Hibbett Inc (HIBB) 2013 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Hibbett Sports fourth-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 Friday, March 15, 2013. I would now like to turn the conference over is over to Mr. Mickey Newsome, Executive Chairman. Please go ahead sir.

Thank you operator. With us also is our CEO and President Jeff Rosenthal, our Senior V.P. of Finance and CFO Scott Bowman, our Senior V.P. of Merchandise and Marketing Becky Jones, and our Senior V.P. of Store Operations, Cathy Pryor. We appreciate all of you all being on our call today. 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 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 in the Company's press release and SEC filings.

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 fourth-quarter earnings per share were up $0.73 versus $0.59 a year ago, a 24% increase. Overall sales increased 14% to $217.4 million compared to $190.7 million a year ago. Comparable store sales increased 4.9%.

Sales for the year increased 11.8% to $818.7 million compared with $732.6 million a year ago. Earnings per share increased 26.5% to $2.72 compared with $2.15 a year ago. Our fiscal 2013 results were accomplished by excellent assortments, great customer service, outstanding support from our distribution team, home office support team, and all of our suppliers.

Comps by month are as follows. November, we were up 5.1%, December was up 8.2% on top of 7.2% a year ago. January was down 3.7%. We lost revenue in the last two weeks due to the tax refunds being delayed. It affected our quarter comps by 1%.

From a real estate perspective, we opened 27 new stores, expanded four high-performing stores, and closed two underperforming stores, bringing the store base to 873 stores in 29 states as of February 2.

Our strategy continues to work very well, and there is no reason that Hibbett cannot be nationwide in the future. There are plenty of small isolated markets to go into.

For fiscal year 2014, the Company expects to open 65 to 70 new stores, expand approximately 18 high-performing stores and close 15 to 20 underperforming stores.

We are up low single digits through yesterday, March 14. However, in the last four weeks, we have been running mid-single digits. There have been many factors that are still in effect such as tax refund shifts, payroll taxes and an early Easter that will impact our run rate for the rest of the quarter.

Our guidance for fiscal 2014 is in the range of $2.85 to $3.05, and an increase in comparable store sales in the low to mid single-digit range. This includes the reduction of $0.07 due to the 53rd week in fiscal 2013. With our strategy to go to small markets, our investments in technology and a new distribution center and in our people, we will continue to grow at a faster rate and continue to lead the industry in profitability.

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

Good morning. We completed our year with solid performance in the fourth quarter. Branded activewear accessories and footwear were strong performers of drove our topline results. Fleece drove results in all activewear categories with Under Armour being the clear winner. We saw good performances in the North Face, NIKE and Adidas fleece as well. Our fashion men's business was also a bright spot for the quarter with Jordan apparel, Adidas originals and Levi businesses on a strong trend.

The accessory business is healthy across the board with all categories enjoying good, strong growth. Headwear, socks and sunglasses experienced big increases, and top-performing suppliers were NIKE, Under Armour and Oakley.

License products were driven by NBA and Headwear. The NFL business was soft for our markets across the -- as a whole, and the Hibbett License Group did a phenomenal job preparing and executing product assortments for Alabama's 15th national championship. Our ability to have products in local markets immediately after the win reinforces our small-market strategy and the coordination between merchandising and operations enables us to take advantage of this opportunity once again.

Footwear business grew double digits. Basketball footwear had a terrific quarter. Jordan product is in high demand. Under Armour men's and youth performance basketball was very good as well. We also saw positive momentum in lifestyle products. Youth footwear had a great quarter in Jordan, A-2T original classics, and NIKE Air Max (inaudible).

The running categories were basically flat last year as a whole. As the running business moderates, the team has adjusted appropriately and the footwear inventory is in good shape to continue to grow and thrive.

Top-performing categories in the equipment business was basketball and football; both categories saw double-digit increases.

Looking into 2014, fiscal 2014, we will continue to focus on premium assortments and new live systems to allocate product appropriately. Our aged inventory is in great shape, and we're prepared to take advantage of warm weather business.

Thank you Becky. Next, our Senior V.P. of Finance and our CFO will speak with you, Scott Bowman.

Let me begin by stating that the fourth-quarter figures mentioned in this morning's press release are based on a 14-week period compared to the usual 13-week period and the annual figures are based on the 53-week year. The 53rd week added approximately $12 million in revenue and $0.07 in diluted earnings per share to our quarterly and annual results. Any reference to comp sales will be for the 13-week or 52-week period ended January 26, while references to total sales will be for the entire 14-week or 53-week period ended February 2, 2013.

The fourth-quarter total sales increased $27 million to $217.4 million, an increase of 14% over the prior year. Comp sales were up 4.9%. Gross profit rate increased 35 basis points in the quarter. Product margin decreased 7 basis points, mainly due to markdowns associated with indices and merchandise. Warehouse and store occupancy leveraged by 42 basis points. SG&A decreased 56 basis points as a percent of sales in the quarter due to leverage in store labor, benefits and debit card fees. Depreciation and amortization decreased 16 basis points as a percent of sales in the quarter due to lower costs for leasehold improvements for our new stores.

The income tax rate for the quarter was 37.3%, which was higher than last year's due to reduction in job tax credits.

