Hibbett Inc (HIBB) 2013 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Hibbett Sports third-quarter 2013 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 today, Friday, November 16, 2012.

I would now like to turn the conference over to Mr. Mickey Newsome, Executive Chairman, Hibbett Sports. Please go ahead, sir.

Good morning, everyone. Jeff Rosenthal, our CEO and President, is with us, as is our Senior VP of Finance and CFO, Scott Bowman, and our Senior VP of Merchandising Marketing, Becky Jones. They will all be speaking with you. We appreciate your being on our call today, and we appreciate your interest in Hibbett Sporting Goods.

Before we start, Scott Bowman will cover the Safe Harbor language.

Thank you and good morning. In order for us to take advantage of Safe Harbor rules, I'd like to remind you that any projections or statements made today to 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, Scott. 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 were up $0.71 versus $0.59 a year ago -- a 21% increase. Overall sales increased 9.6% to $202.9 million compared to $105.9 million a year ago. Comparable store sales increased 6.4%. This marked our 12th consecutive quarter of comparable store sales increase. Comps by month are as follows. August, we were up 8.5%; September, up 4.3%; October, up 5.3%.

From a real estate perspective, we opened 13 new stores, expanded four high-performing stores, and closed two underperforming stores, bringing the store base to 848 stores in 26 states. We are still on pace to open 57 to 60 new stores and expand approximately 17 high-performing doors. We have increased our real estate resources to grow even faster next year and for years to come.

Our strategy still works well within an additional 400 markets that Hibbett can go to in the 26-state area in which we currently operate. There is no reason that Hibbett's should not be nationwide at some point in the future, with over 1300 stores. We are up low comp single-digits through yesterday, November 15. However, we still have another 90% of the fourth quarter to finish. Our inventory is in excellent shape and we have the right assortments. And we look forward into having another good quarter.

We are confident in raising our fiscal 2013 guidance to a range of $2.66 to $2.71, and expect comparable store sales in the low to mid-single-digit range. Our approach is very bright for the future. We are still in the early innings for growth and profitability. I would like to thank all the Hibbett Associates for their hard work, and look forward to finishing the year on a very high note.

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

Good morning. We were pleased with the overall performance of the third quarter. Back-to-school sales were healthy, and the business shifted as anticipated and mentioned in our second-quarter conference call.

Branded apparel, footwear and accessories all had strong performances. In activewear, the consumer continues to support branded products. Nike and Under Armour drove sales volume, and Adidas made marketshare inroads in the men's area. We saw high-single-digit comps overall in the branded active area. Highlights were women's active, youth active, and men's active areas.

We saw strong results in the NBA apparel and headwear, and our high school program is doing well. Adult collegiate apparel performed in low-single-digits for the quarter, while our collegiate youth and accessory business was soft. Major league baseball was challenging during the quarter, as the San Francisco Giants are not in our market areas.

With the majority of our stores in the stronghold states of college football, our upside in NFL is not as impactful to our total. The NFL business does continue to be an opportunity of growth as we expand our base -- store base north. However, during the third quarter, the overall performance was somewhat disappointing.

Footwear had a healthy quarter, up strong single digits, and we continue to see good performance in running and basketball across all genders. We were particularly pleased with the kids footwear performances, as we work towards being the destination for premium footwear in small markets. The Jordan business has continued to drive footsteps into the fashion doors, and high sellthroughs have been achieved. Our supplier partners at Jordan, Nike, Adidas and Under Armour have collaborated with us to identify opportunity.

Team sports continues to drive the equipment business and we achieved a mid-single-digit comp. We had a good football season as well as a strong performance in basketball and volleyball. The fitness business continues to be soft and the soccer area grew moderately.

Accessories had a terrific quarter, driving sales increases across the board. The back-to-school backpack season was very good, with Under Armour being the very clear winner. Socks accelerated and continues to be a very hot accessory of choice right now. We're very well prepared for cold weather and holiday selling. And with our premium assortment focus, our strong inventory management, and store execution, we have confidence to deliver the fourth-quarter results.

