HIBBETT INC Management’s Discussion and Analysis of Financial Condition and Results of Operations. (Form 10-Q)
Caution Regarding Forward-Looking Statements
This document contains "forward-looking statements" as that term is used in the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
address future events, developments and results and do not relate strictly to
historical facts. Any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. They include
statements preceded by, followed by or including words such as "believe,"
"anticipate," "expect," "intend," "plan," "forecast," "guidance," "outlook,"
"estimate" "will," "may," "could," "possible," "potential," or other similar
words, phrases or expressions. For example, our forward-looking statements
include statements regarding:
•the potential impact of COVID-19 on our business, operations and financial
results;
•the uncertainty of future stimulus payments and extended unemployment benefits,
if any, and the related effects on consumer demand for our products and our
overall business;
•the potential impact of new trade, tariff, and tax regulations on our
profitability;
•our ability to accurately forecast consumer demand for our products and manage
our inventory in response to changing demands;
•our cash needs, including our ability to fund our future capital expenditures,
working capital requirements, recurring quarterly dividends and repurchases of
Company common stock under our stock repurchase program (the "Repurchase
Program");
•our relationships with vendors and the loss of key vendor support;
•the possible effects of inflation, market decline and other economic changes on
our costs and profitability;
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•our ability to retain key personnel and other employees at Hibbett and City Gear due to current labor challenges or otherwise; •our anticipated net sales, comparable store net sales changes, net sales growth, gross margins, expenses and earnings; •our business strategy, omni-channel platform, logistics structure, target market presence and the expected impact of such factors on our net sales growth; •our store growth, including our plans to add, expand, relocate or close stores, our markets' ability to support such growth, expected changes in total square footage, our ability to secure suitable locations for new stores and the suitability of our wholesale and logistics facility; •our expectations regarding the growth of our online business and the role of technology in supporting such growth; •the future reliability of, and cost associated with, disruptions in the global supply chain and the potential impacts on our domestic and international sources of product, including the actual and potential effect of tariffs on international goods imposed bythe United States and other potential impediments to imports; •our policy of leasing rather than owning stores and our ability to renew or replace store leases satisfactorily; •the cost of regulatory compliance, including the costs and possible outcomes of pending legal actions and other contingencies, and new or additional legal, legislative and regulatory requirements to reduce or mitigate the effects of climate change; •our analysis of our risk factors and their possible effect on financial results; •our seasonal sales patterns and assumptions concerning customer buying behavior; •our ability to retain new customers; •our expectations regarding competition; •our estimates and assumptions as they relate to preferable tax and financial accounting methods, accruals, inventory valuations, long-lived assets, carrying amount and liquidity of financial instruments, fair value of options and other stock-based compensation, economic and useful lives of depreciable assets and leases, income tax liabilities, deferred taxes and uncertain tax positions; •our expectations concerning future stock-based award types and the exercise of outstanding stock options; •our assessment of the materiality and impact on our business of adopting recent accounting pronouncements issued by theFinancial Accounting Standards Board ; •the possible effects of uncertainty within the capital markets, on the commercial credit environment and on levels of consumer confidence; •our analyses of trends as related to marketing, sales and earnings performance; •our ability to receive favorable brand name merchandise and pricing from key vendors; •the impact of technology on our operations and business, including cyberattacks, cyber liability or potential liability for breaches of our privacy or information security systems; and •our ability to mitigate the risk of possible business interruptions, including, without limitation, from political or social unrest and armed conflicts.
A forward-looking statement is neither a prediction nor a guarantee of future results, events or circumstances. You should not place undue reliance on forward-looking statements. Our forward-looking statements are based on currently available operational, financial and business information and speak only as of the date of this report. Our business, financial condition, results of operations and prospects may have changed since that date. For a discussion of the risks, uncertainties and assumptions that could affect our future events, developments or results, you should carefully review the risk factors described from time to time in our other documents and reports, including the factors described under “Factors of Risk” in our Form 10-K for the fiscal year ended
(“SEC”) on
We cannot assure you that the results, events or circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements. In addition, new risks and uncertainties emerge from time to time and it is impossible for us to predict all of the risks and uncertainties that could impact our forward-looking statements.
