Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Hibbett Sports, Inc. (NASDAQ:HIBB)

F4Q09 Earnings Call

March 13, 2009 10:00 am ET

Executives

Michael J. Newsome - Chairman of the Board, Chief Executive Officer

Gary A. Smith – Vice President, Chief Financial Officer

Jeffry O. Rosenthal – President, Chief Operating Officer

Analysts

Chris Svezia - Susquehanna Financial Group

Dan Wewer - Raymond James & Associates

Sam Poser - Sterne, Agee & Leach

Rick Nelson - Stephens, Inc.

Anthony Lebiedzinski – Sidoti & Co.

Reed Anderson - D.A. Davidson & Co.

Mitchell Kaiser - Piper Jaffray

Elizabeth Montgomery – Longbow Capital Partners

Jeff Mintz - Wedbush Morgan Securities, Inc.

John [Purdy] – Principle Global Investors

Jim Chartier – Moness, Crespi, Hart & Co.

Sean McGowan - Needham & Company

Operator

Welcome to the Hibbett Sports, Inc. conference call. Today’s call is being recorded. At this time for opening remarks and introductions I would like to turn the call over to the Chairman and Chief Executive Officer, Mr. Mickey Newsome.

Michael Newsome

This is Mickey Newsome and I have with me Jeff Rosenthal, our President and Chief Operating Officer and Gary Smith, our VP and Chief Financial Officer. We appreciate you being on the call today and we appreciate your interest in Hibbett Sporting Goods. Before we start, Gary Smith will cover the Safe Harbor language.

Gary Smith

In order for us to take advantage of Safe Harbor rules, I would like to remind you that any projections or statements made today reflect our current views with respect to future events and our financial performance. There is no assurance that such events will occur or that any projections will be achieved. Our actual results could differ materially from any projections due to various risk factors which are described from time-to-time in our periodic reports with the SEC.

Michael Newsome

Thank you Gary. As you know from our press release late yesterday, our fourth quarter earnings per share were $0.26 compared to $0.25 one year ago. Also, we improved our cash position year-over-year. We ended the year with $24.7 million in cash and no debt.

Overall sales for the quarter increased 3.6% and same store sales decreased 2.8%. November was negative 2.6%. December was negative 2.6%. January was negative 3.8%. But January actually was stronger than was indicated. We had 350 days of closed stores due to the snow and ice in Kentucky and surrounding states. Without that we feel January would have probably been a little bit better than November and December.

The number of items per transaction were positive 1.2% and the average selling price of an item was up 2.3%. Both of these indicate a little less traffic in our stores in the fourth quarter. Now I am happy to report first quarter sales have greatly improved through yesterday. We are positive high single digits through yesterday. We are encouraged but cautious with these results. There is lots of uncertainty in front of us and in front of the economy in general.

The first quarter feels good to us obviously. The second quarter could be more of a challenge because we have a 5% comp store sales in the second last year and we had the stimulus checks in the second quarter last year and those were very meaningful to our consumer. We do feel good about the third and fourth quarter but we are cautious because you never know what is out there in the future.

Now why have sales greatly improved in the first quarter? Number one, we have improved as a company at Hibbett Sporting Goods. It is all about systems, systems, systems. We are in stock more with the right product in the right stores in the right quantity relative to last year.

Number two, our stores are selling each customer more items versus last year. Our items per transaction are up.

Number three, our merchant selection of the right merchandise has been great. We are really on target. We are getting better vendor support as we grow. Vendors know we have cash on our balance sheet and that we are not a credit risk. That is resulting in more of the best and most effective merchandise.

In real estate last year we opened 69 new stores and closed 12. Many of the 12 closures were in closed malls. This year we expect to open 65 to 70 new stores with 15 to 20 closures net of reloc’s. We expect to open 40-50 new stores net of closures. Real estate is very uncertain in these times. We are having fall outs from the landlord side. We are going to be conservative with our projections on new stores. Most new stores will be in strip centers and not enclosed malls. We will do more relocations and expansions of our over performing stores this year. We will probably to 10-12 of each of those.

When the current economy improves we will grow our new stores faster. There is no shortage of small markets that need us.

Now Gary Smith will speak to you about our financials.

