Hibbett Inc (HIBB) 2019 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Hibbett Sports First Quarter 2019 Conference Call.

(Operator Instructions) As a reminder, this conference is being recorded Friday, May 25, 2018.

I would now like to turn the conference over to Pat Watson, Corporate Communications. Please go ahead.

Thank you, everyone, for joining Hibbett Sports to review the company's financial and operating results for the first quarter of the fiscal year 2019 which ended on May 5, 2018.

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, in 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, May 25, 2018. 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 First 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.

First quarter results. Net sales for the 13-week period ending March 5, 2018 decreased 0.4% to $274.7 million compared with $275.7 million for the 13-week period ended April 29, 2017. Comparable store sales decreased 0.3%. E-commerce sales represented 7% of total sales for the quarter.

Overall, we were pleased with the results as we exceeded our internal plan and experienced gross margin improvement in April. Branded apparel was expressly strong during the quarter with comparable store sales in the high single-digit range. Footwear and cleats were positive as well. E-commerce sales continued to perform above expectations and represented approximately 7% of total sales for the quarter.

Our app. We are also very encouraged with the early results of our new mobile app and believe this will be a great tool for our highly mobile customer. The app is rated 4.5 out of 5 stars and is one of the top 100 shopping apps on iTunes. Overall, 80% of our web traffic is from smartphones. We have had over 130,000 downloads since we launched the app and is already a meaningful percent of digital sales. We have see -- we have received very positive feedback from our customers with our app, mainly the ability to sign up for our in-store sneaker raffles. We have had over 60,000 entries since we rolled out the process a few weeks ago.

Our website. We continue to make progress and grow our digital business. One of our numerous initiatives is to Buy Online and Pick up in Store and Reserve in Store capabilities. Our plan is to launch this functionality ahead of the holiday season. We will be one of the few retailers that will offer both Buy Online and Pick up in Store and reserve online and pick up in store. This functionality will help drive sales both in stores and online and digital. The growth comes from growth in traffic, conversion and average order value.

Our marketing. We continue to see results from last year's revamp of our loyalty program. Q1, approximately 58% of our sales versus 53% year-over-year increased approximately 9%. Loyalty program registrations are continuing to comp positively. We are focused on measurable activities to drive traffic to our stores, reinventing our e-mail program, direct mail program and in-store raffle process with the app. We will see real opportunity to drive increased store traffic.

Real estate for the quarter. Hibbett opened 7 new stores, expanded 4 high-performing stores and closed 18 underperforming stores, bringing the store base to 1,068 and 35 states as of May 5, 2018. We will continue to close stores while optimizing our store base and improve our return on invested capital.

Looking forward, as we start the second quarter, we feel that we're well-positioned with our inventory, excellent shape with fresh assortments, easier comparisons as we prepare for the back-to-school season. The strategies that we have put in place, we are starting to see the results and I'm encouraged that we are starting to see significant improvement in our business.

I will now turn the call over to Jared Briskin, Senior VP, Chief Merchant, to talk about our merchandise trends.

Thank you, Jeff. Good morning.

The first quarter started slowly with a difficult February. As the quarter progressed, we saw a nice acceleration in our business and some positive indicators for the balance of the year. This acceleration was driven by additional access points, new innovation, growth in e-commerce and cleaner inventory.

Our apparel business was up high single digits in the quarter as our trend from fourth quarter continued to improve. All genders were positive with men's apparel up mid-single digits and double-digit growth both in women's and kids apparel. Our sportswear-focused assortments are resonating with our consumers across all genders. Accessory business remains challenged as declines in socks and hydration continued during the quarter.

The licensed business remains our most challenged area, down double-digit. While a portion of the decrease could be attributed to reduced category investment, challenges in core fan apparel and headwear continued to lead to significant declines. The comparison of the college basketball championship was also a negative as the North Carolina championship in the year-ago period was not offset with Villanova's championship.