Operating income of $30.9 million increased 23% over last year and was 14.2% of sales versus 13.1% last year, an increase of 108 basis points.

Diluted earnings per share came in at $0.73 per share versus $0.59 last year, a 24% improvement. This includes approximately $0.07 in diluted earnings per share for the 53rd week.

For the full year, I would also like to mention a few highlights. Total sales were up 11.8% while comp store sales increased 6.9%. The two-year stack comp was 13.7%. Gross profit was up 69 basis points while SG&A expenses decreased 50 basis points as a percent of sales. Operating income increased 140 basis points to 14.2%, and earnings per diluted share increased 27%.

From a balance sheet perspective, the Company ended the quarter with $76.9 million in cash versus $55.1 million last year with no bank debt. Inventories increased 13.5% over the last year and were 8.2% higher on a per store basis. We spent $22.9 million in CapEx for the year, including approximately $7.6 million for our new corporate office and distribution center.

Also, for the quarter, the Company bought back 204,000 shares for a total of $11 million. At quarter end, we have approximately $245 million remaining under the existing purchase authorization.

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

(Operator Instructions). Sean Naughton, Piper Jaffray.

Thanks for taking the question. First, on the comp for Q4, do you mind breaking it down by transaction and ticket?

And then as a follow-up, on the margin, you guys have done an excellent job of improving gross margins over the last few years. Is there any -- how should we think about that line item in terms of your guidance for 2014?

So first the ticket transaction, it's a pretty similar story to what we've seen in the last several quarters. The ticket part of our comp was the real driver. We did have some improvement in transactions, but we continue to see a larger ticket increase.

And then on the gross margin, kind of like we said over the last couple of quarters, we see the margin improvement year over year a little bit slimmer. We've seen some pretty dramatic increases over the last two to three years and we see that narrowing a bit.

On the product margin side, we've made some huge improvements in aged inventory, in shrinkage, and assortments, RTVs and so forth. And there is still some opportunity there, but it definitely has narrowed. And then on the occupancy side, as we get comps in the 3% range or above, we'll start to see leverage on that piece of it.

So do you think for 2014 though that the occupancy can offset -- or should we expect product margin expansion here in 2014? Is that the way you're thinking about the model at this point in time, or should it be primarily driven by occupancy to offset any sort of March margin gains?

It will be mostly occupancy, but there may be a small nominal increase in the product margin as well.

Okay, thank you. And then lastly on the share repurchases, again, you guys have always done a nice job of returning capital. What sort of share repurchase do you have factored into the guidance that you've outlined today?

It's about 3.5% of existing shares. And that's one of the reasons why our cash balance was a little bit high at the end of the year. We wanted to make sure that we had plenty of cash for our new distribution center as well as a meaningful buyback.

Great, thank you very much.

Peter Benedict, Robert W. Baird.

Hey guys, thanks. A couple of questions. I guess, on the product margin profile in the fourth quarter, you said down slightly. Can you give us a little more color there? How much of that was just the clearance activity? Was there any mix to speak about there? And then on the 42 basis points of warehouse and occupancy leverage, can you break those down in the quarter between the two?

I'll speak to the product margin for the fourth quarter. We really had a strong fourth quarter in November and December. And with those comps, we felt like it was an appropriate time to really ensure that we come out of the quarter with -- as clean as we possibly could in regards to winter product. So, we accomplished that. We did take some marks on product probably more aggressive than we have in the past, just to ensure that we were very clean coming out of the year in an age perspective. So our clearance it is good shape. The age is as good as it's ever been, and we really took advantage of that so that we could go into this fiscal year in a really good position.

And the second piece of that, on the warehouse and occupancy leverage, the way that breaks down is the warehouse leverage was actually a little bit negative for us, so it's all driven by occupancy. The main reason for that in the warehouse is that we handled a lot of RTVs in the fourth quarter, much more than in the prior year. We also had a lot of new stores. Half of our new stores we opened in the fourth quarter so we had a lot of activity to get that product out the door. And then the final thing we had at the very end of the quarter, we had a lot of receipts come in for spring merchandise, and that's one of the reasons or the main reason why our inventory was a little bit higher than normal at the end of the year.

That's helpful, thanks Scott. And maybe can you remind us how the calendar shift is going to impact kind of the first quarter and then the subsequent quarters as we look out over the balance of this year? I know it's all a wash on an annual basis, but just help us understand some of the flow in terms of comps and earnings and what the hits and the puts and takes are as we look forward.

There's -- if you look at the back of the press release, there's a table that hopefully will be helpful to kind of put that in perspective. Kind of in general, as we see the calendar shift, it's going to hurt us a little bit in the first quarter because we pick up -- we give up a higher volume week in the first part of the quarter and pick up a lower volume in the first part of May. And then in second quarter, it's going to help us quite a bit from a revenue standpoint because we will capture an additional high-volume back-to-school week, and then that will reverse in third quarter. It will be negative by roughly the same amount for the same reason. And then in fourth quarter, it's fairly flat. And that's kind of how we see it shaking out.

I totally understand. Lastly, on the real estate, nice to see you guys getting that up, the square footage, at least north of 6%. Do you think that ultimately can make its way towards 8%, 9% as we look out? Are the realistic conditions getting easier? I know you guys had added some more people, so maybe you're just working harder to get these. So I'm trying to understand that dynamic.