Gary Smith

Fourth quarter sales were $147.9 million, a 3.6% increase from the previous year. Comps were down 2.8%. Gross profit increased 260 basis points due to improvements in mark downs, inventory shrinkage and inbound freight. Also we levered occupancy and warehouse costs.

Store occupancy cost is down mid single digits on a per store basis year-over-year due to more stores in favorable percentage rent and distribution costs in the fourth quarter were less dollars than the previous year. Selling and admin costs increased 138 basis points over the prior year due to increases in incentive compensation and the de-leveraging of store payroll. Operating income was $12.7 million and 8.6% versus last year’s $11.8 million and 8.2%. Diluted earnings per share came in at $0.26 versus last year’s $0.25.

From a balance sheet perspective the company ended the quarter with $20 million in cash and zero short-term debt. Total inventories increased 7.3% over the previous year but decreased 1% on a store-by-store basis and 3% on a comp store basis. Aged inventory as a percent of total inventory improved slightly year-over-year. We spent $13.4 million in CapEx for the year versus the $24 million budget. We did not buy any stock back in the quarter but year-to-date we have repurchased approximately one million shares at $16.9 million and that was in the first quarter.

Michael Newsome

Thank you Gary. Now Jeff Rosenthal, our President and Chief Operating Officer will speak with you.

Jeffry Rosenthal

Our strip centers out performed enclosed malls. We have approximately 73% of our stores now in strip centers. Our non-urban stores out performed our urban centers. The three major areas of business, apparel, footwear and equipment, apparel is broken into two areas of business; branded and license.

License was very disappointing, down double digits. However, top performing areas in license were mixed martial arts which was mostly Tap Out and MLB hats by New Era. Branded apparel was off low single digits. Fashion urban apparel was off double digits. However, athletic apparel led by Nike, Under Armour and North Face were up high single digits. Youth apparel, both boy’s and girl’s were up low to mid single digits.

Branded accessories and footwear accessories were up mid double digits. Footwear was up low single digits led by kid’s and men’s lifestyle products. Women’s was off double digits. Key performers were Nike Shox, Air Force One’s and Jordan’s, Under Armour Training, ASICS technical running shoes, DC Footwear. Equipment was off double digits.

However, we are a much improved company going into this year. Our results in the first six weeks have greatly improved. Strip centers are still out performing malls. Highlight footwear is up double digits and women’s are comping positive. Apparel is up in the single digits. Equipment is just slightly off, a much improved performance and we have less inventory.

Inventory is in much better shape versus last year and the mix of product that we are carrying over. E3, our new replenishment system, is a major factor in sales and inventory turns. Our marketing efforts with our MVP program and our visual presentations with Nike and Under Armour are greatly improved. Our items per transaction and our excellent customer service will continue to improve for this year.

Michael Newsome

Thank you Jeff. Operator we are ready for questions.

Question-and-Answer Session

Operator

(Operator Instructions) The first question comes from the line of Chris Svezia - Susquehanna Financial Group.

Chris Svezia - Susquehanna Financial Group

When I look at your guidance and your thoughts here, could you just maybe talk about how much is a function of systems and merchandise planning versus the external environment? Obviously it seems like footwear is doing very well here early in the first quarter but maybe you can just talk about how much of your inventory is on E3 replenishment and kind of where you see that going throughout the year?

Jeffry Rosenthal

We have approximately 20% of our inventory on replenishment. We would like to grow it up over the 30% range at some point. We are very excited, all of the buyers are anxious to put more and more on E3. Really this is something we think we are just beginning to get some of the fruit from, putting in the new system. We have seen numerous occasions that we are doing a lot more business and have less stock out’s with less inventory. So we feel very positive about this and I think a lot of this there is a lot of low hanging fruit that we really didn’t realize until we have really gotten into having all these system upgrades.

Chris Svezia - Susquehanna Financial Group

What is on it right now? When you talk about 30% when do you anticipate getting that 30%? Is that possibly by back to school? What is on it right now? I think you had accessories on it. Maybe give some color on what is on it right now.

Jeffry Rosenthal

A lot of it is basic items. Most accessories like branded accessories and footwear accessories. We have a hard goods items like athletic tape and baseballs and those accessories and gloves. We have a lot of apparel on it. A lot of Under Armour, Nike, compression and shorts and those types of items. We have a little bit of footwear from ASICS and New Balance but we see that growing. We are trying to get it up as fast as we can. We have a good challenge but the problem is we are just trying to keep up with the forecasts with our vendors and trying to keep that going.

