Hibbett Inc (HIBB) 2017 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Hibbett Sports' third-quarter FY17 conference call.

(Operator Instructions)

As a reminder, this conference is being recorded Friday, November 18, 2016. I would now like to turn the conference over to Mr. Pat Watson with Corporate Communications. Please go ahead, sir.

Thank you for joining Hibbett Sports to review the Company's financial and operating results for the third quarter of FY17, which ended on October 29, 2016. Before we begin, I would like to remind everyone that Management's comments during this conference call not based on historical facts, including those in response to your questions, are forward-looking statements. These statements, which reflect the Company's current views with respect to future events and financial performance, are made in reliance on the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, and are subject to uncertainties and risks.

It should be noted that the Company's future results may differ materially from those anticipated and discussed in the forward-looking statements. Some of the factors that could cause or contribute to such differences have been described in the news release issued earlier this morning, and the Company's annual report on Form 10-K and in other filings with the Securities and Exchange Commission. We refer you to these sources for more information.

Lastly, I would like to point out that Management's remarks during this conference call are based on information and understandings believed accurate as of today's date, November 18, 2016. Because of the time-sensitive nature of this information, it is the policy of Hibbett Sports to limit the archived replay of this conference call webcast to a period of 30 days. I'd now like to turn the call over to Jeff Rosenthal, Chief Executive Officer. Please go ahead, Jeff.

Thank you, and good morning, everyone. Welcome to the Hibbett Sports' third-quarter earnings call. I have with me this morning Scott Bowman, Senior VP and CFO; Jared Briskin, Senior VP, Chief Merchant; and Cathy Pryor, Senior VP of Store Operations.

Net sales for the 13-week period ended October 29, 2016, increased 3.8% to $237 million compared to $228.3 million for the 13-week period ended October 31, 2015. Comparable-store sales increased 0.7%.

We are pleased with our back-to-school sales, and continue to see high single-digit comps in footwear. Sales softened in September and October, as apparel sales became more challenging, primarily in our cold-weather categories.

Gross margin rates declined due to a mix shift to footwear and in seasonal apparel sales. As expected, expenses were higher in the quarter due to the investments in our ongoing omni-channel initiative. But we also experienced higher expenses in other areas against a favorable third quarter last year.

For the quarter, Hibbett opened 13 new stores, expanded two high-performing stores, and closed five underperforming stores, bringing the store base to 1,067 in 34 states as of October 29, 2016. We are excited to announce that we opened our first store in California during the third quarter, and we have opened another one so far in this quarter. With California and other states, we still have many opportunities to grow in the underserved markets for years to come. Our goal is still to have over 1,500 stores in the future.

We have begun a full rollout of our new POS system to all stores. And we are very optimistic with our new capabilities that will help drive revenue. With this new system, we will be able to serve our customers much better. And it is our initial step into becoming a full channel omni-retailer.

This is just the beginning in helping us drive our Business. With our 6 million-plus loyalty members and our store base, we believe that we can drive additional business that we have not been able to capture both in store and digitally. We have made significant progress on our eCommerce initiative and will deliver next year.

I would like to thank all our employees for all what they do in stores and at the corporate office in helping us serve our customers better. I will now turn the call over to Jared Briskin, VP, Chief Merchant, to talk about our merchandise trends.

Good morning, and thank you, Jeff. During the third quarter, we had a very mixed performance. As expected, our back-to-school footwear business was fantastic and led to significant gains early in the quarter.

As the back-to-school business waned, sales started to suffer due to category challenges outside of footwear, and declines in seasonal categories. These difficulties prompted a more aggressive stance with markdowns and promotions to drive revenue and keep the inventory as clean as possible.

Our apparel business was down low-single digits for the quarter. The continued updates to our assortment in non-seasonal categories had a very positive impact, although performance product continues to struggle. Seasonal apparel saw significant declines, as the challenging weather pattern is prompting our customers to wait as long as possible to buy seasonal apparel.

The men's business was up low-single digits, as investments in denim, athletic bottoms, and polo's were very solid. The women's and kids business was soft, down high-single digits, as performance product and seasonal challenges were not offset. A strong back-to-school for backpacks did not offset declines in socks, leading to a low single-digit decline in accessories.