And then a tangential to that, Dick's Sporting Goods is obviously talking about things in smaller market stores. Remind us what your overlap is with them and what you see when they are in your markets. Thank you.

Okay Peter, we feel really confident hitting our net store goals for this year. We have a lot more deals already signed this time than we were a year ago. We are way ahead of that pace. We probably have about 30 more deals already done this year than we had all of -- by August of last year. For us, it's a little bit different because we can open a store in 120, 120 to 180 days, so we still have a lot of stores to go.

From the new store construction side, we are seeing it get a little bit better. The last couple years, we -- it was very minimal. We've seen a little bit of opportunity there. So to get to the 7%, 8% range, maybe over time -- we like that we are over 6%. Hopefully we can push it to 7% and then 8%, but one thing we are always very conscious of is really the type of deals that we find. So, we are not going to sacrifice quality to just open stores. There's plenty of stores to go to. We just have to be patient and continue to grow. But we have upped our staff. It has given us the confidence on our new stores being 15% over pro forma to open even more stores. So we feel really good about where we are positioned for this year, and hopefully when we get to this time again next year, we will be even raising it higher.

On the Dick's comment about going to smaller markets, those would be maybe midsized markets to them. To me, it would be a very large market. We'll get occasional Dick's occasionally. It may hit us 15% to 20% the first year, but year two and three, usually we're back and a lot of times we exceed those goals. So we get occasionally, but I really don't see over time, even with them opening stores and other people opening stores, there are so many small isolated markets to go to that it's really not going to be a factor. We say about 75% of our stores are pretty isolated, in 25% we have competition. Today, we have a real estate meeting and most of the deals that we are looking at, we are in the middle of nowhere. And there's no way Dick's or Academy or whoever would put a store there. So we feel very confident in our model.

Their definition of a small store is 35,000 to 45,000 square feet. So clearly much larger than ours. And so for that model to work, you're going to be talking about a very large population base.

Their definition of a small market is probably different than ours. They are not talking about Selma, Alabama or Festus, Missouri or Gun Barrel, Texas. They're talking about a little larger markets than that.

Excellent, great. Thanks so much guys.

Dan Wewer, Raymond James.

Thanks. Can you remind us as to where Hibbett stands on the relocation to the new corporate office, and I guess more importantly the status of the new distribution center? And Scott, how you're taking into account the cost of the new DC in your earnings outlook for the current year as well as the following year.

Yes Dan. From a home office standpoint, we will be moving probably in late May, early June, and we feel very confident that we will hit that. Our distribution center has started clearing the land right now, and we still want to be fully functional, and we're right on schedule for April 1 of next year.

So the other question about the additional costs, kind of how we've looked at it is, for this year, fiscal '14, it will be about a $0.05 to $0.06 impact per share. And then as we open the DC in the following year, it will be a little bit higher, an traditional $0.09 to $0.10 on top of that when we open the DC for that year and then after that it will level off.

On the $0.05 to $0.06 impact for the current year, Scott, is that backloaded or is it roughly $0.015, $0.02 each quarter? Or --

It's going to be a little more back loaded, especially if you consider that we still have the physical move in front of us, as well as the depreciation once we capitalize that building.

And the other costs that will show up I guess in cost of goods sold with a higher distribution cost?

Correct.

Then the same thing would be true next year, or is once the facility opened, the geography of the income statement change as to where that $0.09 to $0.10 impact would take place?

No, we are planning on keeping our geography the same. So those warehouse costs should flow-through cost of goods like they do today.

And one other question. Is it Mickey or Jeff, you talked at the beginning about some distraction with changes in the tax refunds, and changes in the payroll tax. Obviously, the tax refunds, that's kind of a short-lived phenomenon. But perhaps you could talk more about the payroll tax. I know, historically, whenever your customers have less cash in their wallet it tended to have an impact on sales. Is that how you see that impacting us going forward?

There's so much noise now with payroll tax and then you have the tax refunds, you have some things changing with Easter, and it's just really hard to quantify. A lot of times, when things have gotten tough, I take example our Jordan business, you're talking with some low income areas, that's probably one of our hottest things that we have. And our customers still find money for what we have to do. So we feel pretty confident in that.

Just the last question I have, remind us why Easter would have an impact on your first quarter?

Because it's moving into March, and usually spring breaks and all that are around that, and usually the next couple of weeks should be some heavy volume weeks for us just as it moves -- that it's a little bit earlier than it was a year ago.

So it will help, the first quarter.

Yes.

It was one week early.

Great. Thank you.

Rick Nelson, Stephens.

Thank you, good morning. Wondering if you could discuss the footwear business, how (technical difficulty) I noted the running category looks flat in the quarter, and how you see that evolving. And are there other categories such as basketball? How much of an offset could that possibly bring to a slowdown in revenue?