Chris Svezia - Susquehanna Financial Group

Gary, when you look at your guidance of $1.03 to $1.17 maybe just talk about the inputs into getting there. When you look at the bottom of this it is kind of a worst case scenario. What kind of comp are you talking about? When you get to the higher end what kind of comps are you assuming in those numbers?

Gary Smith

Mr. Newsome mentioned that the second quarter is going to be a challenge for us because of the stimulus checks. That could be worth a couple million dollars. We think worst case scenario would be zero the rest of the way out and put us at the bottom end. If we had a 2-3 we would be at the top end or maybe a little bit higher.

Chris Svezia - Susquehanna Financial Group

You mentioned you leveraged occupancy and distribution center costs seem to be coming down. How easy is it now given everything you are doing from a rent perspective to start leveraging the occupancy piece when you talk about a flat comp? It would seem to be a slight positive. What do you need now to do that?

Gary Smith

We leveraged occupancy and warehouse last year on a 0.5 basically a flat comp. We have approximately 15% of our stores in a favorable percentage rent factor. We expect that to increase as we go through the year as more centers are in co-tenancy violations. So we would think that we could probably manage to lever both of those line items with just a flat to slightly positive comp.

Operator

The next question comes from Dan Wewer - Raymond James & Associates.

Dan Wewer - Raymond James & Associates

The first question I had was trying to understand how the shift in Easter impacts your business. With Easter earlier a year ago I am assuming you ran some Easter promotions probably this time a year ago?

Jeffry Rosenthal

Yes, some of that will shift a little bit into April.

Dan Wewer - Raymond James & Associates

So just to make sure I understand we are running at high single digits even though you are probably at a disadvantage in terms of the promotional calendar a year ago?

Jeffry Rosenthal

You really start hitting that I believe next week when we go really against Easter. The next couple of weeks it is going to be up and down a little bit just because of the shift.

Dan Wewer - Raymond James & Associates

Gary, on the balance sheet it looks like your net property and equipment was lower than a year ago. Does that just reflect that you depreciated a significant amount of assets at a faster rate than what you are growing?

Gary Smith

We took some impairment charges and expedited our depreciation. It had a little bit of effect in the fourth quarter but we are in pretty good shape.

Dan Wewer - Raymond James & Associates

Did you run those through in the fourth quarter or was that in a prior quarter?

Gary Smith

We ran a few more through in the fourth quarter than we normally did but we do it on a quarter-by-quarter basis. We look at those stores that are not contributing and have a negative discounted cash flow.

Dan Wewer - Raymond James & Associates

So that went through the income statement? Or was it just a balance sheet adjustment?

Gary Smith

It went through the income statement.

Dan Wewer - Raymond James & Associates

How much was that?

Gary Smith

It was probably $600,000 to $700,000 in that line in the fourth quarter. Maybe $1 million for the year or so.

Dan Wewer - Raymond James & Associates

That would be before or after tax?

Gary Smith

Before tax.

Dan Wewer - Raymond James & Associates

Jeff, given that business is a lot stronger now than what you were probably expecting two months ago how does this increased demand impact your purchasing plans?

Jeffry Rosenthal

We are still going to be very cautious. One of the strategies for this year is to really get inventory turn. There is a lot of product out there to get if we need it but we are going to be pretty cautious just because we really don’t know where it is all going.

Operator

The next question comes from Sam Poser - Sterne, Agee & Leach.

Sam Poser - Sterne, Agee & Leach

The inventory levels which look pretty much in line they were a little bit higher than what I expected to see. How much of that was equated to the Under Armour launches right at the end of the year?

Jeffry Rosenthal

It was a little over $1 million.

Sam Poser - Sterne, Agee & Leach

That was all? Only $1 million of Under Armour footwear for the launch?

Jeffry Rosenthal

A little bit over that.

Sam Poser - Sterne, Agee & Leach

I know you did the Under Armour shoes a little bit differently than others. What kind of performance are you seeing there right now?

Jeffry Rosenthal

It performed what we expected. Kind of a steady shoe. It is doing very well.

Sam Poser - Sterne, Agee & Leach

When we look at the footwear business, you said the footwear business is running up double digits right now quarter to date. What is driving that one right now?

