UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the fiscal year ended: February 2, 2019
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period from: __________________________ to __________________________
Commission file number: 000-20969
HIBBETT SPORTS, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE
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20-8159608
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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2700 Milan Court, Birmingham, Alabama 35211
(Address of principal executive offices, including zip code)
205-942-4292
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Common Stock, $0.01 Par Value Per Share
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NASDAQ Global Select Market
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Title of Class
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Name of each exchange on which registered
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Securities registered pursuant to section 12(g) of the Act:
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NONE
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
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Yes
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No
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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Yes
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No
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Yes
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No
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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Yes
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No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
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Yes
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No
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The aggregate market value of the voting stock held by non-affiliates of the Registrant (assuming for purposes of this calculation that all executive
officers and directors are “affiliates”) was $444,759,513 on August 4, 2018, based on the closing sale price of $24.15 at August 3, 2018 for the common stock on such date on the NASDAQ Global Select Market.
The number of shares outstanding of the Registrant’s common stock, as of April 2, 2019, was 18,384,835.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement for the 2019 Annual Meeting of Stockholders to be held on May 23, 2019, are incorporated by reference into Part
III of this Annual Report on Form 10-K. Registrant’s definitive Proxy Statement will be filed with the Securities and Exchange Commission on or before April 23, 2019.
HIBBETT SPORTS, INC.
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 8.
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Item 9.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Introductory Note
References to “we”, “our”, “us”, “Hibbett” and the “Company” used throughout this document refer to Hibbett Sports, Inc. and its
subsidiaries. Unless specifically indicated otherwise, any reference to the following years or fiscal years relates to:
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Year
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Related Fiscal Year End
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Weeks in
Fiscal Period
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2020 or Fiscal 2020
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February 1, 2020
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52
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2019 or Fiscal 2019
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February 2, 2019
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52
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2018 or Fiscal 2018
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February 3, 2018
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53
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2017 or Fiscal 2017
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January 28, 2017
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52
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Cautionary Statement 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,” “could,” “expect,” “intend,” “may,” “outlook,” “forecast,” “guidance,” “continue,” “plan,” “predict,” “should,” “will,” “target,”
“estimate” or other similar words, phrases or expressions, whether in the negative or affirmative. For example, our forward-looking statements include statements
regarding:
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our plans, expectations and estimates concerning the integration of City Gear, LLC (City Gear) and related costs;
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our ability to retain key personnel at Hibbett and City Gear;
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our anticipated net sales, comparable store net sales changes, net sales growth, gross margins, expenses and earnings;
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our business strategy, omni-channel platform, logistics structure, target market presence and the expected impact of such factors on our net sales growth;
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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;
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our expectations regarding the growth of our online business and the role of technology in supporting such growth;
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our policy of leasing rather than owning stores and our ability to renew or replace store leases satisfactorily;
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the cost of regulatory compliance, including the costs and possible outcomes of pending legal actions and other contingencies;
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our cash needs, including our ability to fund our future capital expenditures, working capital requirements and repurchases of Company common stock under our repurchase
program;
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our analysis of our risk factors and their possible effect on financial results;
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our ability and plans to renew our credit facilities;
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our expectations regarding our capital expenditures and dividend policy;
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our seasonal sales patterns and assumptions concerning customer buying behavior;
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our expectations regarding competition;
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our estimates and assumptions as they relate to the fair value of assets acquired and liabilities assumed in the purchase of City Gear, preferable tax and financial
accounting methods, accruals, inventory valuations, long-lived assets, store closure charges, 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;
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our expectations concerning future stock-based award types and the exercise of outstanding stock options;
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the possible effect of inflation, market decline and other economic changes on our costs and profitability;
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our assessment of the materiality and impact on our business of recent accounting pronouncements adopted by the Financial Accounting Standards Board;
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the possible effects of uncertainty within the capital markets, on the commercial credit environment and on levels of consumer confidence;
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our analyses of trends as related to marketing, sales and earnings performance;
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our ability to receive favorable brand name merchandise and pricing from key vendors;
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the future reliability of, and cost associated with, our sources of supply, particularly imported goods;
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our relationships with vendors and the loss of key vendor support;
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our plans, expectations and abilities relating to cybersecurity; and
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our ability to mitigate the risk of possible business interruptions.
