needed the product that maybe didn't have it in the past and able to turn it quicker in other doors. So I don't see that being an issue going forward as far as what we've done because we've been very methodical about the way we've approached it.

So there hasn't been any out-of-stock issues relative -- other than maybe kind of a vendor related issue?

Right.

Then you had mentioned depreciation. It was down again because of the decline in leasehold improvements. How should we expect that to trend going forward? It's been down the past few years. Is that going start to -- is the D&A going to start to increase year-over-year in 2012 or should we continue to expect that to go down?

I would expect it to continue to go down next year when we start looking at our distribution center and office. Our disposition right now is to build it and own it. It might tick up a little bit but we'll see more than a reduction in the rental cost up top.

Okay, great. Thank you.

Camilo Lyon, Canaccord Genuity.

Thanks. Good morning everyone. Congrats on the good quarter.

My question had to do with the selective price increases that are starting to flow in through to your customers at retail from the vendors. If you could provide some color on what that elasticity of demand is on those products that are seeing those price increases. I'm curious to see how your consumer is accepting those price increases.

It does depend on the product. We see that, from a footwear perspective, as long as there's innovation [brought to] or newness of some sort brought to the product, we're not seeing a lot of pressure from the consumer in that respect. They like seeing newness on the floor and they respond to it very well. It's a little bit more sensitive when you're looking at commodity items, such as shorts or tanks, that may be an item that's been around for a while and needs something new.

One of the things that we think is important is that, as we see price increases go, as long as there's something new or innovative about the product, it's fine. An example would be the Charged Cotton tees that Under Armour came out with. There was newness attached to that. The consumer really responded well to it. And as well as the Storm Cotton fleece that they brought out for fall, there was an up-charge in that respect to have that innovation on the floor, and we've seen no pressures to that. So as long as there's newness or a little bit of innovation to those items, consumers are okay with it, but if you're not -- if we don't see something in that realm on existing items, then it's becoming a little bit more challenging.

That's very helpful. Thank you for the color. So taking that in the context of rising ASPs, is it your expectation that units will be up next year as well?

Yes.

Yes.

Best of luck in the fourth quarter.

Sam Poser, Sterne Agee.

Thank you. On my previous question, we were just clarifying. You said that the price optimization you said should bring a 3% to 5% increase in gross product. Is that margin dollars or (multiple speakers)?

Margin dollars, not rate.

Okay, thank you. Then what was your new store productivity for the quarter?

About 80%.

Thanks so much. Have a great day.

New stores and this year's new stores are certainly over-performing their pro forma.

Peter Benedict, Robert W. Baird.

Thanks guys. Gary, occupancy costs leveraged about 35 to 40 basis points over the first half of this year. How much leverage did you get on that line in the third quarter?

It would have been certainly -- I think the warehouse was fairly flat -- so it would have been about 50 basis points or so. Occupancy in the third quarter on a per-store basis was down slightly.

Okay, good. That's helpful. Then Gary, when is the next 53-week year for you guys?

I thought you'd never ask. It's next year.

Thank you very much.

Mr. Newsome, back to you, sir, for your closing remarks.

Thank you. Year-to-date, we're having our greatest year ever on top of last year's greatest 52-week year in Hibbett history. Last year, earnings per share through three quarters increased 45% over the year before. This year through three quarters, earnings per share have increased another 34.1%.

I believe we will have a successful fourth quarter. We have many advantages fourth quarter this year versus last year.

Last year through the third quarter year-to-date, our comp store sales increased 13%. This year, on top of 13%, our comp store sales increased another 6.6%. But the first 19 days of November last year, comp store sales increased 18%. This year, on top of 18% last year, our comp store sales have increased another 8% in the first 19 days. Our comps versus last year for the fourth quarter get easier in January and February -- in December and January.

In our press release today, we have again raised our annual guidance. We believe we will have a successful fourth quarter.

Thanks for being on the call today and we look forward to speaking with you on March 9, 2012 with our fourth-quarter results. Thank you.

Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and kindly ask that you please disconnect your lines. Have a great weekend everyone.