Jeffry Rosenthal

It is really all genders of footwear are running up. We are proportionately really the kid’s and the lifestyle piece running up the most. What I am excited about is that the women’s for the first time we are starting to see some positive results that we haven’t seen in awhile.

Sam Poser - Sterne, Agee & Leach

Jeff you mentioned that E3 was running around 20% of your total right now. What percent was it this time last year?

Jeffry Rosenthal

I don’t have that off hand. I would say it would have been about half maybe.

Sam Poser - Sterne, Agee & Leach

How much can you bring your inventories down? You are opening stores and so on and so forth. Or is this a matter of sort of keeping a constant and just being much more efficient?

Gary Smith

Our average inventory per store will probably be in the $200,000 at cost level so that would probably equate to coming down another 3-4%.

Sam Poser - Sterne, Agee & Leach

Then the store openings you are planning for fiscal 2010 can you give us some order of when you are planning to open them?

Gary Smith

Probably pretty similar to last year. More back end loaded. We think we may have a few more first quarter because of some of the fall outs but every day we look at the list and some fall off because the landlord or developer wasn’t able to fill it out or get financing. So it is going to be a challenge throughout the year.

Sam Poser - Sterne, Agee & Leach

We should be looking at 2010 and fiscal 2011 pretty similar with store openings and closings as we see it today?

Michael Newsome

Probably. If things improve we can probably get a little more aggressive in 2011 but right now you would have to say you are right.

Sam Poser - Sterne, Agee & Leach

You sound somewhat confident about Q3 and Q4. Besides the comparison with store closures and what not, what other reasons…what are you seeing out there that is giving you that confidence?

Jeffry Rosenthal

I think we are just a much better improved company. I think the systems piece has really taken us awhile to get going. With E3 we will build history which will increase our sales so we see a lot of opportunity there. I just think we are a lot more focused and knowing what we are doing from an allocation standpoint. I just see that we still have some low hanging fruit out there that we can improve on.

Michael Newsome

In addition to that we had that $4 gas in the third quarter last year. Hopefully we won’t have that again this year.

Sam Poser - Sterne, Agee & Leach

How much is Wal-Mart, Wal-Mart came out with some very good comps in February. I don’t know how they are running today in March but with your overlap with your strategy to be in or adjacent to the Wal-Mart centers how much do you think that has helped you for traffic in the so far quarter to date?

Michael Newsome

I think it has helped because our strip centers are out performing our enclosed malls and most of our strip centers are in Wal-Mart influenced centers.

Sam Poser - Sterne, Agee & Leach

Have you seen those levels change since fourth quarter in that regard or an acceleration in those stores versus the malls?

Michael Newsome

Slightly, yes.

Operator

The next question comes from Rick Nelson - Stephens, Inc.

Rick Nelson - Stephens, Inc.

I would like to ask about the gross margin improvement we saw in the fourth quarter with the systems initiatives really pulling together. What sort of gross margin would you expect in the New Year?

Gary Smith

We planned certainly improvement in gross margin rate. If we can stay low to mid single digit comps and 25-50 bip increase is not unreasonable.

Rick Nelson - Stephens, Inc.

Can you talk about the geographic areas of strength and weakness? The Texas market in particular. What are you seeing there?

Michael Newsome

Through the middle of the country, Texas, Oklahoma, Arkansas, Kansas, Nebraska and Missouri is sort of where the strength is. The weakness is more of the east coast.

Gary Smith

The corollary is in a lot of our markets the unemployment rate is significantly below the national average.

Rick Nelson - Stephens, Inc.

The equipment category I didn’t catch the comp for the fourth quarter.

Jeffry Rosenthal

We were off double digits. We have seen a lot of improvement the first six weeks in a lot of our categories. We are just slightly off for the first six weeks of this quarter. We were off double digits for the fourth.

Rick Nelson - Stephens, Inc.

What do you think is changing there?

Jeffry Rosenthal

I think we brought in some other buyers and I think just our direction has changed. I think the replenishment piece is being a big part of us getting better.

Operator

The next question comes from Anthony Lebiedzinski – Sidoti & Co.

Anthony Lebiedzinski – Sidoti & Co.

Your gross margin was up quite a bit in the fourth quarter. Can you quantify the reasons for the gross margin expansion? How much came from better systems, how much from occupancy leverage and so on?