You're correct, you basically hit it right there on the nose. The running category is a little bit softer than where it was a year ago. It's not as robust as we had seen. Last year, however, when you look at the basketball categories, they are on fire. And from our perspective and the way that we go at our businesses in our small markets, it's about do you have the right shoe and do you have the right fashion and they want it. And fortunately we've got a really strong footwear group that recognized that early on-demand and they've adjusted their assortments appropriately. So as we see one category moderating, the other category has been addressed appropriately for that fashion business, and we are seeing our footwear business be quite healthy just for that matter. I am thankful that I've got such a good crew back in footwear that recognizes those potentials and they adjust accordingly. So yes, if you didn't recognize that early on, it could be a concern, but as we see that business moderating in running, we've got really good growth going on in our basketball and in our fashion business. So we are in good shape going forward.

So you're planning for that category to grow?

I certainly am.

Terrific. Also, I was curious how much lift you got from the Alabama championship. I realize you were lapping championship a year ago.

We did. We've lapped it a couple, three years now.

We'll do it again next year!

We don't put that in our plans. We always pull it out and we task ourselves to ensure that we make our numbers without that business in there. So, it's always nice to get it when it comes through. And the championship product actually hit our expectations this year just as it hit our expectations last year. So we were pleased with that. We always like to get it because it does help us with a margin. They come in immediately after the game and they buy everything they can get their hands on at full price. And that's a great thing to have happen for you, especially when you can drive that into the small markets and be there for them immediately after the game. So it hit our expectations. We were pleased with the overall performance.

Terrific. Finally, if I could ask Jeff the time line for potentially discussing an e-commerce strategy.

In the second half of this year, we are coming up with a strategy. And as we put that together, we'll let people know, but really we have got enough on our plate between a new home office, a new distribution center going on right now, but the second half of the year, we will open, spend some time on the strategy and take a further look into it.

Great. Thanks a lot. Great quarter and good luck.

Thank you.

Sam Poser, Sterne Agee.

Sam, are you there?

I'm sorry. Good morning everyone. Can you give us an idea of the number of stores by quarter that you're opening, just generally?

I believe just roughly, Sam, it will be about nine or 10 in the first quarter. Second quarter will be probably around the 15 range. And third quarter, third quarter will be about 20 and about 23 in the fourth quarter, somewhere in there. It's just a rough guess right at this moment, but (multiple speakers)

And will the closings reflect the similar percentages, like kind of the way it fell this year, do you think, as well?

They vary throughout the year depending on when the lease comes due, or those type things, so it varies. Usually, it's you've got a little bit more in the first quarter, a little bit more in the fourth quarter. But that's about what it would be.

I think the key take-away is the distribution will be more front-end loaded this year than last. Last year, we opened half of our stores in the fourth quarter, and 40 of our stores of our total 54 openings were in the back half of the year.

Our store openings this year will be a little bit better balanced quarter by quarter than they were last year. But -- and then they will be even better balanced the following year. We've been opening too many in the fourth quarter and we're going to have that percent down this year and hold it down again next year.

Perfect. And then Becky, can you give us sort of the breakout by quarter of footwear and apparel by month, excuse me, within the quarter on how you saw that roll out? The comp?

We don't give out comp by category. We had good growth in both footwear and apparel. They were both very strong. We do see apparel uptick in percent to total business in the fourth quarter because of the giftgiving of fleece, but as a total, footwear is a driver. But we don't really break it out.

Okay. Lastly, when you look at the brands, the key drivers, you called out Under Armour as far as their footwear and their fleece. Can you talk about like as far as -- what are the key brand drivers for those year-over-year increases as you look going forward at fiscal '14?

Our major partners are still seeing good growth with us across the board. We still see potential in NIKE. Each and every year, they always have something that they are bringing to the table for us. This year isn't any different. We feel really good. It may be different from one area to another of where they find their innovation, they bring it to us, but we do see good growth. And it's not just a footwear thing, or an apparel thing; we experience that in both areas.

Under Armour continues to be a high growth supplier for us. They are very aggressive, and they're very supportive, and in turn we see that potential. In particular, their apparel business just continues to double down on business for us, and we have a lot of confidence in the innovation that they bring. We are also really pleased with what we are seeing with their footwear. After they opened up the spine in the back-to-school time period and going forward, we are seeing that's just getting a real good consistent business for us into spring as well. Their click business is good; their basketball business is good.

And then Adidas has really done well for us as well from originals. It's been a really nice pop for our fashion business. And they continue to support us in the apparel and it's not as big of a business for us, but we are working with them to grow that. And we are seeing their basketball, their cleats, across the board where their categories are good. We support them in that and we see them as potential for the future because. It's something that you always want to have is the potential for the future.

So just talking about it sort of as a percentage increase regardless of size, it would be Under Armour, Adidas, then NIKE all up but sort of in that ranking as far as year-over-year increases.

I would say you are close to right there. Under Armour is -- probably has a large potential for us. And then I don't know that I would say Adidas or NIKE was above one or the other. I think they are probably pretty comparable.

Thanks Becky. And good luck to everybody.

David Magee, SunTrust Robinson Humphrey.

Hi, good morning guys and good quarter. Just a couple of questions. One, just to follow up on the e-commerce question. I was curious. I understand it's important to have that over time, but I'm curious right now how much your customers are asking about that as something they want from you all.