Next, our Senior VP of Finance and our CFO, will speak with you, Scott Bowman.

Third-quarter sales increased $18 million to $202.9 million, an increase of 9.6% over the prior year. [Fiscal accounts] were up 6.4%. Gross profit rate increased 55 basis points over last year. Product margin increased 21 basis points, partially due to improvements in assortments and markdowns, and the remainder due to mix. Warehouse and occupancy leveraged the remaining 34 basis points.

SG&A decreased 67 basis points as a percent of sales in the quarter, due to leveraged in-store labor, debit card fees, and stock-based compensation. Depreciation and amortization were under last year's dollars, due to lower costs for leasehold improvements for our new stores, and resulted in 22 basis points of leverage.

The income tax rate for the quarter was 37.3%, which was higher than last year, due to the expiration of job tax credits. Operating income of $30.3 million increased 21% over last year, and was 14.9% of sales versus 13.5% last year, an increase of 145 basis points. Diluted EPS came in at $0.71 per share versus $0.59 last year, a 20% improvement. From a balance sheet perspective, the Company ended the quarter with $75.3 million in cash versus $53 million last year, with no bank debt. Inventories increased 5.1% over last year and were 1% higher on a per-store basis.

We have spent $15.1 million in CapEx year-to-date versus an annual plan of $15.9 million. This includes approximately $6.6 million spent for our new office and distribution center. Also, for the quarter, the Company bought back 207,000 shares for a total of $11.8 million. At quarter end, we have approximately $110 million remaining under the existing purchase authorization.

Operator, we're now ready for questions.

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

A couple questions. First, Jeff, just on the unit growth outlook, you'd mentioned that you guys have added some personnel to the real estate team. Can you give us a sense on what you're thinking potentially for next year in terms of openings and also the expansions? What's your thought at this point, longer-term? I mean, you just mentioned nationwide. I know in the past, you've kind of talked to 1335 states. What do you think that number could be if you do go nationwide? And when do you think that would occur?

Well, Peter, we haven't given out our projections for next year yet, but we do expect it to be up a lot more than it is this year. And we would also like to expand more stores than we have, next year also. So we really feel pretty good about adding to our staff that will help us get more deals, so that we could grow faster. And our new stores are performing above pro forma, so we feel very confident on our strategy and where we can go.

As we go to other states, go more westerly in some other places, there's no reason that we can't double the chain over time. We're building our infrastructure now, really, with the new distribution center that we're bringing online, so that we can grow faster and also help drive our revenue with our new capacity. So, we're really trying to get ourselves set so we could grow a lot faster than we are today.

That's helpful. Thank you. And then just on the shorter-term with the softer tone in November, you mentioned kind of the World Series, how that probably didn't help really. But what -- has the slowdown been concentrated in any category, whether it be footwear or apparel or other -- what else can you tell us?

Well, Peter, there's a couple things. Last year, Cardinals won the World Series, which we have a pretty good influx of stores around that area, especially in the St. Louis area. So that affected us. And also we shifted a little bit of our promotions, which also made an effect on the early sales.

So, really not worried about it at all, because really, people shop later, and it's really about those two weeks of Christmas that really matter the most. Because those type of volumes -- you know, it's easy because November is sort of like October, not high-volume weeks anyways. It really doesn't matter now; it really matters around December 20th.

Thanks, Jeff. So just to follow-up on that, the promotional shift -- did that pull sales, you think, into October? Or did it push them later into November?

We're just running it a little bit later. So it was just a little bit of a shift of a couple weeks for us. We set out some promotions that we normally do the first week of November, and we set it out to the third week.

Okay. Good. All right, thanks so much.

Dan Wewer, Raymond James.

Mickey, this week, some of your competitors have announced some very impressive growth in their eCommerce channel. I mean, it looks like we're probably at the tipping point where sporting good customers are willing to buy both footwear and apparel online. I know that, historically, Hibbett has not made any investments into that distribution channel, but in light of what you're seeing with some of the competitors, are you rethinking eCommerce strategy?