Gary Smith

90% of it was due to the improvement in the retail product margin and the other 10% or so the increase was due in the leveraging of occupancy and warehouse.

Anthony Lebiedzinski – Sidoti & Co.

The reasons for the retail product margin expansion, was that were you less promotional in the quarter? Also how much do you think was a result of the better systems?

Gary Smith

I think certainly our inventories were in better shape during the holiday season. We didn’t have to liquidate them as quickly as we did last year. Then I think as we move up on the replenishment side that is almost a guaranteed sale at full margin rate. So I think a number of good percentage of that is due to the systems side.

Anthony Lebiedzinski – Sidoti & Co.

I was wondering if you are planning to do any other systems upgrades. I know in previous calls you had talked about price optimization. What is your outlook on that?

Gary Smith

What we are working on now is the planning system which gives us two important components. One is size scaling so we can do better pre-packs throughout the stage in the different demographics. The other one is what we call store clustering so that we can put like-type stores together with our demographic information so we can compare like sales. We think that is the next leg in picking the low hanging fruit. We will start that this spring.

Anthony Lebiedzinski – Sidoti & Co.

How many leases do you have that are up for renewal this year and how do you feel about your ability to negotiate those to lower rents now?

Gary Smith

We think we have a very good opportunity out there to lower rents. I would say with our kick outs and our five year and five year it is anywhere from 20-30% of our leases are probably eligible for some sort of negotiation.

Anthony Lebiedzinski – Sidoti & Co.

It looks like you are going to again generate some good cash flow over the year and it looks like your CapEx is going to be fairly modest here. Would it be safe to say you are going to be just looking to accumulate cash or are you going to do anything else?

Gary Smith

For your write up this morning we think we will have $2 worth of cash on the balance sheet by the end of the year.

Operator

The next question comes from Reed Anderson - D.A. Davidson & Co.

Reed Anderson - D.A. Davidson & Co.

Jeff, I was just curious if you looked at your footwear business what portion of that really comes out of the women’s category?

Jeffry Rosenthal

It is the smallest portion. I’m trying to think of the percentage. I don’t have it right in front of me. I believe it is about 10-20% but I can get you that number.

Reed Anderson - D.A. Davidson & Co.

I am just curious, seeing that start to perform is a nice turn here even though it is a small piece. Are you doing anything different there whether it is from a marketing standpoint or assortment standpoint that would account for why that might be starting to work a little bit better right now?

Jeffry Rosenthal

I believe we are trying to focus a little bit more on technical running. We are doing a lot more of that on replenishment. We really had to almost start over because the last 2-3 years have been extremely tough. I think it is starting to pay some dividends.

Reed Anderson - D.A. Davidson & Co.

Shifting gears a little bit obviously there is a lot of opportunities out there with some good name products to get some good deals. Are you doing more from a, I don’t want to necessarily call it a close out, but just to take advantage of what is probably some good buying opportunities? Do we see that reflected at all in the fourth quarter or is that something you are going to be doing more of near-term here?

Jeffry Rosenthal

We are always looking for good deals. I would think that we are seeing a lot more product available so we are working out much better pricing going forward. With a lot of people that don’t have the means to pay for inventory we are taking advantage of that.

Reed Anderson - D.A. Davidson & Co.

Curious also, Nike you report that as a percent of your business. Did that go up or down last year versus what it was in the prior fiscal year?

Jeffry Rosenthal

It went up.

Reed Anderson - D.A. Davidson & Co.

Order of magnitude?

Gary Smith

Slightly up. It is probably over 50% of what we buy.

Reed Anderson - D.A. Davidson & Co.

Was that a function of just your expanding more or less the assortment or was it more pricing units? What would have been the dynamic for why that would have gone up?

Jeffry Rosenthal

We look at it just because of the demand from the consumer. We didn’t really strategically say they were going to be X percent of our business. It is just more for the demand from what our consumer wants.

Reed Anderson - D.A. Davidson & Co.

Gary, if you just look at the first quarter and you look at what you did in the fourth quarter and the trends for margins, I am going to presume that if you did a flat comp in the first quarter you could even see EPS up from what they were last year. Does that make sense? Or am I too positive on that assumption?

Gary Smith

It makes sense.

Operator

The next question comes from Mitchell Kaiser - Piper Jaffray.