The license business was down double digits. Decreases in college were broad based across teams and categories. Major League Baseball was significantly aided by the Cubs and Indians playoff run, but was offset by weakness from last year's playoff runs of the Royals and Rangers, and general weakness in Braves and Cardinals merchandise. Seasonal merchandise was also a challenge.

Team sports business was down low-single digits. Cleated business was positive, up low-single digits, with football and soccer both positive. Equipment was soft across all categories, down mid-single digits. Fitness continues to have the most significant declines.

Footwear was up high-single digits, as all genders performed consistently at that level. Our merchants did an excellent job of negotiating best-in-class footwear access for more of our locations.

Basketball was led by strong performances from Retro Jordan and the Curry 2.5 from Under Armour. Lifestyle had a fantastic back-to-school, led by Nike's Huarache, Air Force 1, Roshe, and Juvenate. We also saw a significant increase with Adidas, as customers responded to Superstar, ZX Flux, and Nomad.

Running improved with explosive results from Adidas's Alpha Balance, strong performances from Under Armour Slingride and Bandit, and strength from Nike's Free and Pegasus. We continue to be very encouraged by future growth opportunities in footwear.

From an inventory perspective, we are working diligently to identify opportunities to reduce inventory and improve productivity. Through our store typing strategy, we have identified numerous store category combinations where inventory is not productive, and are ensuring that these combinations are being retracted from future assortments. These retractions will allow us the opportunity to continue to invest in growth opportunities.

We also expect our save-the-sale and digital initiatives to have a significant impact on our inventory productivity next year. Our expectations for the end of this fourth quarter are for inventory levels to be flat to slightly elevated, but down on a per-store basis. I will now turn the call over to Scott Bowman to discuss our financial results.

Thanks, Jared, and good morning. For the third quarter, total sales increased $8.7 million to $237 million, an increase of 3.8% over the prior year. Comp sales increased 0.7%. By month, comp sales were 4% in August, negative 1.5% in September, and negative 2.9% in October.

Gross profit rate decreased 70 basis points in the quarter. Product margin decreased 55 basis points due to a higher mix of footwear sales and markdowns taken to reduce inventory. Warehouse and store occupancy expenses increased 16 basis points as a percent of sales.

SG&A expenses increased 15.8% in the quarter, and increased 243 basis points as a percent of sales. 82 basis points of this increase was due to a $1.9 million favorable legal settlement received last year in the third quarter. 75 basis points of the increase was due to expected investments in our omni-channel initiative, and another 70 basis points of the increase was due to higher expenses in employee benefits, credit card fees, and store maintenance and repairs. The remainder of the difference was due to deleverage associated with lower comp sales.

Depreciation and amortization increased 16 basis points as a percent of sales in the quarter, mainly due to the capitalization of IT projects of new stores. The income tax rate for the quarter was 36.8%, which compares to last year's rate of 37.3%. The decline was mainly due to ongoing federal and state tax credits.

Operating income of $23.2 million decreased 22.4% from last year, and was 9.78% of sales versus 13.08% last year, a decrease of 330 basis points. Diluted earnings per share came in at $0.66 per share versus $0.79 last year, a decrease of 16.2%. Adjusted for last year's favorable legal settlement, earnings per share decreased 10.6% versus last year's adjusted $0.74 per share.

From a balance sheet perspective, the Company ended the quarter with $41.2 million in cash versus $45.5 million last year, with no borrowings outstanding on our revolving credit facilities. Inventories increased 5.6% over last year, and were 2% higher on a per-store basis. We spent $6.9 million in CapEx for the quarter.

Also for the quarter, the Company bought back 54,000 shares for a total of $1.9 million. At quarter end, we had approximately $269 million remaining under the existing purchase authorization.

Based on these results for the third quarter, we are updating our full-year guidance as follows. For the year, we expect earnings per share to be in the range of $2.82 to $2.88 from a previously reported range of $2.93 to $3.02. Additionally, merchandise margin is expected to be relatively flat compared to a previously reported expectation of flat to slightly positive versus the prior year.