Okay. I'm going to turn that over to Jeff. Jeff, do you want to answer that?

Yes. You know, we're definitely taking looks at it, Dan. From an infrastructure right now, we're putting things in place to be in that position. Currently, with our distribution center network and moving the home office, it just does not make sense right now. But we're doing the pre-work in trying to decide what our stance will be. But right now, with the amount of things going on with the new distribution center -- we're also moving our home office -- it's going to take us a couple years.

I'll add to that, it's in our five-year plan, but we have got so much growth left in just new stores in small isolated markets that it doesn't concern us. But it is in our plan. And we have affiliate programs today that are growing, so we will be there. But we've got a lot going on.

You know, one of the things we always talk about when it comes to eCommerce, 75% of our business is cash and debit. And a lot of -- we're very 1st and 15th of the month-driven. So, we see a lot of people, as soon as they have paychecks, they go to stores, and they want that instant gratification. Not that that isn't a reason not to do it, but that's one of the reasons that we're a little bit more isolated from it; not that we're not losing us some share to the Internet.

You know, and Mickey, just to follow-up on your comments, there's a lot going on with the new distribution center and the relocation of the corporate office. I know we're not talking about 2013 yet -- that maybe is a good question for Scott. But can you remind us how the -- running two DCs simultaneously is going to impact margins, profitability, next year?

Yes. So for next year, I mean, we're going to be really in the build phase of the DC next year. So we're not going to see a lot of duplicate cost to the DC next year; it's going to be mainly capital. But for the new office, during that transition, we will see some pressure there. I expect that to be about 20 basis points of pressure next year.

And one big advantage we have on this, we'll be moving the corporate office in April just five minutes away. We've always had them together, the office and DC, but we're just going to be moving it five minutes away. So we'll have a year there to get used to it being separated before it gets to be 30 minutes away. So I think that's a real advantage.

Great. Okay, great. Thank you.

Thank you.

Sean McGowan, Needham.

I wonder if you could share with us what your outlook is and expectations are for the fourth quarter, in terms of how mix is expected to change or not change? As well as commentary on what kind of SG&A leverage you think you can get in the fourth quarter?

From a mix perspective, we always say our fourth quarter will see apparel becomes a higher percentage of what our business is, just because of the gift-giving aspect of it. However, it's not different than what it was a year ago. We always -- we'll see that pretty consistent from year-to-year. It's very much the same as when you go into back-to-school, footwear takes a higher percentage of the mix. And in fourth-quarter, it really does become apparel. And they have really good margins there.

But if that's been something that's been driving gross margins in the third quarter, would you expect a similar kind of upside versus last year coming from the same sources?

Well, you would in regards to the fact that the apparel margins are relatively healthy. We do have a couple of things in front of us during the fourth quarter from a national championship perspective, that product always goes out very quickly within a week or 10 days. And that's at top margin dollars/full price. So we'll wait and see whether or not we'll be in the game this year or not. Whether it's Alabama or someone else, if it's within our market area, we're happy about that. But you don't know that until it actually occurs.

Okay, and then (multiple speakers) -- go ahead.

Yes, I was just going to comment on SG&A. So I would expect SG&A in Q4 to leverage a little less than what we've seen recently. A couple reasons for that. We expect a little bit lower comp than what we saw in Q3, so you won't get quite as much leverage on store labor.

And then another one that, going forward, we've had some pretty nice favorability from credit card fees, you know, the Durbin Amendment -- actually debit card fees -- that actually cycled in October. So going forward, that will be flatter. And then the third thing -- we'll spend a little bit of money in preparation for our office move, a lot of that getting prepped from the IT standpoint. So we'll see a little bit more expense for that preparation in Q4.

Okay. Thanks. That's helpful. And then one other question. If you could just comment on the performance of the expanded stores, kind of relative to stores in comparable markets, how much better are they doing? You've offered us some help in the past on that and we'd love some color on that. Thanks.