Mitchell Kaiser - Piper Jaffray

Could you help us remember how the first quarter trended last year? I think you had a pretty negative March if I remember correctly and then April bounced back. Is that right Gary?

Gary Smith

That is fairly correct. The first quarter of the last two years have been fairly flat.

Mitchell Kaiser - Piper Jaffray

So March is an easier compare and then April becomes a little more challenging then?

Gary Smith

That was Easter.

Mitchell Kaiser - Piper Jaffray

On the product margin side I know two years ago you had some pretty significant mark downs so I am just trying to extrapolate just maybe an easier compare and then really just some benefits from the E3. If you could just talk about that a little bit.

Jeffry Rosenthal

I believe our inventory is in much better shape. A year ago fourth quarter we came off a pretty negative fourth quarter which we had some carry over from especially apparel which we do not have this year. The bigger percent we put on E3 should drive our margins up because it is merchandise we won’t have to mark down.

Mitchell Kaiser - Piper Jaffray

Thinking longer term I know a lot has changed over the last couple of years but I think a few years ago you were talking about potentially getting to mid-teens operating margin. Could you just help us think about where you think the longer term operating margin might be? It certainly seems you might be getting some traction from E3 and it looks like rent is going to provide an opportunity for you and the product side seems to be going pretty well.

Gary Smith

We’d like to think this year we get closer to double digits and hopefully next year if we have the same sort of momentum we can be in the double digit range again.

Operator

The next question comes from Elizabeth Montgomery – Longbow Capital Partners.

Elizabeth Montgomery – Longbow Capital Partners

I wonder if you could talk about compression sales and whether you have seen any change in terms of the sell through in any of those items over the past several quarters.

Jeffry Rosenthal

I would say the compression business in general has matured. There isn’t a lot of expansion there. I think it is a pretty mature business. There are a lot of items around compression but in general the compression business is a pretty mature business.

Elizabeth Montgomery – Longbow Capital Partners

What are the key brands that you have within that category?

Jeffry Rosenthal

The two main brands would be Nike and Under Armour.

Operator

The next question comes from Jeff Mintz - Wedbush Morgan Securities, Inc.

Jeff Mintz - Wedbush Morgan Securities, Inc.

Jeff can you talk a little bit about what was driving the AUR up? Was that more of a mix shift or was that just kind of higher AUR’s across the board?

Jeffry Rosenthal

It really came from footwear and apparel. We are selling higher footwear. Apparel we have picked up North Face which has done pretty well.

Jeff Mintz - Wedbush Morgan Securities, Inc.

On the Under Armour running shoes can you give us a sense of how many of your doors that are in currently and is that expanding going forward?

Jeffry Rosenthal

We are expanding Under Armour footwear. We played it a little differently than most. We looked at the training piece as being a big part of it. With Under Armour athletic shoes we are over 400 locations.

Jeff Mintz - Wedbush Morgan Securities, Inc.

Gary, can you talk a little bit about how your CapEx ended up coming in so low compared to plan or budget in 2008 and also what the plans are for 2009?

Gary Smith

The reason it came in so low we really had penciled in we were going to open store count of 764 so that was almost 20 stores we didn’t open up. Another part of the CapEx was in the IT part. Mostly with PCI. The planning system and some of that is going to fall into this year. The plan next year is $17 million gross but I would expect we will only spend $11-12 million.

Jeff Mintz - Wedbush Morgan Securities, Inc.

In terms of store openings in 2009 can you talk a little bit about where you are opening them in terms of your core markets versus some of the newer markets? How do you see those opening?

Michael Newsome

We are in 24 states and we are going to open new stores probably some in all of them. Most of them are going to be in the sun belt. We even have some new stores in Alabama and that is our most mature state. So there are a lot of places we need a Hibbett Sporting Goods store. We just have to wait until things get a little better, wait until landlords get their money and get them built so we can accelerate our store growth. There is opportunity in every state we operate in.

Gary Smith

The number one store state we opened in last year was Texas that had a plus of eight and Louisiana with a plus of eight. We are still finding numerous opportunities in our core states to open new stores.

Operator

The next question comes from John [Purdy] – Principle Global Investors.

John [Purdy] – Principle Global Investors

I wanted to know what caused the tick up in the tax rate in the fourth quarter and what kind of a rate we should be using for the upcoming year.