It's kind of a hardened measure. The way I look at it is if we can do it profitably and satisfy customers, at the end of the day it's about our customers and how do we satisfy some of their needs and how to do it profitably. David, you know, if you come in for a certain size shoe and we don't have it, we would obviously like to find a way to get it to them, but it's part of where the world is going and how does Hibbett strategize to do that. And we'll look at it in a lot of different ways. We could determine that we won't do it, but right now we just need to look at it as a viable option.

One of the things we had to do, even before we could get there, was invest in our infrastructure, such as people, a new distribution center, we are looking at POS. So there's some logical steps that we had to make before we would get there. So it's something that we will address as we go forward.

I'd like to comment on that. Hibbett's philosophy going back is we always try to do what is needed. We try to go to small markets where we are needed. What we sell is needed, the landlord needs us, the customer needs us, we are needed in Gun Barrel, Texas. And we have to ask ourselves the question, are we needed in our net sales? As long as we can continue to go to small markets where we are needed, where we take brands that's not there, we are going to have to eCommerce and it's in our future plans. But it's not anything we've got to do today.

Understood, thank you Mickey. The second question is on the traffic side, that being a little flatter relative to the ticket size. What is the longer-term plan for traffic? Or wouldn't you like that to be a few points higher, and if so, how do you get there?

Well you know, we, from a marketing standpoint, will continue to drive footsteps. We really have started it a pretty good way with mobile marketing, which has helped drive footsteps. As we continue to communicate through different types of social media and stuff, we hope to drive more and more footsteps. I think we are still just in the very, very beginning stages of really getting our arms around mobile marketing and social media and what that will mean for us in the future in driving footsteps.

This is Scott. We are also investing in some business intelligence tools as well just to make sure that we have some system and kind of horsepower behind looking at assortments, looking at SKU growth productivity, looking at trends by market, type of store, that type of thing. So we are going down that path as well.

Thank you Scott. And then lastly, what is the outlook for inflation this year? Product inflation?

I'm sorry. I thought you were like I don't know what the economy is going to do. Product inflation, probably more than anything else we are not anticipating anything in particular to be much higher than what we've experienced in the last -- we've taken some price increases over the last 12 to 18 months, and it's moderated out at this point in time. I know that we've had conversations in regards to our tickets and increasing naturally a matter of our assortment mix being changed. And that's really focusing in on premium products and that drives good footsteps into our stores. But the consumer is wanting that premium product. So from a price increase perspective, we are not anticipating anything significant.

So less of a number this year than last year?

Yes.

Great, thank you.

Sean McGowan, Needham & Company.

Thank you. I may have missed this earlier when you were talking about the shift of some revenue related to the tax refund, but did you comment on what the impact you've seen so far in the first quarter?

So far in the first quarter, we said that quarter to date we are kind of in the low single-digit range. However, if you take out the first week we are more in the mid single-digit range. So coming into the quarter, the first week was still down for us but we've seen it recover since then.

Okay, great. That's helpful. Scott, what's your outlook for the tax rate in 2013, calendar -- fiscal '14?

One of the benefits that we saw in all of the activity with the fiscal cliff at the end of the year last year from a corporate standpoint, it actually will help us a little bit, mainly because of the reinstatement of the work opportunity tax credits and some bonus depreciation. So looking forward, we are looking at 37.4% to 37.5%

Okay, thank you. And a couple of others. The impact of that extra week in the quarter, you quantified it as around $12 million. Is that relative to the total quarter on a normal quarter? Is that a little less than the usual kind of impact you would have because of the timing of the tax refund?

It is. We really have higher expectations for that 53rd week. As you remember, last time we guided that week would give us $0.09 to $0.11 in EPS. It gave a $0.07. And the difference is mainly the shortfall in revenue that we saw mainly because of the tax refund shift.

Okay, thank you. And last question then about the impact on the DC, given the near-term and kind of next year, how far out do you feel like we need to go before we start to actually get some leverage from that DC so that it's picking up relative to what it would have been in terms of profit impact?

Yes, I would say about 18 months, 12 to 18 months after we take it live.

Okay, so maybe some benefit in 2015?

Correct.

Okay. Thank you very much.

Mark Smith, Feltl & Co.

Hi guys. Can you give us any more insight on impact from weather, especially as we look at outerwear trends, some of the North Face and fleece stuff that you talked about?

Yes. Looking back in fourth quarter, it was about the same as it was a year ago. So I wouldn't really use weather as a theme for the fourth quarter.

When we see -- as you expand into more states and more stores kind of in places that maybe get some inclement weather in wintertime, do you expect to be able to leverage that and do more kind of outerwear sales or will you see more kind of negative impact and volatility based on weather?

I don't know if there would be a negative impact, but as we have more northern markets, we definitely look at the fleece and outerwear a little bit differently than we do in some of the southern markets. But I think it's a big advantage because obviously they are usually higher tickets and they usually drive more revenue. So -- but as we change some of our geography, our assortments do change a little bit.

It's the duty of assortment planning, and that group really working on helping the merchants really understand what they need to do from a market perspective.

And then lastly, can you talk a little bit about store expansions and what you're seeing today as far as lift coming out of an expansion and the return on the investments into an expansion today and whether you've seen much of a delta on that compared to where we were a year or so ago?