Yes, you know, those stores, we expect them to perform quite well, and really almost all of them are way above pro forma. Usually by the year two, we're getting the same bottom-line expense than we did before that with a lot more sales. So, they have continued to pay off.

Our goal was always to get them back in year two to the same percent bottom-line with a lot more sales. And that's -- as a group, we've been achieving that goal. We have about 120 more that we'd like to expand, and we will do it when the opportunity arises.

All right. Thank you.

Rick Nelson, Stephens.

I'd like to ask Becky about the outerwear, how you're positioned for holiday? North Face, how many doors do you have that product in, compared to a year ago?

Hi, Rick. North Face is in -- I would say about half of what our total store base is at this point in time. We did add a few doors this year, but it wasn't a huge amount that we added to it. We did do some adjustments in regards to where was North Face versus last year. We had some stores that we didn't feel like it performed as well as it should have last year, so we moved it to stores that we felt a little bit more confident in and gave them an opportunity.

As far as the outerwear goes in general for the back half, we feel like we're in really good shape from a product perspective, where we have a very nice assortment across the board between Nike and Under Armour. And then in those stores that carry North Face, it's a very clean and well-positioned assortment.

Okay. Thank you for that. I'm wondering if you can also update us on markdown optimization, where you are with that, and what sort of bounce [hits] you're going to see from that program?

Yes, Rick. So, markdown optimization is live, and we are taking some live markdowns for that program, but it's on a very limited basis. And that's by design. We want to take a very slow approach to it and make sure that we take our learnings from it, and kind of roll that into adjustments to the system, make sure it works the way that we need it to. But so far, so good.

You know, the system itself is absolutely working. But with a lot of the different categories and how they react, there's obviously a lot of tuning that we need to do with it. And kind of looking forward into next year, I would expect that it's really learning mode and test mode for us. So you're really not going to see a bounce in product margin next year. But that should set us up for fiscal '15; this shows some meaningful improvement.

Okay, got you. And finally, if I could ask for some more color on the real estate additions. You'd talked about more resources, adding staff, some color on the size of the real estate department today versus what it was? And what the new (multiple speakers) --?

Yes. We've already hired two additional people. We're hiring one more. But really what it does is really help us get more feet on the ground, especially the way we look at real estate. It's still dealing with a lot of mom-and-pop landlords, you have to be out in the marketplace. So, really not expanding territories, just putting more people in some of the states that we're in. So we see that as a real positive. We know we'll get more deals.

This -- our staff is continuing to grow. And if we need more people for the opportunity, we'll continue to do that. But we feel very good about where we sit on our staff, and the experience levels and stuff like that. So, we expect, as next year comes along and they get a little bit more experienced, that we'll see more deals in the pipeline.

And one of our internal goals is really to try to get more stores. There are only -- we've -- unfortunately, we opened a lot of our stores in the last quarter; we're trying to get more deals so we can spread that out a little bit. And we'll give more color to this in March.

Great. Thanks, Jeff. And good luck this holiday season.

Thank you, Rick.

David Magee, SunTrust.

Just a couple of questions. You mentioned some marketing differences in the fourth quarter as we're pushing things up by a couple of weeks. Is that -- would that theoretically cause a, say, a two or three point shift in terms of the comp momentum, that activity alone?

It could. It definitely could. You know, really, when you look at even like a Cardinals winning the World Championship, when it's a low volume week, those sales inflect your comp much higher than other things, even though it's a low volume time of the year. And shifting a couple weeks on a promotion could definitely drive the comps down a little bit.

Has the cooler weather been a positive in November?

You know, it's been -- you know, weather's been about the same. But last weekend, it was extremely cold and we saw some really good sales from it. So it's kind of been up and down. But weather definitely makes a difference. I don't like using weather as good or bad, because I think, over time, it all (multiple speakers) washes out over time. But definitely, we see when it's cold weekends, we definitely see a better pop in the business.