Gary Smith

The tick up in the rate in the fourth quarter was really just due to an adjustment. We were at 37.8% for the year. I think 37.7% the year before that. I am using 38% for budget purposes going forward.

John [Purdy] – Principle Global Investors

Could you talk a little bit about what additional developments you will be doing on the systems front this year? What will be rolling out and maybe an anticipated timeframe for some of this stuff to become operational?

Gary Smith

From the merchandise side we are enhancing the planning piece so that we can deal more with size and detail level. We are looking at the store clustering piece from an assortment standpoint. We are going to be cutting over on that piece this weekend and we will start planning going forward second, third, fourth quarter and next year on that. We would expect to see some benefit for that towards the end of the year.

John [Purdy] – Principle Global Investors

Is there much in the CapEx budget for systems this year that is delayed from last year to this year?

Gary Smith

I think it is probably in the $3-4 million range. Yes.

Operator

The next question comes from Jim Chartier – Moness, Crespi, Hart & Co.

Jim Chartier – Moness, Crespi, Hart & Co.

I was wondering if you could talk about the impact of Footlocker and Finish Line having a greater or more doors with Under Armour apparel in it and how that is impacting your business.

Jeffry Rosenthal

I’m sure it has to affect us some where we compete but we only have 27% of our stores are in enclosed malls and some of those malls we are the only ones because we are in small towns. So I would say it would be minimal.

Jim Chartier – Moness, Crespi, Hart & Co.

How many doors are you carrying North Face in and what is the plan to expand that going forward?

Jeffry Rosenthal

We worked really closely with North Face and we are working on how many stores it is going to be right now. We are still working on it and we really don’t know.

Jim Chartier – Moness, Crespi, Hart & Co.

How many stores had North Face in the fourth quarter this year?

Jeffry Rosenthal

We just don’t really want to give it out for competitive reasons.

Jim Chartier – Moness, Crespi, Hart & Co.

Can you tell us what percentage of your sales was done on automatic replenishment in the fourth quarter and then what the plan is for first quarter in FY09?

Gary Smith

I would say it is probably in the fourth quarter 10-12%. Jeff thinks we are at 20%. We will probably want to get to 30% by the end of the year.

Operator

The next question comes from Sean McGowan - Needham & Company.

Sean McGowan - Needham & Company

Mickey looking at the issue of store openings and how it is affected by real estate development I wanted to ask if you could have opened all the stores you wanted how many more would it have been? If that were not a factor, the lack of development in some markets?

Michael Newsome

We would like to have another 20-25.

Sean McGowan - Needham & Company

Were there any particularly noteworthy weather issues in the fourth quarter that we might want to be aware of going towards the end of this year?

Michael Newsome

We had the snow and ice in Kentucky and surrounding states in January that impacted our January sales. Other than that…

Gary Smith

We had snow in the Southeast in March.

Michael Newsome

We had snow in the Southeast in March but it didn’t last but about two hours.

Sean McGowan - Needham & Company

About 5” in Atlanta, right?

Michael Newsome

It didn’t last long.

Sean McGowan - Needham & Company

Outside of Kentucky ice, nothing you think will have an impact next year?

Michael Newsome

I don’t think so. Gary just mentioned we had some storms in the third quarter. Three.

Sean McGowan - Needham & Company

Those seem to be pretty common that time of year. Gary, what do you expect depreciation and amortization to be in 2009?

Gary Smith

Probably in the $15 million range.

Operator

I am showing that we have no further questions. I will turn it back to management for any closing remarks.

Michael Newsome

Thank you. Obviously we are encouraged with our start in the first quarter. We have improved as a company year-over-year especially in the systems area and most of the benefits from these improvements in systems are in front of us. Our small market approach is sound and solid and it has a lot of potential for a lot of growth in the future. We have identified more than 400 additional markets in our 24 state area, mostly in the sun belt where the population is expected to continue to grow. We think we can be a very large company in the future. We have a great future. We appreciate you being on our call today and we look forward to May 22, at 9:00 CST when we will discuss our first quarter results. Thank you for being on the call.

Operator

Ladies and gentlemen that does conclude our conference for today. Thank you for your participation. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Hibbett Sports, Inc. F4Q09 (Qtr End 01/31/09) Earnings Call Transcript
This Transcript
All Transcripts