Team sports business was down low single digits. Cleated business was very strong with all categories up as our penetration of e-commerce improved. Significant growth was achieved in track, football and soccer cleats. While equipment was down as a whole, baseball was positive due to regulation changes impacting the bat business. Fitness remains a challenge as we continued to reduce our investment in the category.

Footwear was up low single digits. Men's and women's were both positive for the quarter while the kids business was down low single digits. Additional access points and delivery of new innovative models resulted in improvement over the prior year.

As we look to second quarter and beyond, we're confident in our assortments and plan. The team sports business is starting to stabilize. We have reduced our investment in licensed products. We're clearly on trend in apparel and many of our new product intros will scale in footwear. Our aged inventory is significantly reduced and we are continuing to improve our productivity by reducing our overall inventory.

I will now turn the call over to Scott Bowman to discuss the financial results.

Thanks, Jared, and good morning.

For the first quarter, total sales decreased 0.4% to $274.7 million, which included the decline of $1.8 million due to the sale of our Team Division last year. Strong sales trends continued in our e-commerce business, which represented 7% of total sales in the quarter.

Overall comp sales decreased 0.3%. By month, comp sales were negative 7.3% in February, positive 6.1% in March and positive 0.6% in April.

Gross profit rate decreased 40 basis points in the quarter. Product margin decreased 50 basis points, mainly due to higher levels of clearance sales and freight associated with e-commerce sales. In April, we experienced gross margin improvement versus the prior year due to a significantly improved aged inventory position.

Logistics and store occupancy expenses decreased 10 basis points as a percent of sales, which is mainly due to leverage gained from e-commerce sales.

SG&A expenses increased 6% in the quarter and increased 137 basis points as a percent of sales. This was mainly due to operational costs associated with our e-commerce business, costs associated with the launch of our mobile app, increased marketing expenses and higher compensation costs.

Depreciation and amortization increased 9% in the quarter and was up 20 basis points as a percent of sales.

The income tax rate for the quarter was 24.7%, which compares to last year's rate of 38.7%. This reduction was mainly due to the decrease in the federal rate from 35% to 21% as a result of tax reform. The rate was also somewhat higher in the first quarter due to the accounting treatment of stock-based compensation.

Operating income of $28.6 million decreased 16% from last year and was 10.4% of sales versus 12.4% last year.

Diluted earnings per share increased 15% to $1.12 per share compared with $0.97 per share last year.

Turning to the balance sheet. The company ended the quarter with $116 million in cash versus $76 million last year with no borrowings outstanding on our revolving credit facilities. Inventory decreased 8% from last year and was 7% lower on a per-store basis. We spent $4.1 million in CapEx for the quarter as we opened 7 new stores and made further progress on our major initiatives. Also, the company repurchased 40,000 shares for a total of $871,000 in the quarter. At quarter-end, we had approximately $204 million remaining under the existing purchase authorization.

Turning to our guidance. I would like to reaffirm our full year guidance of earnings per share in the range of $1.65 to $1.95. As we stated in the press release, we exceeded our internal plan for the first quarter.

In the second quarter, we believe that there will be more opportunity due to the following reasons. Number one, we will have a cleaner inventory and higher volumes of new product. Last year, we had a negative 11% comp adjusted for the week shift driven by weakness in branded apparel and footwear. This year, these categories are much healthier, which we believe will continue in the second quarter due to better assortments and fresher product.

Number 2, we will have easier comparisons for gross margin. Last year, our product margin was down 264 basis points and total gross margin was down 404 basis points. We expect significant improvement in product margin due to fresher product and significant leverage on store occupancy expenses due to the additional revenue from the week shift.

And lastly, I would like to remind everyone about the details of the week shift caused by the 53rd week last year. Based on last year's sales, second quarter would be positively impacted by about $18 million and third quarter would be negatively impacted by approximately $17 million. Keep in mind that this negative impact for the third quarter would also impact the leverage on store occupancy expenses and thus gross margin. Further details regarding this week shift are contained in the supplemental information in the press release.