I noticed recently there was a, I think, a fleece promotion you all were doing. Is that something that's the result of a -- maybe a special buy that you made? Or does that reflect maybe just needed to move some inventory?

Yes, Becky and I -- we're looking at each other. We (multiple speakers) --

We don't have a fleece promo going on.

Yes, we don't have any (multiple speakers) --

But I got an email, like -- okay, maybe I misread it. I thought I saw an email that was promoting that. But (multiple speakers) --

We'll have a fleece promo for Thanksgiving weekend. (multiple speakers)

Weekend.

But that's traditional. We do that every year.

Okay. And then just lastly, with regard to growing faster, you're adding some folks, and that's good. Are you actually seeing a lot better availability of sites out there?

You know, we have -- not that it's grown that much. What we're seeing is, we're seeing some visibility on old Wal-Mart's still getting chopped up. Believe it or not, we're still doing Movie Galleries and some Blockbusters, even -- you know, I think it's been two or three years now, those are still coming up. New store construction, maybe a tick better; not a lot. But we feel, since we really performed above pro forma on our new store models, we're very confident in opening up more stores. And we just need more feet on the ground to find those deals for us.

David, I agree with Jeff. I was at the Atlanta Shopping Center Convention, and it's obvious that new store construction is just ticking up just a little bit. And the general consensus was, it's going to be another one to two years before it gets back to where it was.

But we're seeing a little bit, and we're certainly seeing some small landlords chop up some old Wal-Mart's. Like in Hamilton, Alabama, they'll chop it up and put in a Hibbett and a Dollar Tree and a Cato, and that's perfect for us. So, hopefully, we'll see more and more of that.

Great. Thank you and good luck here.

Thanks, David.

Thank you.

Sam Poser, Sterne Agee.

Thank you for taking my call. You're talking -- you're going to net open about 40 to 41 stores this year. I mean, when we think about next year -- I'm sorry to harp on it. I mean, when you say significant acceleration, does that mean that -- could we see 6%, 7% store growth, net store growth next year?

That's possible, but we're still working on next year. And we'll have that in March, Sam.

Well, Sam, we've got more deals done for next year than we had this time last year for this year. But we'd rather wait another 4 to 8 weeks to -- we'll probably know then. But we expect it to be more than what we do this year on a net basis, that's for sure.

Okay. Thank you. And then back to the -- can you give -- you mentioned how the smaller weeks for the big event affect, but I mean, can you talk about the percentage to the comp that having the -- without the Cardinals, how -- sort of could you quantify the hurt to the comp that that affected you?

Hold on just a minute, Sam.

Yes, so, Cardinals and Rangers, you kind of put that all together, it's about one-half. It's about half-of-a-point on the comp -- all in.

And then the shift of the promotion would be about how much?

At least the same, right?

The same or more.

Yes.

The same or more.

So, when you say you're running up low-singles, is that like a 3 or is that like a 1? I mean, can you give us a little more color? (multiple speakers)

(multiple speakers) It was [19 Basel] for the quarter.

Yes, so -- and so, really, if you kind of back into it, Sam, if you look at the quarter, we're kind of looking at low to mid-singles.

For the quarter (multiple speakers) --.

(multiple speakers) No, I know you're saying low to mid-singles for the quarter, I'm talking about quarter-to-date, though. Can you give us some idea of sort of more specifically where you stand right now?

No. (multiple speakers)

Well, I think that really (multiple speakers) where we stand right now, based off of the fact that we've got 90% of the quarter yet to go, it's -- where we stand today is such a small piece of what we're doing that we're just really confident in that low to mid-single for the quarter.

Okay. Okay, thanks. And then can you -- there's a lot of conversations about running versus basketball and all the things going on in footwear. Can you sort of give us some idea by category on how you saw -- on the stronger categories and how you see different categories in footwear trending?

You know, we still feel really good. In particular, Sam, the basketball business is really healthy. And we feel really good about where that's headed into the fourth quarter, based off of the assortment that we've got and the allocations that we received from our supplier partners.