It's been pretty consistent. And the results, they continue to be very favorable for us. I think we do a really good job of identifying what stores we need to expand. And that can provide us that good return. And we've looked at it for a couple of different years going back. And the answer we see is it's pretty consistent that those stores, if we expand them from, say, a 5000 to a 7500 square foot box, that they get back to their same EBIT percentage at the end of year two. And that's on a pretty good sales increase. So, they've been very productive for us, and it's been pretty consistent.

They have been very productive and successful for us. We think it's at least another 150 that we could expand in the future today.

Great. Perfect. Thanks guys.

Camilo Lyon, Canaccord Genuity.

Good morning. This is actually Patrick on for Camilo. Thank you for taking the question. With 2013 being a year in which markdown optimization becomes a more meaningful part of the business, how should we think about merchandise margin and total gross margin trends throughout the year?

I'll talk about markdown optimization specifically and Becky can tag on if she's got any additional comments. But markdown optimization is live; it has been live for a little while now. It is on the very small piece of our business. And we continue to think this year will be more of a learning year for us. And we'll kind of keep it in pilot mode. But to just kind of give you some perspective, on the very small piece of the business that we're working on right now, the early read is it's giving us some pretty good indication it is going to be successful for us. And that early read is an acceleration of sales, which you would expect, but some improved gross margin dollars as we get through that product and some improved GMROI, which is a pretty important metric that we keep a close eye on. So we see the early read as positive, but at this point, we are reluctant to say that that's going to add any benefit this year. It's more of a next year kind of benefit for us.

Category by category we will be rolling out this year. We are conservative in the way we have that calendar planned just to ensure that we do it thoughtfully.

Great, thank you. And as far as comp in Q4, maybe you can help us think about what the components were between traffic and ticket, and how you see that unfolding in 2013.

In Q4, it was still more heavily weighted towards the average ticket, and some of that is by design as we move our consumer into more of the higher premium products, so there's really no big surprises for us in that regard. It's been pretty consistent over the last few quarters. Looking into this year, we would expect it to be roughly the same.

Okay, thank you very much.

Eric Tracy, Janney Capital Markets.

Good morning. I guess the first question just in terms of margins, you guys have obviously done a tremendous job over the last several years through system enhancements, inventory management, this markdown optimization, just trying to get at kind of the structural levers beyond occupancy and G&A leverage that are still sort of on the come. And maybe is there sort of an updated view on the longer-term sort of op margin plan?

We all talk about margins, and we've done a good job on improving it the last couple of years. We are -- with such things as the markdown optimization, we think in the future that will help us expand margin. As we get into our new DC facility and be able to fill in more frequently to our stores and flow our product a little differently, we know that there's turn and margin implications there. So as we get through some of these transitions which we expect to start growing our margins quite a bit, this year, with markdown optimization, there'll be some impact, and as we get into the following years, there will be a much larger impact. We get our distribution center up and be able to flow our goods much faster and quicker to our stores and being able to get the right product to the stores better than what we already are doing will definitely helped our margins in the future.

And just to tag on that, a couple of comments Eric. I mentioned some business intelligence tools. I think that will help us to some extent as well, just to give us a little bit better insight to where the unproductive inventory is, so give us a little bit sooner heads up on that, and so we can flow the inventory appropriately. And then just as we expand our store base and as we continue to grow, we become more important in the suppliers' eyes as well.

So with that, is there sort of an optimal or sort of planned out margin you guys think about? Is it just one of the themes or is it --?

Eventually, we want to be consistently 14%, 15% type margins. That's where we would like to be long-term.

In total operating margin, that's kind of our goal longer-term is -- that's what I work on quite a bit looking forward is how do we get to that 15% operating margin? So, I work on that a lot and update that model a lot, so we're really focused on that.

Okay. And then as we think about real estate and the new store expansion, any sort of differences in the kind of rural markets versus maybe some of the more suburban in terms of the visibility or ease of getting leases signed? I guess, as we think about there are certainly opportunities in rural markets, but are those a little bit more challenged to get signed versus some of the more developed markets?

Not necessarily. A lot of smaller markets, they weren't as overbuilt as some of the larger markets. Not necessarily. We sign different types of deals all the time, and there's not one advantage or disadvantage. Only sometimes in some of the more rural markets there just may not be as much real estate available sometimes. But really no difference between the two.

Okay. And you kind of mentioned obviously some stuff may have -- some of the encouragement from be it a Dick's or an Academy, that you don't feel like that is sort of a threat. But it seems like you talk about when there is an overlap kind of a 15% to 20% hit out of the gate. Is that when you just have kind of a direct overlap, or is that still a Dick's store that's not all that close in proximity to a Hibbett store?

That's really more of a direct -- it really depends on where they open in the town. A lot of times, we don't take a hit at all. But on average, it's probably about 15% to 20%, but a lot of -- really depends if we are in a mall or a strip center or the real estate where they are at. But it's really -- that's about it.

We take that hit the first year. We start coming back in year two and three, and in some cases five years later, we are way ahead of where we were.