Also, as a housekeeping note, please keep in mind that FY18 will include a 53rd week. And we will establish annual guidance on our next call on March 10, 2017. With that update, operator, we are now ready for questions.

(Operator Instructions)

Seth Sigman, Credit Suisse.

Thanks a lot, and good morning guys. I wanted to just follow up on how the quarter played out.

It looks like comp slowed a little bit throughout the quarter on a 1- and 2-year basis. Was that just apparel that slowed because of weather, or did you see a broader moderation as well?

It was definitely the apparel components, but the seasonal declines that we mentioned had a pretty negative offset to our total comp. It really hit us for about 1.5 points on the total comp line with the majority that coming during September and certainly October. It was really the moderation in apparel and that compares to last year from a seasonal perspective.

Okay. And did weather, flooding and hurricanes impact the quarter at all, particularly in October?

I would say, Seth, that it impacted us a little bit in certain areas. But it didn't have a big impact on the total number.

Okay. And then just finally, as you think about the improved allocation in certain categories like footwear, can you give us a sense of how many stores are seeing the incremental improvement in that assortment today and how we should be thinking about the benefits? Thanks.

As we executed our store typing strategy, our partnership with our vendors have never been better. We still see significant opportunity to get more best-in-class footwear into additional locations. We still have some runway in front of us as we continue to execute that strategy.

Thank you.

Rafe Jadrosich, Bank of America.

Hi. It's Rafe. Good morning. Thanks for taking my question. I might have missed it. Did you give the November-to-date same-store sales?

No, we don't do that anymore.

Got it. And then as we think about apparel in 3Q, I think last year was pressured, as well, on warm weather. Can you help us parse out how much is maybe the assortment needing to continue to shift versus what the weather pressure was?

Maybe could you give trends by region? And then did you see the sell-through improve in areas maybe where the weather turned colder?

Yes really the overall trend by region from an apparel perspective were pretty similar. The seasonal impacts really impacted all regions.

Our non-seasonal business was significantly better. And we felt very good about that assortment at the early part of back-to-school, and continue to see improvement fronted. But the seasonal impact was just too much to overcome.

Without question, that was a big impact last year. And we had hoped that we would start to see a more normalized third quarter from a weather pattern standpoint, but that didn't materialize. It actually seems to be significantly worse than last year.

Do you feel you have to make further assortment shifts, either by brand or by category?

We do. We continue to shift more of our business towards lifestyle, very focused on premium lifestyle.

So we are certainly not done by any stretch from an assortment shift perspective. And certainly as we move forward, that will continue to evolve based on what the customers telling us they are interested in

And then final question. Could you just remind us of the timing of the point-of-sale store-to-home delivery in the e-commerce launches? And maybe just give a little bit of color on the list you have seen in the stores that have already rolled out the point-of-sale systems, where it's already been tested. Thank you.

Sure. It's a little too early to see the lift in the stores that have been rolled out so far. We are in full rollout mode, like Jeff mentioned.

We anticipate we will be in about 200 stores by Christmas if the feedback from the stores has been excellent and the learning curve is very short with the new software. And so from that standpoint it's operating as planned with no major issues. And so as we look into early next year, we envision the store-to-home capability to be rolled out some time early to mid-first half of the year.

Our initial POS was delayed slightly, but part of that delay was we did a little bit more work on the store-to-home functionality. So there's not that much more to do there. And we are pretty confident that we have most of the programming in place.

We look forward to that. And then looking forward to the back half of the year, with our digital initiative making very good progress there, both on the website build and then all integration work to tie it into all of our existing systems. A lot of work in that project, but we are on track and we are feeling pretty good about launching in the back half.

Great. Thank you.

Stephen Tanal, Goldman Sachs

Good morning. This is Allison on for Steve. Thanks for taking our question. First, can you please break out traffic versus ticket?

We don't measure traffic specifically. We use transactions as a proxy. Similar trend is what we have seen in prior quarters, that the ticket was up mid-single and the transactions were down mid-single.