But from a running perspective, it's a very good piece of the business. We do know that the consumer still is very engaged in color and they're very engaged in that lightweight still yet in the running piece. Running as a category isn't as impactful in the fourth quarter, just because people are not out running as much as they do in the spring and the summer. But the basketball business is very encouraging going into that fourth quarter. We're feeling really good about it.

Hey, Sam, I just want to clarify the Cardinals. That half-a-point -- and the Rangers, that would really be a half-a-point for the quarter, not for the first 19 days.

So it'd be a lot more meaningful early? (multiple speakers)

(multiple speakers) Yes. Yes.

(multiple speakers) Yes, that's right.

(multiple speakers) A lot more meaning, Sam.

Yes, we were thinking quarter, and I know you're talking first 19 days -- or first 15 days.

And the promotional would be the same thing. It'd be more meaningful to the first 19 days into the quarter.

Right.

Right. So if you took those out, I mean, how meaningful -- that's really what I was asking.

(multiple speakers) Yes, you're right.

(multiple speakers) Yes. Yes, sorry, Sam.

We got a little bit turned around with what you were saying there, Sam.

Yes, I was thinking quarter (multiple speakers) --

So I mean, like, I mean, do you think that for the first 19 days, is it like 5 points? Or is it 500 basis points on the comp?

I would say 3 to 4.

Okay. Thanks.

3 to 4 would be (multiple speakers) --.

All right. Thanks, guys. Continued success.

Thank you.

Thanks, Sam.

Sean Naughton, Piper Jaffray.

I may have missed this, but can you give what the transaction versus ticket in the third quarter? And then maybe speak to -- you know, you guys have been doing a fantastic job in expanding operating margins here over the last few years. Where do you think about that number over the long-term? And maybe just a comment also on the inflationary front that you're seeing with the goods that you're bringing into the warehouses right now?

Yes. So, what we're seeing on operating margin, we've seen some nice expansion here lately. And as we get into the new office and new DC, I mean, we do expect that to slow down a little bit with all those related expenses. But longer term, as we open more stores and keep a decent comp, it's pretty easy to figure that we'll continue to leverage operating margin specifically, due to leverage on store occupancy costs.

But as we kind of look at the other piece on the margin side, for product margin, it's going to be a little bit lighter next year. But as we roll into markdown optimization and get that up and running, as we get the new distribution center up and running, that is going to give us the margin benefit longer-term. So if you combine some comp performance along with some of the initiatives we have internally with systems and new DC, we see expansion and operating margin for quite a few years.

You know, and we still -- I guess the point that we're looking at, at some point, we want to get into the 15% range.

Okay, that's fair. And then any color on traffic or transactions in the quarter, how you guys did in Q3?

Yes. For -- so for tick in transactions, I mean, we continue to see more of the comp driven by ticket and transactions flatter (multiple speakers) --

On a comp basis.

Yes, on a comp basis. So, we definitely do see that trend continuing. Keep in mind that some of the ticket increase is items per basket. And so the operations folks continue to do a very good job on the selling side to get more items into that basket. So that is a piece of that ticket increase for us.

Okay, great. And then just maybe lastly, the NFL was a little soft. Any specific reason do you think it was soft? Or at price points? Do you think it was product-related? Just any commentary there would be helpful.

You know, we really think that it's just that we're not really an NFL-based kind of geographic area, when you look at where the NFL is up in the Northeast and it's such a big impactful business for that fan base. And we're really an NCAA movement. When you look at the NFL teams in our area, the Falcons are down here in Atlanta and we also have the Cowboys. And we have the Saints,. and the Saints haven't had a great season. So, just like in any football-driven licensed area, wins and losses make a big difference in what the business is. Ticket in itself, it's not been really an issue, we don't think.

Okay. That's great. Best of luck for holiday.

Anthony Lebiedzinski, Sidoti & Company.