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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 all based on currently available operating, financial and business information and speak only as of the date of this Annual Report on Form 10-K. 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” as well as “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” included elsewhere in this report.
We cannot assure you that the results, events and 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. Moreover, new risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and
uncertainties that could have an impact on our forward-looking statements.
We do not undertake to publicly update or revise any forward-looking statements after the date of this Form 10-K, whether as a result of
new information, future events, or otherwise, and you should not expect us to do so.
Investors should also be aware that while we do, from time to time, communicate with securities analysts and others, we do not, by
policy, selectively disclose to them any material non-public information in connection with any statement or report issued by any analyst regardless of the content of the statement or report. We do not, by policy, confirm forecasts or
projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.
Our Company
Our Company began in 1945 under the name Dixie Supply Company in Florence, Alabama. Although we initially specialized primarily in the
marine and small aircraft business, by 1960, we were solely in the sporting goods business. In 1965, we opened our second store, Dyess & Hibbett Sporting Goods, in Huntsville, Alabama, and hired Mickey Newsome, who is now Chairman of our
Board. The following year, we opened another sporting goods store in Birmingham and by the end of 1980, we had 12 stores in central and northwest Alabama with a distribution center located in Birmingham and our central accounting office in
Florence. We became a public company in October 1996.
In November 2018, we acquired City Gear, LLC (City Gear), a privately held city specialty retailer with over 130 stores. The City Gear
acquisition provides us with substantially greater scale in the athletic specialty market and is an extension of our strategy to provide high demand, branded products to underserved markets. Today, we are a leading athletic-inspired omni-channel
retailer operating stores primarily located in small and mid-sized communities, and e-commerce websites under hibbett.com and citygear.com. As of February 2, 2019, we operated a total of 1,163 stores consisting of 1,025 Hibbett stores and 138
City Gear stores in 35 states. Overall, our stores are approximately 5,500 square feet and are located primarily in strip centers frequently influenced by a major chain retailer.
Our primary merchandising strategy is to
provide a broad assortment of quality brand name footwear, apparel, accessories and athletic equipment at competitive prices in a conveniently located full-service environment. At the end of the second quarter of Fiscal 2018, we successfully
launched our e-commerce website. We will continue to grow our online business aggressively, while continuing to enhance our stores to improve the overall customer experience. We believe that the breadth and depth of our brand name merchandise
consistently exceeds the product selection carried by most of our competitors, particularly in our smaller markets. Many of these brand name products are highly technical and require expert sales assistance. We continuously educate our sales
staff on new products and trends through coordinated efforts with our vendors.
Our Executive Officers
Our current executive officers and their prior business experience are as follows:
Jeffry O. Rosenthal, age 61,
has been our Chief Executive Officer and President since March 2010. He also currently serves on our Board of Directors. Formerly, he served as President and Chief Operating Officer from February 2009 through March 2010 and as Vice President of
Merchandising from August 1998 through February 2009. Prior to joining us, Mr. Rosenthal was Vice President and Divisional Merchandise Manager for Apparel with Champs Sports, a division of Foot Locker, Inc., from 1981 to 1998.
Scott J. Bowman, age 52, was
hired as our Senior Vice President and Chief Financial Officer in July 2012. Prior to joining us, Mr. Bowman was Division Chief Financial Officer – Northern Division of The Home Depot, a large home improvement retailer. Previously, Mr. Bowman
served The Home Depot as their Senior Director, Finance – IT for approximately three years. In prior retail experience, he has worked in various controller and accounting management positions.
Jared S. Briskin, age 46,
was appointed our Senior Vice President and Chief Merchant in September 2014. Formerly, he served as Vice President/Divisional Merchandise Manager of Footwear and Equipment from March 2010 through September 2014 and Vice President/Divisional
Merchandise Manager of Apparel and Equipment from June 2004 through March 2010. Prior to his appointment to Vice President in 2004, Mr. Briskin held various merchandising positions across multiple categories since joining the Company in April
1998.