Great. Thanks. And then we're trying to understand what changed with respect to merchandise margin. Looks like last quarter it seemed the outlook was improving and inventory had been where it was. Is that apparel was softer and perhaps guidance called for that to continue, or is there more to note here on the change in the merchandise margin outlook?

I think the merchandise margin piece through the quarter was based on two factors. First of all, the lack of the seasonal apparel business certainly changed our mix. The mix became more focused to footwear.

So that had an impact on the merchandise margins. And then certainly the lack of the weather patterns and the lack of what we call high-end margin seasonal product sales had a pretty significant impact, as well.

As I stated in my comments, we did get more promotional during the quarter just to ensure that we do not have a hangover on seasonal product. We want to ensure that we are very clean, certainly as we exit Q4 from a seasonal perspective.

Great. Thank you. And one final one from us. Thanks for the color on the e-com rollout.

As it relates to SG&A, do you expect the run rate and expense growth per average foot or average store, however you're thinking about it, to accelerate from here? Or are we in a more normal pace?

I think we'll still see -- I don't think it will really accelerate much from what we saw on the third quarter. Third quarter was a little bit of an anomaly. If you look at a two-year history of SG&A increases and adjust for that $1.9 million legal settlement, the first quarter and second quarter were about 14% higher on a two-year basis.

Third quarter about 15.5%, so it does look a little more normal if you look at it that way. As we go into the fourth quarter, I would anticipate that we will continue to see some pressure, credit card fees and healthcare kind of is an anomaly.

It should remain a little bit higher. I wouldn't anticipate as big of an impact as in the third quarter. But will still see some pressure going into fourth quarter.

Thank you.

Dan Weaver, Raymond James.

Thanks. Jeff, you noted that the ship-to-home capabilities will not be completed until, I think you said the second quarter 2017. Are there any initiatives or strategies that you can pursue to rejuvenate sales prior to that launch taking place?

Yes, Dan. We are -- the first part of save-a-sale we're actually testing, and actually the pilot goes out next [week]. That's store-to-store. And then we are working with the next function of store-to-home to try to get it out in first quarter.

I know Scott said the first half, but really our goal is to get it out in first quarter, the store-to-home piece. But next weekend in pilot we'll have store-to-store. And we feel very positive that that functionality is working and stuff. We are just -- be on pilot next week and hopefully get it to all stores through the first quarter.

But in addition to waiting for that initiative to be rolled out, are there any other tools or levers the Company can pull to rejuvenate traffic back into the store?

Well there's a couple things we are doing to help drive sales. We are definitely incentivizing our employees to obviously sell more to the customers that are coming in: items for sale and retail for sale. So we are running additional incentives for them to do that.

We also have the opportunities to touch our loyalty members much more. And we have plans in the quarter to do that to help drive sales. And then there some significant launches in footwear during this fourth quarter that we feel very excited about that will drive additional footsteps to our stores, and we believe that that could help our business.

The last question I have now is that with the Company moving its assortments away from traditional sporting goods and performance apparel and into more lifestyle categories, do you ever think that perhaps the name Hibbett Sports maybe no longer really conveys what the merchandise is about? Are you ever concerned that perhaps it's a hindrance?

No, because it's really around the brands that are sports. A lot of times I think people get so stuck in the categories. And it's really when it's lifestyle, it's not lifestyle like high fashion lifestyle. It's within our brands like Nike, Under Armour and Adidas. When we are saying fashion, it's really sports inspired fashion.

We are not really getting out of what we do. And it's really more about the brands that we already do business with. There may be some others that we do business with, but it's still Nike, Under Armour, Adidas, Puma, those type brands will continue to drive our business.

Okay. Thank you.

Camilo Lyon, Canaccord Genuity.

Thanks. Good morning. Jared, I wanted to get your thoughts on the apparel piece a little bit more, digging into that seasonal part of the business that was a drag on comps. My question is, last year we obviously had a very warm winter.

I was surprised by your decision to start marking down product, seasonal products so early in like the winter timeframe. How did you think about maybe doing that versus holding off until the true heart of the winter season in November and December, and January, as well? And maybe not sacrificing a little bit more on the margin side, and waiting for that season to really unfold before pulling the markdown trigger?