With that update, operator, we are now ready for questions.

(Operator Instructions) Our first question comes from the line of Camilo Lyon with Canaccord Genuity.

Dig a little deeper into the commentary around Q2 gross margin opportunity that you discussed. Clearly, you got easier comparisons. You got the benefit of the extra week from the calendar shift and how that should help occupancy. Can you -- last year, I think your merch margins, you said they were down 264 basis points. Can we think about what's the probability of you gaining -- recovering half that margin degradation given that there's a better inventory position and you've got more volume coming in on the newer innovations? Could it be possible to gain all of that back? Just trying to understand the magnitude of the recovery opportunity as it plays out for the second quarter.

Sure. The way that we look at it is, first, on the product margin side, there's significant opportunity there and we're already seeing that. And so we feel comfortable that product margin will improve significantly. And the other piece of that, the week shift, I mean, that's just straight math. That will significantly improve our leverage on occupancy expenses. So to answer your question on the 400 basis points we were down last year, I think we had really good opportunity to recover more than half of that.

Perfect. And then, similarly on the comparisons on the comp line item, clearly, Q1 had the impact of a reset February from last year's tax shift and so that makes the 2-year seem like it decelerated pretty significantly. How should we think about the trends as product improves and volumes improve and aged inventory improves with respect to kind of the 2-year trend?

And then, maybe within that, I think in the back half, it looks like you're guiding to about a low single-digit comp -- positive low single-digit comp. What are your assumptions for your e-commerce growth now that you will have lapped that introduction in the back half?

Yes. So I'll answer that question first. As we look at the back half, I mean, we will be lapping e-commerce, but we still see growth in e-commerce. And I think the dynamic that we'll see, which is what we're seeing now, is that we are seeing some acceleration in growth in e-commerce and the mix is getting better as well. So we're selling less clearance product, more full-price product, which is helping leverage on freight cost and certainly on product margin. So the business is getting healthier and it is accelerating. And so we do see that opportunity to comp positively just on the e-com business in the back half.

And just to add a little bit more color on the opportunity on sales for the second quarter, I think your statement is correct. On the first quarter last year, we did a negative 5% comp. And in my mind, that was also just a reset for the most part based on timing of tax refunds. We saw a similar trend this year and so we think that is more of the new normal, whereas if you look at the negative 11% comp last year in the second quarter, that was based more on true weakness in the business, both in branded apparel and footwear.

The good news is, as we look at those businesses today, they're much healthier. It's a different environment and we see significant opportunity to improve that comp because of that and because it was true weakness last year. So normally, we don't do this, but since there is a lot of confusion around the numbers and the week shift and everything else i n the trend, I would say that early in the second quarter and at the end of April, we're up about mid-single digits in our total comp. And a lot of that is being driven by our branded apparel business and a healthier footwear business.

And so as we look forward of the product that we have coming in the second quarter, that new product volume will increase as we get closer to back-to-school. We have better assortment in our apparel business that are really getting good traction. And we see that continuing throughout the quarter, which should allow us to maintain that mid-single level comp number.

Great. And just remind me, your monthlies from last year's Q2, they got worse as the quarter progressed, right?

They did. We were about a negative 8.5% comp in May and we were negative 13% comp in June and July. And so that's really where we see the opportunity, especially as we get closer to back-to-school. I think, at the same time, as you look at Q3, you need to keep that in perspective too because our comp was much better in Q3 last year, negative 1.3%, and we had e-commerce last year in Q3. And so you have to kind of incorporate that into your thinking as well as you model out Q3. And long story short, there is probably a little more opportunity in Q2, a little less in Q3 than what is reflected today.