Cathy E. Pryor, age 55, has
been our Senior Vice President of Operations since 2012. Formerly, she served as Vice President of Operations from 1995 to 2012. She joined our Company in 1988 serving in areas of increasing responsibility including district manager and
Director of Store Operations.
Our Employees
As of February 2, 2019, we employed approximately 10,600 employees, of which approximately 3,600 are full‑time employees. None of our
employees are represented by a labor union. The number of part‑time employees fluctuates depending on seasonal needs. We consider our relationship with our employees to be good and have not experienced significant interruptions of operations
due to labor disagreements. We have implemented programs in our stores and corporate offices to ensure that we hire and promote the most qualified employees in a non-discriminatory way.
Employee Development: We develop our training
programs in a continuing effort to service the needs of our customers and employees. These programs include online and DVD training in all stores for the latest in technical detail of new products and new operational and customer service
techniques. We also have an intensive, five-day session designed specifically for new store managers. Periodically, we conduct shorter onsite training sessions for all or a specific group of employees as needed. Because we primarily promote or
relocate current employees to serve as managers for new stores, training and assessment of our employees is essential to our sustained growth.
Our Business Strategy
We target small to mid-sized markets with branded products and provide a high level of customer service. This market strategy enables us
to achieve significant cost benefits including lower corporate expenses, reduced logistics costs and increased economies of scale from marketing activities. We use information systems to maintain tight controls over inventory and operating costs
and continually search for ways to improve efficiencies and the customer experience through information system upgrades. In addition, we establish greater customer, vendor and landlord recognition as a leading athletic specialty retailer in
these communities. We believe our ability to align our merchandising mix to local preferences and trends differentiates us from our national competitors.
We strive to hire enthusiastic sales people with an interest in sports and athletics-inspired fashion. Our extensive training program
focuses on product knowledge and selling skills and is conducted through the use of in-store clinics, interactive group discussions and store associate training, self-study courses and Hibbett University designed specifically for store
management.
Our Store Banners
Hibbett Sports: As of February 2, 2019, we
operated 1,007 Hibbett Sports stores. These stores average approximately 5,700 square feet and are located primarily in strip centers, usually near a major chain retailer such as a Wal-Mart store. We operated 809 Hibbett Sports stores in strip
centers, which includes free-standing stores, and 198 stores in enclosed malls, the majority of which are the only enclosed malls in their county.
City Gear: In November 2018, we acquired 136
City Gear stores and as of February 2, 2019, operated 138 City Gear stores which average 5,000 square feet and are located primarily in strip centers. We operated 97 City Gear stores in strip centers, which includes free-standing stores, and 41
stores in enclosed malls.
Sports Additions: We operate 18 Sports
Additions (SA) stores, which average 2,500 square feet and are located primarily in enclosed malls. Approximately 90% of the merchandise carried in our SA stores is athletic footwear with the remainder consisting of headwear and apparel.
Team: In December 2017, we sold a portion of
the assets and ceased the operations of Hibbett Team Sales, Inc. (Team), a wholly‑owned subsidiary of the Company. Team was a supplier of customized athletic apparel, equipment and footwear primarily to school athletic programs in Alabama and
parts of Georgia, Florida and Mississippi. Team sold its merchandise directly to educational institutions and youth associations. The operations of Team were independent of the operations of our retail stores.
In selecting retail locations, we consider the size, demographics, quality of real estate and competitive conditions in each market. Our
stores offer a core merchandising mix of localized footwear, apparel, accessories and equipment designed to appeal to a wide range of customers within each market. We strive to meet the technical and fashion demands of our consumer as well as
respond quickly to major sporting events in college or professional team sports of local interest within our markets.
None of our store concepts meets the quantitative or qualitative requirements of Accounting Standards Codification (ASC) Topic 280, Segment Reporting.
Our Growth Strategy
We identify markets for our stores under a clustered expansion program. This approach primarily focuses on opening new stores within a
two‑hour driving distance of existing locations, allowing us to take advantage of efficiencies in logistics, marketing and regional management. It also aids us in building a better understanding of appropriate merchandise selection for the local
market. In addition to proximity to existing stores, we also consider population, economic conditions, local competitive dynamics, availability of suitable real estate and potential for return on investment when evaluating potential markets.