We spent a lot of time in discussions on that, and we felt like potentially last year we might have waited a little bit too long with that anticipation of the weather coming. And I think that's the big unknown at this point is, does fourth quarter operate to historical levels or does it continue to be a very warm pattern.

And we wanted to ensure that we eliminate all risk from a seasonal carryover perspective. We feel pretty confident that if the weather does come, we are in good inventory position and we have opportunities to get more if we need it. But the bigger risk we felt was to carry some of that inventory out of Q4 and into next year, as we know we have opportunities from a productivity perspective and a margin perspective that we would like to capitalize on.

Okay. Just with respect to the third-quarter merchandise margin impact, could you parse out which was the driving force of that merch margin decline? Was at the footwear mix or was it the apparel markdowns? And then how does that unfold in the fourth quarter?

It was about half and half. About half of it came from the mix and then half of it came from the apparel declines.

From a fourth quarter, we feel good about where our inventory is. We feel good about some of the drivers that we have. But there's certainly a significant amount of seasonal business that's done in the fourth quarter.

We also have some headwinds on the licensed product side with Panthers, and certainly in Alabama national championship from last year. Our expectation is that the merchandise margins will be flat, but certainly if we do have a very negative weather pattern that could put some pressure on that.

That's flat for the fourth quarter, as well?

Yes.

Okay. And as you think about how the -- you talked about the store typing benefits from an allocation perspective. What are you seeing into next year from the trends that are unfolding now, as well as the product pipeline that either gives you insights into the perpetuation of what we are seeing now or maybe a change in trends unfold?

I'd love to get your thoughts on, does basketball start to reaccelerate based on improvements in product introductions, or do we continue to see the lifestyle business, and Audi, particular, really accelerate their share gains?

Yes. I think the category question is always an interesting one, because certainly everyone categorizes certain products differently. That's something we certainly spend some time on.

But we try to really look at what we think the items are that are going to drive our business and be the drivers in the marketplace. It's pretty broad-based across categories.

We are seeing some very strong product offerings as we get into next year that are really broad across categories. I do feel like, from a basketball perspective specifically, the price value on a lot of the product that we are seeing is significantly better. The details on the product are significantly better. So we still feel that there are certainly some strong product there that is very relevant for our assortments.

And then certainly on the lifestyle piece and some of the sports retro-inspired running product that's out there, comfort product that's out there has a lot of runway as well. It's a great thing typically for us when we have multiple vendors that are bringing great innovation and great product. They are all pushing each other, and we see still a pretty strong pipeline of product that we have seen so far.

Great. Final question on that price value comment on basketball. Is that to suggest that there are further price reductions expected next year on some of the weaker categories, like signature? Or is it just that the actual (multiple speakers) is looking better?

No, we don't see any further reductions. We see the value in the product being enhanced.

Understood. Thanks, guys. Good luck in the fourth quarter.

Patrick McKeever, MKM Partners.

Okay. Thank you. Just a couple big picture questions. One on the competitive front, just wanted to get your thoughts on what you are seeing there.

Walmart, I think saw some of the same weakness in cold-weather merchandise that you talked about, but they also called out sporting goods as a strong category in the quarter. Just wanted to get your perspective there.

And also just the impact at the direct-to-consumer businesses. How are you thinking about that? And then the second question is just how are you feeling about the economic wellbeing of your core customer?

I think there's some good questions there. Obviously, some of the business is going to online. That's one of our major initiatives, and since we have not $1 in sales, we think that with a huge opportunity for us, we believe over a period of time that it could become 10% of our business.

We are working diligently on getting that up and having that tool, which we don't have today. To say a number on how much is going there, we are not sure. There are some categories, such as equipment, that we do feel that a little bit more of that business is going online than in brick and mortar stores.

With the Walmart and the winter categories, I think it's just people wait and wait until they have to get it. We thought last year was warm. Well, this year proved to be warmer.

Now, we are in very good shape from an inventory, on that we won't have the carryover that we had last year. So we should be in much better inventory shape.