Got it. And then, my last question is on the accessories business. I think you had a really healthy contribution from Yeti last year and, clearly, that's slowed significantly. Is there any way to articulate how much of an impact that's been to the accessories business or maybe to the overall comp and when you'll start to lap those declines?

Yes. It's been an impact for us certainly for the last few quarters and was in the first quarter as well. The early part of the second quarter gets impacted to a degree, but the impact lessens really starting at that point.

Our next question comes from the line of Peter Benedict with Robert W. Baird.

First question on the fresh product that's coming in now and, I guess, increasingly over the balance of the year. How do the quantities compare to historical levels? I mean, we know that Nike's being tighter with Jordan allocations, but how about with the product, I think, you're referring to, which is I presume it's non-Jordan product just for clarification, but how are they allocating those products now? Are they holding them back a bit more than they typically do or is this kind of a normal pace of business?

Yes. This is Jared. I think, first and foremost, certainly there are always some controls in the marketplace, which certainly help the heat of the product, that we certainly support. We do feel, as a slice of the pie, that our share is going to continue to get larger.

The most exciting news that started really in the first quarter throughout the rest of the year is just the amount of new products and franchises that will start to scale for us as we go through the year. Whether it be the Air Max platform from a new product creation such as VaporMax and Air Max 270, heritage models around 90s, 95, 97s, 98s, Air Force, React, adidas Xplorer, Swift, there are a lot of models that we feel can really impact our business that we can start to scale as we go throughout the year.

Okay. That's helpful. Moving over to e-commerce, the 7% penetration. How do we think about that going forward? How are you guys thinking about that? The second quarter, you still aren't cycling having it a year ago, but -- and then as you think towards 3Q and 4Q, I think that can continue to build. And what percentage of the sales that you're getting online are coming from those markets that don't have a store? I think you spoke to that in the past.

Yes. So as we see e-commerce continuing to progress, naturally the penetration will probably increase in the fourth quarter due to seasonality and holiday, but outside of that, we see it still ticking up a bit. We see some good traction on some of the work we're doing around marketing and making adjustments. We have the mobile app now, which we think will help as well. The product assortments continue to expand online. And so have a lot of good things going to keep that business accelerating, even in light of fewer sales of clearance merchandise. And so that will make for a healthier margin on the e-commerce business, which should help out a little bit as well.

So everything is -- it's going pretty well there. We'll continue to drive it. And we think that back-to-school should be good for us from an online perspective and so we look forward to that.

That makes sense. Do you have the percent that comes from the markets outside, I guess, store-based markets?

Yes. It hasn't changed too much, Peter. It's still in the 25% to 30% range and so that's encouraging where we see that traffic coming from.

Yes. And my last question is just shifting over to kind of the store comps. The trajectory that you're envisioning in your plan as you look 2Q and then into the back half of the year, I know you've got some marketing initiatives to try to drive that. You've got some easier comparisons to 2Q. So just curious how you're thinking about that as you've got your full year guidance laid out.

Yes. So we are seeing some healthier store comps more recently as well and so that is encouraging. I think it's being helped by fresher assortments and some newer product. And so we see that continuing to be a little bit stronger for the remainder of the year.

We think as we get later in the year and we have Buy Online, Pick up in Store and reserve online, pick up in store, we definitely see it as an opportunity to drive traffic to our stores. So as we look upon launching the app, the loyalty and then, by fourth quarter, doing Buy Online, Pick up in Store and reserve online, pick up in store, we definitely see it as a traffic driver that should help our store comps.

Our next question comes from the line of Dan Wewer with Raymond James.

Jeff, a number of your largest vendors have invested heavily in their direct-to-consumer capabilities, including very powerful online shopping sites. From the consumers' perspective, why -- what is Hibbett's advantage in generating a sale of a branded apparel item, let's say, Nike or Under Armour? Why would the consumer buy that from Hibbett as opposed to going directly to the vendor's shopping site?