Other than the markdown optimization, are there any other IT systems projects that are in place to potentially improve the product margins?

Yes, the main one that comes to mind is, as we look ahead for the new distribution center, we'll be looking at software to do a much better job on warehouse replenishment. So now it's mostly cross-talk, so it's basically from vendor through the DC to the stores. But we'll be investing in some software that will really help us on the replenishment side from the DC. Right?

So that means from DC to store, and then from vendor to replenish to DC. So we'll be investing in some software there to get much more efficient in that area, which will allow us to replenish the stores more efficiently. So that should help from a sales and margin standpoint.

Okay, that's helpful. And also, could you give us also a breakdown of your same-store sales strip centers versus enclosed malls?

They're about the same.

Yes, they were really close for third quarter.

Anthony Lebiedzinski But (multiple speakers) --

(multiple speakers) And that's a little bit of a change from two and three years ago. The strip centers were outperforming in closed malls, but it's gotten pretty even in the last 12 months.

All right. Thank you very much.

Thank you.

Mark Smith, Feltl and Company.

First, just a quick question. How comfortable are you with current inventory levels?

We feel like we're in really good shape.

Great. And then, second, Becky, I think you talked about it a little bit earlier, but what could be the potential impact of not having an SEC school in the National Championship?

Well, I'm not going to think about that. (laughter) We're SEC-driven. (multiple speakers)

That's impossible.

Yes. It could be -- with any kind of special event, it's impactful at that point in time; not only because it's a decent amount of volume, but it's also really good at margins. So, the thing is, is that when we look at it quarter-to-quarter, year-to-year, we take that into account in the way that we plan our business. And we know that we may or may not have that for the next year, so we don't really put that into our number from a merchant perspective. To say -- all right, so we know that we did that, but how do we make our business work -- whether that happens or not.

Okay. That's fair. And then last question, can you guys talk about potential healthcare costs and impact as we look going forward?

Yes. So, as we look into next year, we're not going to really see a lot of impact from new provisions from the Affordable Care Act. You know? There have been some that have rolled in already, so it's really be just a continuation of those, and just in general, kind of inflation for next year. So, really no big impacts for next year other than just normal inflation.

As we get into fiscal '15, you'll see potentially a little bit bigger bump. You know, the two things that we're looking at, one is this auto enroll kind of provision, where folks will be automatically enrolled in healthcare but have the option to opt out. And a lot of that depends on your assumption on how many would not opt out and stick into that program.

So that's one piece of it. And then the other thing that we're kind of getting some information on, and a lot of these regulations aren't entirely clear yet, but the focus on these exchanges, these state exchanges, there's been some indication that we could see a little bit of bump in cost to help fund getting these exchanges up and running. And that would be kind of a one to two-year kind of temporary bump. But for next year, we're not going to see any big changes.

Okay. Perfect, thank you.

(Operator Instructions). Camilo Lyon, Canaccord Genuity.

Becky, I wanted to get your take on where you're seeing pricing for next year come in. It seems there's been a pretty good pricing tailwind that has driven comps. And I wanted to just get your sense on how that's shaping up next year.

You know, from a pricing increase perspective from the suppliers, I think it's probably selling out a little bit. I think the major increases have come across at this point in time. Our increases more than anything else will be about mix, not about price increase on the items itself.

And could you elaborate on that a little bit more? Is that shifting to -- is that more apparel mix? Or is that shifting to a higher price footwear categories or --? Any color there'd be great. (multiple speakers)

(multiple speakers) It's really a footwear discussion. Just because we've learned that when we go into these small markets, they're really hungry for premium products that they couldn't get before. And as we go into these small markets, it makes sense for us to really give them the premium assortments that they've lacked in the past.

So, we're adjusting that a little bit and making sure that we're really driving that business. And of course, the Jordan business has been very good for us, and that drives a higher ticket as well.

So that makes some more footwear in those slower markets will help offset this -- the natural deceleration in the overall pricing environment? Is that -- do I have that correct?