How does the consumer feel? I think it maybe a little bit better, but I think between the election and other things, I think it's still kind of early to tell.

There are some pressures, rent's more expensive and other things out in the marketplace. I would say that it's maybe slightly better, but that's a hard question to answer.

Thank you very much.

David Magee, SunTrust.

Yes. Hi. Good morning. Jared, what do think it's going to take for the license business to come back?

I get the sense that a lot of kids are ordering that stuff, knock-offs of the merchandise from overseas sources and things like that. Is that business permanently impaired, do you think?

I don't know if I would say it's permanently impaired. We certainly have seen declines there for certainly the last few years, and certainly don't see it today as a trend with kids, which is some of the challenge.

There's certainly a lot of business that's being done. Some of the levers we currently don't have are impacting some of our ability to get some of that business, without question.

The general business in license is pressured. And certainly with the majority of the licensed business occurring in the back half of the year, there's a significant portion of that business that is also weather driven and seasonal, as well. I think there's a lot of things that are impacting the licensed business.

Certainly it's part of our DNA. We're going to continue to try and drive as much business there is we can. But at the same time we have to ensure that we have the right assortment within each store for every customer that we have. Today the licensed business is definitely pressured.

Thank you. And secondly, maybe Scott If you could talk a little about the infrastructure upgrades and improvement, and which I think we had seen some green shoots adding to stability up until this past quarter? Maybe talk a little bit about the in-stock progress and the markdown management, things like that that hopefully will continue into next year.

Yes. I think just on a general infrastructure question, we've done a ton of work in the last 2 or 3 years. And I think that's paying off for us in terms of stability of our core systems and the talent level we have in our IT group.

I think we've made huge strides in that area. And I think that really has set us up nicely to deliver on our store-to-home and digital initiatives. We feel really good about that.

And we've done a lot of good work over the last 2 or 3 years that isn't readily visible, but we are very pleased with that progress. And in some of the systems, the markdown authorization system and some of the upgrades in our merchandising system are still working fine.

A lot of it is working through some of the anomalies, like Jared's been talking about with weather and so forth that it's hard to predict. It basically takes a historical basis, so it's not foolproof. It definitely requires some intervention, especially when we need to reduce our inventory levels and not cause an overhang going into the next quarter or next year.

Is a better in-stock -- or are better in-stocks helping the footwear business, which seems to be strong?

We definitely think that is the case. Using the DC for quick replenishment we think definitely has provided some benefits. We see it in some in-stock rates that we look at and we get feedback from the stores that that -- that confirms that.

We were confident that that has started to happen. The good assortment certainly help. But as we go store-to-home capability, that's the next step of improving the conversion rate. And so we are excited to see that on the horizon early next year.

Great. Thank you.

Peter Benedict, Robert Baird.

Hey, guys. Couple questions. First, the save-a-sale and the store-to-home capabilities, certainly looking forward to those in terms of what they can do for sales. What it is your thinking, though, about what the impact is on margin there?

There's an extra step in serving the customer. How do the costs of doing that play into your view of product margins or gross margins as those capabilities roll out?

Yes, Peter. This is Scott. We definitely think that margins will be impacted somewhat with the freight costs. We are working on ways to mitigate that as much as possible. But it will be some impact. And we'll have better information as we get rolled out on that functionality.

Looking at the other side of it, we do feel like there is some favorability potentially, because with each store kind of operating independently today, there's a lot of product that gets stuck in individual stores that as you open that up chain-wide and get that visibility there's better chance of clearing that product. Okay?

And I think the other benefit that we will see over time is that as we get a better read on true demand for each store, when we convert more sales in each store we will get a better feel for that demand by store. And allocation will adjust accordingly to give those stores more product in the future. And so I think over time that will pay some dividends is well.

Okay. That makes sense and is helpful. New store productivity was very strong in the quarter. I think the new allocation is probably helping drive that. Can you talk to us about your view there, Scott, going forward, and kind of your latest thinking on new store openings and the pace of expansions?

Sure. Our new store productivity, we are pleased to see that's increased. And I think it's really the result of a couple of things. Number one, we're being a little bit more selective on new stores, and I think that's part of it.