Sure. As we look at this, and we work very hard with Nike and adidas and other brands really -- it's really the differentiation of having a comparison of brands among -- so people can look at not just Nike or just adidas or whatever. Also, the brands are really helping us with our digital growth, giving us exclusive products or better colors or some of those type things. So as it's a pull market in trying to get through things, there are some unique things that we have and also the comparison of brands is what a lot of consumers want. They'll shop both ways, but they also -- a lot of the products that are hot and Nike may be selling out at the same time we're selling out or vice versa. So they are really enhancing what we're doing digitally with all kinds of content, extra product. So they want it to be just as healthy for us as it is for them.

When you comment that 25% to 30% of your online revenues are outside of your traditional geography, are those the sales that are primarily shopping for the clearance items?

Not necessarily. We do a really good job on SEO. We are rankings on our search pages on search. We're on the top one page and quite a few compared to where our competition is. And we've really done a good job of setting our website up correctly from the beginning. Paid search, we also show up, but we have really done a good job on making sure that we show up and people know about us and a lot of times, they are finding us that way.

I think the last question I have is subtracting out the e-commerce revenues, it appears that the bricks-and-mortar same-store sales may have declined around 7% during the quarter. Do you have a sense as to how much of that is, use the word cannibalization, of existing customers using your online shopping site?

It's really kind of hard to get a feel for cannibalization. As you talk to store managers and people out in the field, they think our customer awareness has gone up. I'm sure it's affecting -- it has affected us somewhat. And really when you're looking at the store comps, really a lot of it was around the tax refund and then a little bit tougher comparisons in the northern markets really where we had the most impact on comps. We're in the northern markets and then tax refunds were just not to the levels we expected in February. And we think this may be the new norm for tax refunds. So as we got into March and April, we see significant improvements in our store comps.

Our next question comes from the line of Patrick McKeever with MKM Partners.

Just a question also on e-commerce. You talked in the past, I think, about breaking even at $50 million in annualized sales. Just wondering what your thoughts are currently on that.

And then, on the marketing for e-commerce, maybe you could talk about how that has been evolving and where you're investing the most in terms of incremental marketing. And I think I had one more, but I can't think about it right now, so I'll just leave it those 2 for the time being.

First question on the breakeven point on e-commerce. It may be a little bit higher than that and the main reason for that is because we are investing more in marketing. And the reason for that is we've seen some pretty good traction in some of the initiatives we have in that area. And so some of that is for near-term sales and some of it is to acquire new customers for future benefit. So it -- if you look at this year for e-com, our revenue will be probably a little bit higher than that. So we should come close to breakeven this year in e-com and it will continue to get better after that.

From a marketing standpoint, we are spending a lot of our dollars in paid search and PLAs, product listing ads. And it -- the reason for that is because we've run tests on several terms and we kind of take a test-and-learn approach where we circle back and look and see which terms have been more profitable than others. And so we're still in that mode and we have seen some good traction on certain things that we've done and so we have put some more dollars behind that. We're also doing a fair amount on social media to get the word out. We're looking into doing some direct mail, kind of an oldie but goodie, but it has been effective. And so we're doing a little bit more on that especially to help our stores. And so as we continue into the back half, we'll continue to invest in marketing, but we will keep a close eye on return as well.

Then, the other one I was thinking about earlier, the weather, you didn't mention, many retailers have though. I'm wondering if that had a material impact, just the colder weather, some of the winter storms that came through during the quarter, even down into some of your core markets. And if so, do you think some of the more recent strength is related to any kind of pent-up demand related to the weather?

Yes. We don't like to talk about the weather too much. What I would tell you is that, as Jeff mentioned, if you look at the northern half of our geography, the comps were noticeably worse than the southeast and the southwest. Now to be fair, that has been the trend over the last few quarters. It was just a little bit worse this past quarter. So given that, you can make your own assumptions. There may be a little bit of an impact, but we don't think it was that impactful.