Omni-channel strategy: We recognize that our
customer is evolving and looking to engage with us in multiple ways. As a result, we continue to make investments that will enable us to engage our customer specifically in the digital commerce channel. In addition to having store-to-store and
store-to-home capability allowing us to use our chain-wide inventory to satisfy a customer sale, we have an e-commerce website allowing customers to shop across both channels. In Fiscal 2019, we completed development of our mobile app and rolled
out Buy Online, Pickup in Store (BOPIS) and Reserve Online, Pickup in Store (ROPIS). These developments complement our website and provide our customers with even more advanced features such as shopping, loyalty and raffle capabilities.
Our Logistics
We maintain a full-line wholesale and logistics facility in Alabaster, Alabama (a suburb of Birmingham) where we receive and ship most
our merchandise. In addition, we utilize a third-party logistics facility in Memphis, Tennessee and a third-party consolidation center in southern California to improve efficiencies and to improve time to market. For key products, we maintain
backstock at the Alabaster facility. This product is allocated and shipped to stores through an automatic replenishment system based on inventory levels and sales. Merchandise is delivered to stores via Company‑operated vehicles, small package
carriers or third-party logistics providers. We believe strong logistics support for our stores is a critical element of our business strategy and that our current logistics structure will support our growth over the next several years. See “Risk Factors.”
Our Merchandise
Our merchandising strategy is to provide a
broad assortment of premium brand name footwear, apparel, accessories and athletic equipment at competitive prices in a full service environment.
We believe that the assortment of brand name merchandise we offer consistently exceeds the merchandise selection carried by most of our
brick and mortar competitors, particularly in our smaller markets. Many of these brand name products have limited availability and/or are technical in nature requiring considerable sales assistance. We coordinate with our vendors to educate the
sales staff at the store level on new products and trends.
Although the core merchandise assortment tends to be similar for each store, important demographic, local and/or regional differences
exist. Accordingly, our stores offer products that reflect preferences for particular demographics as well as interests from each community. Our knowledge of these interests, combined with access to leading vendors, enables our merchandising
staff to react quickly to emerging trends or special events, such as fashion shifts or athletic events.
Our merchandising staff, operations staff and management analyze current trends primarily through the lens of our store typing strategy.
Information is largely gathered and analyzed utilizing business intelligence tools. Other strategic measures we utilize to recognize trends or changes in our industry include:
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maintaining close relationships with vendors and other retailers;
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studying other retailers for best practices in merchandising;
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attending various trade shows, both in our industry and outside as well as reviewing industry trade publications;
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actively participating in industry associations such as the National Sporting Goods Association (NSGA);
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visiting competitor store locations;
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monitoring industry data sources and periodicals;
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monitoring product selection at competing stores and online; and
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communicating with our regional vice presidents, district managers and store managers.
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The merchandising staff works closely with store personnel to meet the requirements of individual stores for appropriate merchandise in
sufficient quantities. See “Risk Factors.”
Our Vendor Relationships
The athletic specialty retail business is brand name driven. Accordingly, we maintain positive relationships with a number of well-known
vendors to satisfy customer demand. We believe that our stores are among the primary brick and mortar retail distribution avenues for brand name vendors that seek to penetrate our target markets. As a result, we are able to attract considerable
vendor interest and establish long‑term partnerships with vendors. As our vendors expand their product lines and grow in popularity, we expand sales of these products within our stores. In addition, as we continue to increase our store base and
enter new markets, our vendors increase their brand presence within these regions. We also work with our vendors to establish favorable pricing and to receive cooperative marketing funds. See “Risk Factors.”
Our Information Systems
We use technology as an enabler of our business strategies. We have implemented and maintained systems targeted at improving financial
control, cost management, inventory control, merchandise planning, logistics, replenishment, and product allocation. Based on our evaluation of City Gear to-date, we believe that it followed a similar approach to maintaining package and
partner-based systems.