But the other thing is as we open these new stores, we are looking at these new stores in terms of store typing and what type of store that would be appropriate for the demographics in each of these areas. I think as we have look at it that way, we are getting a little better assortment in matching it to the demographic and the customer base for those areas. I think that is resulting in some better productivity, as well.

Okay. In terms of the pace of growth, it sounds like you're on plan for this year. What do you think longer term?

I think longer term, I think what you will see is we will probably be a little more selective. And we may be a little more aggressive as well on store closures.

I think you'll continue to see that trend. I think that is -- will really increase kind of the health of the store base. And as we got store-to-home and digital up and running that will offset any shortfalls that we see for additional closures.

Okay. That's good. And then last question. On your buybacks, I think you've done a little over $30 million so far this year. I think you were closer to $90 million at this point last year. What's driving the buyback decision here? How should we think about your plans on buyback going forward? Thanks.

Last year we started off with a very high cash position, so that allowed us to buy back a little more. As you look forward into the fourth quarter, chances are we will be a little more aggressive. Originally I thought we'd buy back close to $50 million for the year, and I still think it will be fairly close to that number.

Okay. Perfect. Thank you.

Anthony Lebiedzinski, [Fidelity Investment].

Yes. Good morning. Thank you for taking the question. First a quick clarifying question, if I could. As far as the guidance for the year, Scott, you're still assuming a low single digit comp increase, right?

That's correct.

Okay, all right. Jared, I think you mentioned that fitness is your most challenged category. Can you give us a sense, what percentage of your business that is? And is that a category that you would perhaps totally eliminate if this continues?

It's getting smaller every year. We continue to retract stores from the program. And certainly we have stores where the business is still important and we'll continue to service it there. But it is retracting, without question.

Got it. Okay. As far as the e-commerce launch, given what you guys said as far as the point-of-sale system rollout, is it pretty safe to say that e-commerce will not be launched by back to school next year?

It's too early to say, Anthony.

Okay. Got it. Lastly, Scott, you mentioned that next year the year is a 53-week year. As far as the impact from that extra week, anything you can say now?

Really, all I can tell you now is that the last time we had a 53rd week was in FY13. The impact at that point was about $0.07 per share, but I'm going to have to do some work on really identifying the range for this coming year.

Okay. Thank you.

Jim Duffy, Stifel.

Thanks. Good morning. A few questions.

The first dovetails with your comments on new store productivity. Can you maybe speak in more specifics on the 3Q comp variance you saw between the different store concept types, fashion specialty, athletic specialty, and sports specialty?

We really don't get into that level of detail by store type.

Is it safe to say based on some of your comments, including that of fitness lagging, that fashion specialty and athletic specialty out-comped the sports specialty?

That's fair.

Yes, I think in general that's fair.

Okay. And then in terms of your mix of new stores going forward, they are biased toward fashion and athletic. Any comments you can provide about that mix would be helpful

We will continue to do analysis around each of that. And sometimes it depends on what area of the country, and there are different factors that we will put into it. We definitely want to go where we're successful.

Fair enough. Changing direction a little bit. Adidas has been the brand coming on strong in the category, presumably specifically in the context of your fashion specialty direction.

Is that brand gaining meaningful share in the mix, and are you pleased with the allocations you're getting? Will you be participating in their upcoming launch schedule this fourth quarter?

Yes, we are very pleased with the partnership that we have with Adidas, and certainly we still see significant opportunity to take that brand to additional locations. And yes, we will be participating in their launch product for the fourth quarter.

Okay. And then given some of the comments you made about upward pressure on OpEx, what would the comp leverage point for expenses of occupancy and OpEx be looking out to 2017? And how does the 53rd week impact that?

It will be closer to the mid-single digit comp range needed to leverage so will be elevated until we get through this investment cycle. So that's what I would expect. And the 53rd week will help marginally, but it won't make a huge impact.

That's all I have, guys. Thank you very much.

Sam Poser, Susquehanna

Thank you for taking my question. It's sort of half-asked. What was the conversion rate in the quarter in footwear?