Our next question comes from the line of Sam Poser with Susquehanna.

I've got 3. Number one, follow-up on one of the other questions. Some of your major accounts -- major vendors have offices and have -- down in Birmingham still and continue to support you very closely. Is that -- am I correct?

That's correct.

Secondly, can you talk about sort of the line, Jared, between performance product outside of the cleats, like performance running, performance basketball versus the more fashion product in footwear and apparel and how that's performing, the different sides of that?

Yes. I mean, the lines are certainly blurry between the 2. We have certainly positioned our business away from core performance. Certainly, we have some other premium performance products that we still take a position in and some are doing very well. Some of the products that are developed from a performance standpoint also do resonate as nonperformance as well. A great example would be the Nike Epic React, which is a fantastic performance shoe; or an adidas UltraBoost, again, fantastic performance shoe. But we're selling certainly more of those products as cool sneakers versus performance product.

We look at all products today, there has to be some compelling feature, whether it's performance or whether it's lifestyle, a compelling feature, whether it's a visible technology, materials, aesthetics, color trends, just to assure that it will resonate with the consumer as the consumer today is not sold on performance alone. There needs to be a significant elevation, again, whether it be storytelling materials or visible technology that really enhances their interest in the product.

And then, lastly, for Jeff and Scott. In the press release today, you commented that the first quarter results were better than -- it came in above your expectation. Can you give us some idea more specifically as to what your expectations are for second quarter and third quarter results? And the reason I'm asking for both is because of the shifting dollars and the effect of leverage so everybody gets on the same page relative to what's going to happen in this quarter and next. And I understand this is not something you normally do, but given the calendar shift and given that you say -- in the release, you said you beat your numbers and hence -- but your stock's getting abused a bit right now.

Right.

Yes. So in the first quarter, I mean, the reason why our own internal plan was probably a bit lower than the street was a couple of things. I think the first thing is that we still saw some cleanup that needed to be done in our inventory. And we did work through that in first quarter as planned. That had some impact on the margin side. We didn't have the volume of fresh product yet. And I think that's an important kind of nuance to understand is that as we go throughout the year, that volume of new product will expand. So we did have the Air Max 270 and Epic React, a couple other items in first quarter, but very small volume. And so that didn't have as much of an effect that it eventually will in later quarters. And so we had some pretty clear visibility to that and that did go into our thinking about our internal plans.

So question about Q2 and Q3, we kind of discussed a few points around that. And I think that Q2, we're running mid-single-digit positive comps today. With expansion of new product, some easier compares, we see the potential of that continuing. It's always at the whim of the consumer and things like that. But just based on how we fit internally, we feel that, that's entirely possible in the second quarter. I think as you look in the third quarter, the comps should return to flatter numbers and main reason for that is because we're going to be lapping e-commerce from last year.

From a gross margin stand...

Yes. Sorry.

Go ahead. From a gross margin standpoint, as I kind of talked about, we were down 400 points last year and a lot of that was -- more than half of that was driven by product margin. We see the ability to recover a good portion of that. And then, of course, the leverage we'll get on store occupancy should allow us to recapture not all of that 400 points, but a good portion of that back for Q2. As we get into Q3, there will be a little bit less of an opportunity. Our margin was down 337 points last year. So it's still down, but we won't have as much opportunity on the store occupancy line because of the revenue shift that will occur.

And the thing to keep in mind is store occupancy expenses stay pretty static, so that impact on leverage will be pretty significant as those dollars shift from one quarter to the next. And from a product margin standpoint, there's some opportunity in Q3, just not as much as we see it than Q2.

Why is that when you were down 375 bps in your merch margins in Q3 last year?

I think on an overall gross margin basis, it's definitely the impact from the week shift that will affect the total gross margin. So there's not as much opportunity from that standpoint. As we get into -- later into the quarter, I think we will have some promotion that come in and things like that, that won't allow us to recover all of that in the third quarter.