Our systems are designed to be flexible to meet the unique needs of each specific store location. In Fiscal 2018, we added our digital
channel and in Fiscal 2019, we accomplished further channel integration and a more seamless and frictionless set of capabilities aimed at enhancing our customers shopping experience in store, online and through our mobile solutions. In Fiscal
2020, we expect to extend shipping options that our customers have expressed great interest in and also decrease costs for shipping services. Additionally, we plan to co-brand our web presence by including City Gear into our omni-channel
experience.
Our communications networks send and receive critical business data to and from stores, third-party cloud providers, and managed hosting
facilities (data centers). Our company’s information is processed in a secure environment to protect both the actual data and the physical assets. We attempt to mitigate the risk of cyber-security threats and business interruptions by
maintaining strong security protocols, threat monitoring, regular risk reviews, and a detailed disaster recovery plan. While many of these same controls are utilized by City Gear, we plan to update the City Gear systems where warranted to the
above stated aspects of security to be more closely aligned across all our operations.
We strive to maintain highly qualified and motivated third-party partners and teams of individuals to support our information systems,
which includes security, help desk, engineering, operations, quality assurance, business analysis, solution development and project managers. Our systems are monitored 24 hours a day and management believes that our current systems and practice
of implementing regular updates will continue to support current needs and future growth. We use a strategic information systems planning process that involves senior management and is integrated into our overall business planning and enterprise
risk management. Information systems projects are prioritized based upon strategic, financial, regulatory and other business criteria.
Our Marketing and Promotion
We focus on marketing opportunities that drive traffic and sales to our stores and website. In Fiscal 2019, digital marketing was the
major growth area of our marketing budget, while direct mail continued to be an important part of our marketing mix. Because these investments in digital marketing are yielding strong response, we expect to continue to grow digital marketing in
Fiscal 2020. We utilize our internal marketing team, as well as external digital marketing agencies, to ensure execution and returns from these new programs.
We offer two customer loyalty programs, the Hibbett Rewards program and City Gear Reward Points, whereby customers can earn awards that
can be redeemed in our stores. Our Rewards programs represent a significant portion of overall sales. In Fiscal 2018, we launched an improved Hibbett program that provided more value to our customers and made it easier to use. Since then, we
have significantly increased our member base as well as their frequency of purchases. We continue to explore opportunities to further improve our Rewards programs to drive member acquisition and sales.
Our Competition
The business in which we are engaged is highly competitive. The marketplace for athletic specialty merchandise is highly fragmented as
many different brick and mortar and online retailers compete for market share by utilizing a variety of formats and merchandising strategies. We compete with department and discount stores, traditional shoe stores, specialty sporting goods
shops, local sporting goods stores, outlet centers, mass merchandisers, e-commerce retailers and, in some of our large and mid-size markets, national sporting goods superstores. In addition, we face competition from vendors that sell directly to
consumers.
Although we face competition from a variety of competitors, we
believe that our stores are able to compete effectively by providing a premium assortment of footwear, apparel, accessories and team sports equipment. Additionally, we differentiate our store experience through extensive product knowledge,
customer service and convenient locations. We believe we compete favorably with respect to these factors in the smaller markets predominantly in the South, Southwest, Mid-Atlantic and Midwest regions of the United States. See “Risk Factors.”
Our Trademarks
Our Company, by and through subsidiaries, is the owner or licensee of trademarks that are very important to our business. For the most
part, trademarks are valid as long as they are in use and/or their registrations are properly maintained. Registrations of trademarks can generally be renewed indefinitely as long as the trademarks are in use.