We don't have a way to measure that specifically. A lot of what we look at our in-stock rates and just sell-through rates on some of the products, especially in footwear. We know that it's higher than it has been in the past, but we don't have a specific number that we track.

I think you said in the last call you were running around 62%

That was an estimate.

And so is it better than 62%, or you think it's right around that?

I think it's gotten a little better since then.

What are you thinking -- I mean, I know you don't guide the quarters, but can you give us some idea of what you are thinking about same-store sales for Q4?

We don't give quarterly guidance. We are still sticking to our low single digit for the year.

We definitely think we have some opportunity based on the product that we are seeing and everything like that. But it's difficult to tell what's going to change with the cold weather situation or lack thereof, and then the consumer around the holidays

I have three quick ones. One, your accounts payable was way down versus last year, just want a little color on that. Number two, you talked about normalized winter. We haven't had whatever a normalized winter is.

So when you are thinking, Jared, about next year what are you going to do? Are we just going to say, okay? Are you going to be willing to sell out rather than set up the chase so you don't get this problem? The mix issue related to footwear, wasn't that increased mix of footwear sales a result of the poor sales and the markdowns that happened in apparel?

I'll let Jared answer the last two. I'll address the accounts payable question. That's mainly due to timing of receipts.

And so last year we received a lot more product in the month of October. This year we kind of scaled down our receipts as we got towards the end of the quarter. And so we didn't have as many of those payable dollars there at the end of the quarter.

Sam, I think with regard to your second question, we certainly agree and feel like the weather pattern has become so consistent that this is the new norm. We are certainly looking for, and we've had some success with, some transitional rate product that we'll continue to make a larger part of our assortment. And then we will, going forward, be very careful on the seasonal product as well, and plan to sell out and plan to chase as much as possible.

With regard to the mix, certainly some of it was driven by the lower apparel sales, but we also had very significant growth in footwear. So I think it was a combination, but more towards the comp line with regard to footwear.

Just last thing. But you were disappointed with your apparel sales? Based on -- what did you miss your apparel sales by versus what the plan. I mean, versus plan, how much did you miss it by?

The apparel declines from a seasonal perspective impacted the quarter by about 150 basis points of comp.

If you it had that, your gross margins would've looked significantly better, even though -- .

Yes. We feel like the comp would have certainly been better, and then certainly the margins would have been better, as well. We still would have seen some shift driven declines, but the margins certainly would've been better if we had captured that seasonal business.

Thank you. Good luck.

Rick Nelson, Stephens.

Thanks. Good morning.

I'd like to ask you about regional performance. How you account in the non-weather affected markets, like the Southeast? And how you did in the Northern markets, and maybe the oil states?

Sure, Rick. Unfortunately I think the weather effect did impact most regions, if not all. In general we saw the Southeast perform the best, Alabama, Georgia, Florida, the Carolinas did very well.

We saw the Midwest softer, and the Southwest especially soft (technical difficulties). At this point with thought that states like Texas, Oklahoma and those states in that energy sector would be performing better, given the low comps that we saw last year in that area. But we're still seeing even lower comps this year. So we haven't seen that turnaround yet. And hopefully we will see that soon.

And Southeast performed, what level of comps did you generate in those states?

Southeast, they were up about mid-single

And guidance, what does that assume about the weather, more of the same or are things getting colder?

In general, Rick, it does assume some improvement. But we do remain cautious because there's a lot of unknowns there.

Thanks. And good luck.

Michael Weisberg, Crestwood Capital.

One question about average ticket, which continues to do great for you guys. Is that driven by mix because of the increasing sale of sneakers, or is it higher pricing on sneakers? And just as a follow-up, is sneakers roughly now 50% of the revenues?

Yes. We see that average ticket continue to be up probably mid-single digits, and it has a lot to do with mix and higher price ticket.

Okay. Are you getting higher pricing on the sneaker side?

Yes.

Okay. Is a 50% number roughly right for the sneaker component?

That's about right.

Great. Thanks a lot.

And I will turn the call back to you for your closing remarks.

Thank you for listening. Look forward to our fourth-quarter earnings call on March 10. And thank you for participating.

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.