But last year, your e-commerce hit. You had a lot of inventory that was hard to clear. Now your inventory is cleaner. You have your e-commerce -- it was cleaner. That means you should be able to clear sort of the slower sellers more quickly at higher prices. And your inventory's down on a year-over-year basis, at least now it is. As you look forward, shouldn't those all be very positive things for merchandise margins?

Yes. Those should help and I think it's just a matter of -- as we get closer to that time frame, I mean, we'll get a better read on that. We have a little bit clearer line of sight on Q2. But on Q3, I mean, there's -- when we get to that point, I think we'll have a clear idea of how much we can recover.

Why not just give everybody your EPS estimate, a range of EPS for second quarter and then everybody can sort of figure out back half of the year since you clearly have plans in mind here and there was such a disconnect in the first quarter?

Yes. I'm not really -- I don't really want to give specific EPS numbers. I think if you take into account the discussion that we've had around revenue and the gross margin opportunity, I think that will get you very close.

Our next question comes from the line of Jim Duffy with Stifel.

It's Jim Duffy with Stifel. I just have a question around the branded apparel strength. Can you guys talk about what are the key things that are behind that? Is there an ASP component to this? And how do you plan to build on that branded apparel strength in the back-to-school and holiday?

Yes. We're seeing both increase in units sold as well as ASPs. Some of it certainly is the cleaner inventory that we have in apparel, some of it is our ability to capitalize on some of the more sportswear 90-ish trend that's going on today. But our customers across all genders are really resonating with what we currently have. Our expectation is our penetration of that product gets better as we get to the back half. So we feel very good about where we are with apparel currently.

So it's more lifestyle-oriented than performance product-oriented?

It is very much lifestyle and then we do start to lap some of the significant declines from a performance standpoint as we go throughout the year.

Okay. And then, can you also comment on your statement that you're seeing stabilization in the team sports business? It seems the cleats category was healthy. I recognize there's the regulation change in bats. What else is behind that stabilization?

Yes. I think the number one component, I mean, we've obviously tried to follow a similar path that we followed in some of our other categories with regard to cleats focusing on differentiation, so that certainly has helped. But certainly, the development of our e-commerce business has been the biggest enhancement we've had within our cleated business. So the stabilization is primarily coming from our e-commerce growth.

Our next question comes from the line of Rick Nelson with Stephens.

Nick Zangler on for Rick here. I know it's early, but on the app, I'd imagine the shoe launch schedule is a hit. It's very clean, easily accessible. And I'm sure shoe launches have always been a traffic driver for Hibbett. But with the new app, have you seen any incremental in-store traffic that you can attribute to this launch -- the launch schedule?

And then also, can you talk about the raffle? Is this a new feature? It just seems, in general, like there's a lot of opportunity here. Anything else you could potentially do to lever this schedule, to drive app downloads and traffic into the store? I would imagine just -- it seems like, given your relationships with all the brands and exclusive allocations, it seems possible that like this Hibbett mobile app could be the place to gain complete awareness for all these shoe launches especially for enthusiasts. So just any thoughts here?

Sure. One of the things we did a lot of customer surveys on people's pain points on buying launch sneakers. We did customer surveys in New York and out in our stores and we really see that we've built a really good opportunity to increase our store traffic through launch. We've just rolled it out to some of our stores, not all of our stores and trying to do that really soon. But the stores that we have rolled it out, we see how much demand that we're really having for those shoes, which really gives us an opportunity for the first time to say, "Hey, we got 24 pairs last year, but we had a demand for 300," which will help us with our vendors on showing them how much opportunity that there really is. And it also drives store traffic and conversion and all that.

So we see it as a huge opportunity. And really, we've only been testing it and just launched about 3 or 4 weeks ago in some more stores. And as we get throughout the second quarter, it will go to almost all of our stores, if not all. And so we see it as a huge opportunity.