Following is a list of active trademarks registered and owned by the Company:
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Hibbett Sports, Registration No. 2717584
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Sports Additions, Registration No. 1767761
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Hibbett, Registration No. 3275037
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City G.E.A.R, Registration No. 4398655
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City G.E.A.R., Registration No. 4413864
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CITY GEAR, Registration No. 4675462
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City GEAR, Registration No. 5008316
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DEVEROES, Registration No. 3479737
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GRINDHOUSE, Registration No. 5107399
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GRINDHOUSE DENIM, Registration No. 5107398
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Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) are available free of charge through our website www.hibbett.com, as
soon as reasonably practicable after such material is electronically filed with, or furnished to, the U.S. Securities and Exchange Commission (SEC). Our website is the primary source of publicly disclosed news about Hibbett Sports, Inc. In
addition to accessing copies of our reports online, you may request a copy of our Annual Report on Form 10-K for the fiscal year ended February 2, 2019, at no charge, by writing to: Investor Relations, Hibbett Sports, Inc., 2700 Milan Court,
Birmingham, Alabama 35211.
In addition, we make available, through our website, the Company’s Code of Business Conduct and Ethics, Corporate Governance Guidelines
and the written charters of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. Information contained on our website is not included as part of, or incorporated by reference into, this Annual Report.
You should carefully consider the following risks, as well as the other information contained in this report, before investing in shares
of our common stock. The occurrence of one or more of the circumstances or events described in this section could have a material adverse effect on our business, financial condition, results of operations, cash flows or on the trading prices of
our common stock. The risks and uncertainties described in this Annual Report on Form 10-K are not the only ones facing us. Additional risks and uncertainties not known to us at this time or that we currently believe are immaterial also may
adversely affect our business and operations.
Risks Related to Our Business and Industry
Integrating City Gear’s operations with ours may be more difficult, costly or time consuming than expected and the
anticipated benefits, synergies and cost savings of the acquisition may not be realized.
The success of the City Gear acquisition (Acquisition), including anticipated benefits, synergies and cost savings, will depend, in part,
on our ability to successfully combine and integrate the businesses and cultures of City Gear into our company. It is possible that the integration process will take longer than anticipated, and could result in the loss of key employees, higher
than expected costs, ongoing diversion of management attention, increased competition, the disruption of our ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain
relationships with customers, vendors and employees. If we experience difficulties with the integration process, the anticipated benefits of the Acquisition may not be realized fully or at all, or may take longer to realize than expected. In
addition, the actual cost savings of the Acquisition could be less than anticipated.
If we lose any of our key vendors or any of our key vendors fail to supply us with quality brand name merchandise at
competitive prices, we may not be able to meet the demand of our customers and our net sales and profitability could decline.
We are a retailer of manufacturers’ branded items and are thereby dependent on the availability of key products and brands. Our top
three vendors accounted for approximately 80% of our total inventory purchases during Fiscal 2019. Our business is dependent upon close relationships with vendors and our ability to purchase brand name merchandise at competitive prices. As a
retailer, we cannot control the supply, design, function or cost of many of the products we offer for sale. Moreover, certain merchandise that is in high demand may be allocated by vendors based upon the vendors’ internal criteria, which is
beyond our control.
As a result, our sales could decline if we are not provided with a sufficient allocation of high demand merchandise from one or more of
our key vendors or if the vendor’s merchandise were to decline in quantity, quality or desirability to our customers. Our profits could decline if we are unable to pass along any increases in the cost of brand merchandise from our key vendors,
including costs resulting from higher tariffs or taxes on imported merchandise. In addition, many of our vendors provide us with return privileges, volume purchasing allowances and cooperative marketing such that any changes to such benefits
could have an adverse effect on our business.
We believe that we have long-standing and strong relationships with our vendors and that we have adequate sources of brand name
merchandise on competitive terms. However, the loss or decline of key vendor support could have a material adverse effect on our business, financial condition and results of operations. There can be no assurances that we will be able to acquire
such merchandise at competitive prices or on competitive terms in the future.
We also rely on services and products from non-merchandise vendors. A disruption in these services or products due to the financial
condition or inefficient operations of these vendors could adversely affect our business operations.
If we are unable to identify and capitalize on retail trends or provide an omni-channel experience for our customers
that is comparable to our competitors, we may not be able to compete effectively, and our sales and profitability may be adversely affected.