I'm not sure I know what you're saying there. (multiple speakers)

For next year, as the general pricing decelerates, you don't have the mid-single-digit increases. Will the mix help to offset that deceleration (multiple speakers) --?

(multiple speakers) Yes, it absolutely will. You're right.

Okay. Just wanted to make sure I have that straight. And you said that the NFL wasn't a big part of your business, given your regional exposure. Is that also -- are you not -- do you not have a lot of the NFL jerseys, the new jerseys from Nike, is that not a part of your business that's been at all helpful?

Well, we do have the jerseys, so we have them -- and we certainly have them in the teams that make sense. But when you're looking at Green Bay jerseys, we may have three or four stores that would carry it, as opposed to another retailer that has a larger penetration of stores that carries in the -- specifically in the Northeast. So, it's not that we don't do it; it's just that our store base is not as large to where it would be impactful to the total.

Got it, understood. (multiple speakers)

(multiple speakers) Yes.

And then just finally on the product side, on the vendor side, there's been the new Under Armour basketball shoe, any insight as to how that's been received, would be interesting and helpful. I know that they've come out with some pretty radical new product. And your insights will be greatly appreciated.

Yes, it's limited distribution at this point in time. But every time we've had their new product hit the floor, it's been particularly good for us. But it's not a high penetration. So it's not impactful as far as moving the needle.

I think that the more important thing is, is that they're bringing newness and excitement to the floor, and we really are pleased with what we've seen so far. We were quite pleased with the sign product and how that performed for us in the third quarter in the back-to-school. And we know that the product that's coming for spring and also what we saw -- you know, the plans for back-to-school next year, that they're really getting stronger in that footwear piece. And we're excited to see that happen.

Great. Well, best of luck with the holiday. Thanks again.

(multiple speakers) Thank you.

Sam Poser, Sterne Agee.

Just two questions. Clarification, does your guidance -- what does your guidance assume with the SEC situation? Does it assume that it's not going to repeat?

(multiple speakers) Jeff?

Jeff Rosenthal (multiple speakers) Yes, I mean, yes, it does. The guidance really assumes that we won't get that bump.

Okay. And then secondly (multiple speakers) -- I'm sorry, go ahead.

Go ahead.

Go ahead, Sam.

Secondly, to follow-up on the Under Armour question, another retailer said that there was sort of a north-south divide with a lot of the Under Armour footwear. Are you seeing like your stores further north aren't doing as well, and it's really much more a southern exposure doing better?

You know what, Sam? That's a good question, and I don't have that answer off the top of my head. I know that overall, we're pretty pleased with it. And what we've seen is that -- I don't -- if you remember like a year ago, when Reebok was really strong with the Zig and the Flex, we were very strong with that program. It was phenomenal for us across the board.

And then later on, it became very, very strong in the kids area. And we heard that other retailers didn't do as well with that as we did. And I don't know if that's the truth or the same from Under Armour, but from our perspective, we're pretty pleased with how it's working for us.

Okay. Well, thanks very much and, again, continued success.

Thanks, Sam.

I'm showing no further questions, Mr. Newsome. I will turn the call back to you for closing remarks.

Thank you. In summary, we are very pleased with the results we achieved in the third quarter. Earnings per share increased 20% on top of 34.1% increase in Q3 of last year. Our same-store sales have increased 12 straight quarters, and we have raised guidance 10 straight quarters. We are a greatly improved company and we will continue to improve, and I believe we will continue to achieve great results.

Last three years, new stores are performing well above our new store model. This gives us some encouragement to open more and more new stores. We will continue to increase our new store count, net of any closings again next year. We have added to our real estate staff, and we will continue to grow our new store count in the future years.

Hibbett Sporting Goods has a great future. Thanks for being on the call today, and we look forward to speaking with you on March the 15th at 9 o'clock Central Standard Time. Thank you.

Ladies and gentlemen, that does conclude the conference call. We thank you for your participation and ask that you please disconnect your line.