Just a few launches that we had, over 60,000 people put their names in for the raffle. So we know that there's a huge, huge opportunity. And this isn't even the time of year where you have a ton of launches. So when we get into those area later in the year, we see that as a big driver.

Also, another feature which we will take live in the next 4 to 6 weeks is a re-raffle. So if somebody doesn't show up to pick it up, we can relaunch it to customers, which will also help with our liquidation and drive store traffic. So there are many things that we think we can do with it and we're very excited of where it can take us.

Were -- are the raffles completely new or is it -- do you see that continuing to be an ongoing offering? Or is it part of the initiative just to get downloads and actually have apps downloaded for new customers?

It's not completely new. We did it with old-fashioned buckets and we had to call people and all that. This just makes it a lot easier for the customers. And one of the unique features that we have in it is that when you do sign up, you have the opportunity to put 3 different stores on there, which -- so it also drives traffic to other stores. So if you happen to be in a town like Birmingham where there is multiple stores that have it, you have a chance to win it in multiple locations. So I think, especially the sneaker kid, really likes that opportunity that he feels that he can get it anywhere and that will help drive loyal customers to our raffles.

No. It looks great so far. It's super clean. And then, just finally on the e-commerce. So in the quarter, higher mix of aged inventory weighed on margin this quarter. And in prior quarters, you had mentioned that the e-commerce offering itself was helpful in mitigating the markdowns. Just curious if in this quarter if that was the case as well. Did e-commerce help you? Or can you estimate maybe the spread that e-commerce may have provided on margins because it was there versus potentially obviously if you didn't have e-commerce, you wouldn't have had such a expanded marketplace?

Yes. It's a little bit difficult to measure, Nick. I mean, we do see some examples where we think we are clearing it sooner with fewer markdowns. It's a little difficult to get the total impact of that at this point just because we are adjusting and trying some things to see if our liquidations still are at a high level. So it's a little bit early to put an exact number on it, but we will continue to monitor that and do see some opportunity there.

(Operator Instructions) Our next question comes from the line of David Schick with Consumer Edge Research.

I joined my friend, Tim Duffy. It's David Schick. Two questions. First, you talked about performance and fashion, the line's blurring. It sounds like you're trying to say footwear ASP is going to be better. Could you give us some sense of that in some -- in a mathematic basis if that's true?

And then second, the March comp was 6% and you've talked about mid-singles as you start -- or for May and April was essentially flat or flattish. Is it fair to say that, that was the -- you think that was weather and that 6% in the May would have been more normal?

Yes. I think as we get into the second quarter, a lot of the change -- last year, we did a 3% comp in April and then a negative 8.5% in May. So we saw a really big shift last year from April to May. And so part of the mid-single comps that we're seeing now is -- a lot of it is pressure product, but a lot of it is just a real soft compare from last year.

Great. And then, anything on the footwear ASP, some sense of the math, what that might look like as we shift into the new stuff coming in?

Yes. So from an ASP standpoint in footwear, there is some shift from an assortment perspective to positive, but the bigger impact on ASPs is the lack of aged inventory. So we will get some benefit in ASPs, both from assortments as well as the health of the inventory.

Okay. Great. And then last, with the launch of the app, any real step-down in the cost of that build or should we expect that to stick around into a lap next year?

Cost of the build.

Well, you've been adding costs around digital and then you have the incremental around app. Finding out if there's anything incremental in the short term around the app launch or if it's just part of the general spending towards digital that you've budgeted out.

It will be part of the general spending. So the launch of the app, we spent a little more, but as we continue further into this year and next year, we'll continue to make improvements and enhancements to the app. It won't be to the magnitude that we've seen so far to launch it, but we'll continue to make improvements and that is built into our guidance.

Mr. Rosenthal, there are no further questions at this time. Would you like me to turn the presentation back to you?

Sure. Thank you for being on our call today. We look forward to our second quarter earnings call in August 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.