Competition in the e-commerce market continues to intensify as the Internet continues to facilitate competitive entry into the market and
comparison shopping by consumers. As a result, a growing portion of total consumer expenditures with retailers is occurring through digital platforms rather than traditional retail stores as consumers increasingly embrace shopping online and
through mobile commerce applications. Our future success could be materially and adversely affected if we are unable to identify and capitalize on retail trends, including technology, e-commerce and other process efficiencies, to gain market
share and better service our customers, or if we are unable to provide an omni-channel experience for our customers that is comparable to our competitors.
In Fiscal 2018, we successfully launched our omni-channel platform, which integrated digital commerce with our stores to provide a
seamless experience for our customers. In Fiscal 2019, we launched our new mobile app, Buy Online Pickup in Store (BOPIS) and Reserve Online Pickup in Store (ROPIS) which complements our e-commerce site and provides our customers with customized
advanced features and shopping experiences. We cannot give any assurances that our omni-channel platform, including our mobile app, BOPIS and ROPIS, will perform in a manner that will give us the ability to attract and retain customers, increase
sales and successfully compete with other online retailers. If we do not successfully provide a relevant and up-to-date digital experience or cannot attract online buyers through our omni-channel platform, our sales and profitability could be
adversely affected.
We are increasing the use of social media as a means of interacting and enhancing the shopping experiences of our customers. If we are
unable to attract and retain team members or contract third parties with the specialized skills to support our omni-channel platform or are unable to implement improvements to our customer-facing technology in a timely manner, our ability to
compete and our results of operations could be adversely affected. In addition, if our websites and our other customer-facing technology systems do not function as designed, the customer experience could be negatively affected, resulting in a
loss of customer confidence and satisfaction, as well as lost sales, which could adversely affect our reputation and results of operations.
Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media
could adversely impact our business.
In recent years, there has been a marked increase in the use of social media platforms, including blogs, chat platforms, social media
websites, and other forms of internet-based communications that allow individuals access to a broad audience of consumers and other persons. The rising popularity of social media and other consumer-oriented technologies has increased the speed
and accessibility of information dissemination. The dissemination of negative information via social media could harm our business, brand, reputation, marketing partners, financial condition, and results of operations, regardless of the
information’s accuracy.
In addition, we frequently use social media to communicate with consumers and the public in general. Failure to use social media
effectively could lead to a decline in brand value and revenue. Other risks associated with the use of social media include improper disclosure of proprietary information, negative comments about our brand, exposure of personally identifiable
information, fraud, hoaxes or malicious dissemination of false information.
Pressure from our competitors may force us to reduce our prices or increase our spending on marketing and promotion,
which could lower our net sales, gross profit and operating income.
The business in which we are engaged is a highly competitive and evolving market. The marketplace for athletic specialty merchandise is highly fragmented as many different brick and mortar and online retailers compete for market share by utilizing a variety of formats and merchandising strategies. We compete
with e-commerce retailers, traditional shoe stores, department and discount stores, national sporting goods superstores, specialty sporting goods shops, local sporting goods stores, outlet centers and mass merchandisers. In addition, we face
competition from vendors that sell directly to consumers. Direct sales by vendors may adversely affect our market share and reduce our revenues.
Many of our competitors have greater financial, marketing and distribution resources than we do, which enable them to spend significantly
more on marketing and other initiatives. In addition, many of our competitors employ price discounting policies that, if intensified, may make it difficult for us to reach our sales goals without reducing our prices. Should our competitors
increase spending on marketing and other initiatives such as additional discounting, if our marketing funds decrease for any reason, or should our marketing, promotions or initiatives be less effective than our competitors, there could be a
material adverse effect on our results of operations and financial condition. As a result, we may also need to spend more on marketing, promotions and initiatives than we anticipate. Inadequate marketing that is less effective than our
competitors could inhibit our ability to maintain relevance in the market place and drive increased sales.
We cannot guarantee that we will continue to be able to compete successfully against existing or future competitors. Expansion into
markets served by our competitors, entry of new competitors or expansion of existing competitors into our markets could be detrimental to our business, financial condition and results of operations.
Our inability to identify and anticipate changes in consumer demands and preferences and our inability to respond to
such consumer demands in a timely manner could reduce our net sales or profitability.
Our products appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to rapid change.