I think one of the things that differentiates us is the fact that we really stay focused on customer service. And footwear is full service for us, and continues to be. It's something that I know that the operations group works incredibly hard to ensure that our group and our store managers really know product and can speak to that on a one-on-one basis with the consumer. So when anybody comes into town, whether it's a Dick's or an Academy or any sort of competition, everybody goes to the store because they need to see what's new, but they continue to gravitate back to where they know they're going to get good service in the product that they are looking for. And that's one of the reasons that we work on our assortment is to ensure that we stay premium and that we stay focused on making sure the customer is taken care of.

One of the things, probably one of our advantages is that we are a lot more nimble, so our assortments, we know how to compete against larger boxes, so we know what our strengths are and we know what their weaknesses are, and with assortment planning, we adjust our assortments.

The big advantage we have over big box is we are full-service. And we talk full service, we need to talk training at the same time. We have a very sophisticated in-depth training program for store managers. It really emphasized full customer service.

Okay, that's great. And then maybe just a last thing as it relates to e-commerce and the plan there. It sounds like you're already sort of in the phases of building out some marketing spend and allocating more dollars to social media and sort of online marketing. How do we reconcile that to maybe not still needing -- having a need for an e-commerce platform? And I guess just the overall assessment of your consumer and where the trends have gone in terms of their access to the Internet, where that's going, what the pace is, and ultimately, yes, the strategy for Hibbett in terms of holding onto that consumer as they migrate along.

One of the advantages that we have, and you talk e-commerce strategy, and one of the things we talk about -- 75% of our transactions are cash or debit. So very little has been spent from a credit card. So our consumers are very (inaudible) driven, which is impactful. Most of our markets, we are in small towns. Their form of entertainment is getting out into public and going to a physical store.

The other thing that we look at, two, is our items that we carry from our vendors are at suggested retail prices. It's not about price. So our main focus is making sure we have the right stuff at the right time for our customer. But this world is small. People -- trends that are happening all over the world, I don't care if you're in a small town or a large town, they know what's going on. So it's just on how you can be more convenient and how can you service our customer better. So continuing on that strategy, we will make sure that we go and we do what we need to do because we are needed and make sure that we are very profitable.

According to the National Sporting Goods Association, if you go back 20 years, approximately 13% to 15% of sporting goods was sold by mail order or catalog. Today, that's almost nothing by mail order or catalog. It's gone to nothing, but e-commerce has gone up to the 13% to 15%. So this is probably why we haven't been impacted in Hibbett. But if it keeps growing in the future, we will have to look at it but we want to be needed. We are not too sure we are needed there today.

Okay, fair enough, I really appreciate it. Best of luck guys.

Anthony Lebiedzinski, Sidoti.

Good morning. Just wondering, given the strong performance of these store expansions, I was wondering if there was any way that you could actually accelerate the pace of the store expansions.

Anthony, really either the space has to become available or there had to be there -- we are always looking to do -- if there are more available real estate, we will do it faster. But that's basically we wait and make sure we get the right deal and all of that. A lot of times we have to wait until somebody goes out of business or there is a spot available in the center.

Got it. Okay. And as far as your CapEx expectations, given the DC move and the corporate center move?

So for this year, Anthony, we expect to spend about $55 million in capital and about $38 million of that is the DC and the office and the remainder is just normal capital spending for IT and other projects.

So even with this higher-than-usual CapEx, you will still be able to repurchase about 3% of your shares, right, you said?

Absolutely, about 3.5%

Okay. Thank you very much.

Seth Sigman, Credit Suisse.

Good morning. Just a couple of quick follow-up questions. First, on the Dick's question, is there a way to actually quantify the overlap in your assortment with the full line competitors? Obviously, there's some differences there with your Jordan exposure, the college business. What's the right way to think about that?

I don't know if we've quantified it, but we see marked differences in our license business. We see marked differences in our footwear business, marked differences in our kids business. So as we continue to mature against these, we will continue to be retaining our assortment. So we really don't quantify it but we know where there's definitely gaping holes where we can out-service them and out-assort them.

Okay, that's helpful. And then in the hardlines category, did you actually quantify how that business did overall? I know you mentioned football and basketball as standouts, but how did the category overall perform? As you think about it in Q1, you're going to be lapping the increases in baseball bats last year. What's the right way to think about that?

The baseball bats from last year, we are lapping that now. And it's obviously not as strong as it was a year ago because everybody had to have a baseball bat. More importantly, from a baseball perspective, in spring right now, it's a little bit soft. It's been a little bit rainy for us, and I don't want to talk about the weather but it has been a little bit wetter than normal and it's taken some time to get the kids out onto the field. So, as we go into warmer weather, we expect that to rebound, but we put that in our plans from a baseball bat perspective. And as a total, last year we were talking -- everybody was concerned about gosh that's going to be really impactful to your total. And it really doesn't move the corporate dial, if you will, from one item, one kind of category perspective, so we were fine.

Equipment as a total for the fourth quarter was fine. It was not an overachiever by any means, but I felt really good about the way we managed the business as a total. And in particular, we felt that our basketball business was a bright spot as well as footwear. Baseball is not really in play for the fourth quarter at all for us.

Okay, thanks. Then one last one. Scott, the payables were up way up this quarter versus last year. Anything specific going on there?

That really kind of coincides with the inventory. We brought in a lot of spring inventory at the very end of the quarter, so if you look at those two together, that's the reason for that. It's we just had an extra week and that spring merchandise comes in that week.