We do not undertake to publicly update or revise any forward-looking statements after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events or otherwise, and you should not don’t expect us to. Investors should also be aware that although we communicate from time to time with securities analysts and others, we do not, as a matter of policy, selectively disclose to them material nonpublic information with an issued statement or report. by an analyst, regardless of the content of the statement or report. We do not, by policy, endorse forecasts or projections issued by
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others. Thus, to the extent that reports issued by securities analysts contain projections, forecasts or opinions, such reports are not our responsibility.
Investor access to documents filed by the company
We make available free of charge on our website, www.hibbett.com under “Investor Relations”, copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to such reports filed or furnished under Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Securities Exchange Act”) together with all Forms 3 , 4 and 5 filed by our executive officers and directors, as soon as the filed documents are made public by the
Overview
Hibbett, headquartered in
From
Location
Average
Brand Square Footage Strip Center(1) Mall Total
Hibbett 5,800 727 180 907
City Gear 5,100 145 37 182
Sports Additions(2) 2,900 3 13 16
(1) Strip malls include stand-alone stores and, for our Hibbett locations, are typically located near a major chain store. (2) Approximately 90% of the goods carried in our Sports Additions stores are athletic shoes.
Our merchandising emphasizes a TOE-TO-HEADTM approach. We provide a wide assortment of premium brand name team sports footwear, apparel, accessories and equipment at competitive prices in a full-service omnichannel environment. We believe that the assortment of branded merchandise we offer consistently exceeds the merchandise selection offered by most of our competitors, particularly in our underserved markets and neighborhood centers. Many of these branded products have limited availability and/or are technical in nature requiring considerable sales support. We coordinate with our vendors to educate our store-level sales staff on new products and trends.
Comparable store sales – Stores considered comparable stores include our Hibbett, City Gear and Sports Additions stores open throughout the reporting period and the same period last year, as well as online sales. We consider comparable store sales to be a key indicator of our current performance; measure sales growth and sales productivity of existing stores. Management believes that positive comparable store sales contribute to better leverage of operating costs, particularly labor and occupancy costs, while negative comparable store sales contribute to cost deleveraging. Comparable store sales also have a direct impact on our total net sales and cash level.
If a store’s renovation, relocation or expansion results in the store being closed for a significant period of time, its sales are removed from the comparable store’s sales base until it has been open for a full 12 months . In addition, rebranded stores are treated as new stores and are not reflected in comparable store sales until they have been open for a full 12 months under the new brand. In the 13 weeks ended
Summary
Net sales for the 13 weeks ended
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the first quarter of the previous year. We believe stimulus funds in the first quarter of fiscal 2022 significantly boosted sales and generated leverage across a number of spending categories.
In addition to the positive impact of stimulus measures on sales in the first quarter of fiscal 2022, as noted above, the outbreak of the COVID-19 pandemic had a significant negative impact on sales in the first quarter of fiscal 2021. Accordingly, we believe that sales performance versus the first quarter of fiscal 2020 provides the most relevant pre-pandemic comparison. On a three-year basis, compared to the 13 weeks ended
Store operating, selling and administrative (“SG&A”) expenses represented 22.5% of net sales for the 13 weeks ended
During the first quarter of fiscal 2023, we opened nine new stores, renamed one store and closed one underperforming store, bringing the number of stores to 1,105 in 35 states in
available under our credit facility. The net inventory was
despite continued supply chain disruptions due to the impacts of the COVID-19 pandemic on manufacturing capacity, port backlogs, transportation equipment availability and international conflicts. Fundamental improvements to the customer experience and our ability to attract and stay in touch with underserved customers continue to strengthen our relationships with our supplier partners.
Significant Accounting Policies and Estimates
Our significant accounting policies are described in Section 1, Note 1 – Basis of presentation and significant accounting policies. The unaudited condensed consolidated financial statements are prepared in accordance with
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