Got it, thanks.

Chris Svezia, Susquehanna Financial Group.

Good morning everyone. Scott, just for you. I'm just curious. You talked about occupancy, the ability to leverage that above a 3% comp, product margins, some opportunity but I guess call it fair to say kind of flattish. When you think about the SG&A component, given what you're doing in corporate headquarters, etc., where does the lever point stand for SG&A this year?

Yes, so with the additional overhang, the leverage point for SG&A will be closer to a 4 versus kind of the 3 that we stated in the past.

Any of that first half for second half weighted, or is it pretty even?

The pressure is a little bit more back-half weighted because we will have a little more expense as we fully move into the new office.

Okay. And then product, Becky for you. Running for a second you comment it's flat, I guess no huge surprise. Within running, there are certain aspects. So I guess maybe if you can talk about from either a fashion or a color perspective versus function, so difference between Mizuno versus, I don't know, NIKE and Reebok, and there's puts and takes. I'm curious. Maybe you can do a little deeper dive. And are you guys getting (technical difficulty) from NIKE or do you have it yet?

We don't have it yet. We're going to have it in a very limited way in our stores. So, we see it as important to have on our floor just because of the technology and the innovation of it. We didn't get invested too heavily in it just from an allocation perspective, and ensuring that we put it in our very best-run doors so that that customer will appreciate what that innovation brings. Running as a total, when you look at it from a brand perspective, NIKE is still the strongest for us and the NIKE Free continues to be a good selling product for us.

We do see in our technical running that's a healthy business. And it's in limited doors, so we're pretty careful that we are ensuring that, from a product perspective, that we are really looking at the assortments in the doors that can drive technical running. And it's healthy, but it's not the biggest percentage of our total. So the running business as a total, we still look to NIKE to really drive that for us and Free continues to be the biggest play.

Okay. And then a small one here, just on hats. Headwear, the driver, is that still just snap backs continuing to grow for you guys? Does that continue to expand into additional doors, or what's going on there?

Snap backs have been a lot of doors for us since I would say the back half of the year. It's plateaued as far as the growth piece of it, but it's a big piece of what the hatwear -- of the hat business at this point in time. We do see that there is some newness out there. The under-the-bill is good for us at this moment. However, we think that the fashion customer is probably going to move on.

The NBA headwear is phenomenal, and that's really all about the snapbacks at this point in time. But as far as going forward, it's now a consistent piece of our business and it's not decreasing. We still see really good sell-throughs on a week-in and week-out basis, but we are not seeing it accelerate like it was before, and probably because we have it in the appropriate number of doors at this point.

I see, okay. Very helpful. That's all I have. Best of luck to you guys. Thank you.

Sam Poser, Sterne Agee.

Just two quick questions. What was your inventory level sort of on a comp basis? Because you basically flowed the goods probably the same way you did last year but the extra week threw it off. Could you give us an idea maybe as of the first week of -- on a comp basis on either week, where you stood?

At the end of the year Sam?

Yes, at the end of the year. Either take the end of the first -- as of the end of the fiscal year on the comp basis or end of I guess the equivalent of January 26, which was the end of last year.

I guess the best way to look at it probably is just on a per-store basis we were up 8.2%. I had a 4.9% sales comp, but that 8.2% was inflated because of those receipts we brought in that very last week of the year. Take that out and you're pretty close to the comp number.

Got you. Then you mentioned your new stores were running 15% over the pro forma. Can you give us either a new store productivity by square foot number or sort of give us some idea of what that expectation is, what that pro forma is?

Yes, so the pro forma is -- if you talk about productivity, usually we figure that the stores will start out at about 70% of a normal store and then build up to 100% over the three-year time period. And that's kind of generally what we've seen, and it's pretty typical of the new stores that we open today.

But you said that some of these new stores are outperforming, so the question is does that mean they're running at about 79%?

They are running slightly ahead of the 70% that we've seen over the last couple of years, so in kind of low to mid 70% kind of range.

All right, thanks again.

Sean McGowan, Needham & Company.

It had to do with CapEx. Could you talk about what -- remind us what was for '12. And you said about $50 million for '13? And the same for --

So for 2012, it was closer to $22 million. And just keep in mind about $7.5 million of that was just getting started on the new DC and the build out of the new corporate office. And in fiscal 2014 this year, the $55 million that we'll spend, about $38 million of that is the distribution center and finishing up the corporate office. And then the remainder will be new stores and IT projects and other normal store refurbishments and that kind of thing.

Okay, great. Thank you very much.

We have no further questions on the line. I will now turn it back to you, Mr. Newsome, for closer remarks.

Thank you. We have had three straight record-breaking years at Hibbett Sporting Goods. The last three years, new stores have outperformed their sales pro forma budget by over 15%. This gives us more confidence to accelerate our new store growth again this year and in future years. Net of closings, we believe we will open 50-plus new stores this year and more next year. We are a greatly improved company. We could have 1500 stores in the future because our small market model works in all 48 states. We have a great future at Hibbett Sporting Goods.

Thanks for being on the call today. We look forward to speaking with you on May 24 at 9 A.M. Central time with our first-quarter results. Thank you.

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.