Our success depends on our ability to identify product trends as well as to anticipate and respond to changing merchandise trends and consumer demand in a timely manner. We cannot assure you that we will be able to continue to offer assortments
of products that appeal to our customers or that we will satisfy changing consumer demands in the future. Accordingly, our business, financial condition and results of operations could be materially and adversely affected if:
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we are unable to identify and respond to emerging trends, including shifts in the popularity of certain products;
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we miscalculate either the market for the merchandise in our stores or our customers’ purchasing habits; or
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consumer demand unexpectedly shifts away from athletic footwear or our more profitable apparel lines.
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In addition, we may be faced with significant excess inventory of some products and missed opportunities for other products, which could
decrease our profitability.
We depend on key personnel, the loss of which may adversely affect our ability to run our business effectively and
our results of operations.
We benefit from the leadership and performance of our senior management team and other key employees. If we lose the services of any of
our principal executive officers or other skilled and experienced personnel, we may not be able to fully implement our business strategy or run our business effectively and operating results could suffer. The Compensation Committee of our Board
of Directors reviews, on a regular basis, a succession plan prepared by senior management that addresses the potential loss of key personnel positions. The goal of the succession plan is to have a contingency plan that minimizes disruptions in
the workplace until a suitable replacement can be found, but no assurance can be given that we will be able to retain existing or attract additional qualified personnel when needed.
On March 22, 2019, we announced the planned retirement of our Chief Executive Officer, Jeff Rosenthal. Although we expect him to remain
in his capacity as CEO until a successor is named and to assist in the leadership transition, he is currently under no binding agreement to do so. No assurance can be given that Mr. Rosenthal will remain through a satisfactory leadership
transition or that we will be successful in finding a suitable replacement in a timely manner.
Further, as our business grows, we will need to attract and retain additional qualified personnel in a timely manner and develop, train
and manage an increasing number of management-level sales associates and other employees. Competition for qualified employees could require us to pay higher wages and benefits to attract a sufficient number of qualified employees and increases in
the minimum wage or other employee benefit costs could increase our operating expense. An inability to attract and retain personnel as needed in the future could negatively impact our net sales growth and operating results.
Security threats, including physical and cyber-security threats, and unauthorized disclosure of sensitive or
confidential information could harm our business and reputation with our consumers.
The protection of Company, customer and employee data is critical to us. Through our sales, marketing activities and use of third-party
information, we collect and retain certain personally identifiable information that our customers provide to purchase products, enroll in promotional programs, register on our website, or otherwise communicate and interact with us. This may
include, but is not limited to, names, addresses, phone numbers, driver license numbers, e-mail addresses, contact preferences, personally identifiable information stored on electronic devices, and payment account information, including credit
and debit card information. We also gather and retain information about our employees in the normal course of business. Furthermore, our online operations depend upon the secure transmission of confidential information over public networks,
such as information permitting cashless payments.
We have security measures designed to protect against the misappropriation or corruption of our systems, intentional or unintentional
disclosure of confidential information or disruption of our operations. Our risk remediation procedures include an annual IT risk assessment based on the SANS Institute Critical Security Controls framework which prioritizes security functions
that are effective against the latest advanced targeted threats while emphasizing security controls that have demonstrated real world effectiveness. While we maintain insurance coverage that may, subject to policy terms and conditions, cover
certain aspects of our cyber risks, such insurance coverage may be insufficient to cover our losses or all types of claims that may arise in the continually evolving area of cyber risk.
Even so, these security measures may be compromised as a result of third-party breaches, burglaries, cyber-attacks, errors by employees
or employees of third-party vendors, faulty password management, misappropriation of data by employees, vendors or unaffiliated third-parties or other irregularity, and result in persons obtaining unauthorized access to our data or accounts.
Despite such safeguards for the protection of such information, we cannot be certain that all of our systems and those of our vendors and unaffiliated third-parties are entirely free from vulnerability to attack or compromise given that the
techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently. During the normal course of our business, we have experienced and we expect to continue to experience attempts to breach our
systems, and we may be unable to protect sensitive data and the integrity of our systems or to prevent fraudulent purchases. Moreover, an alleged or actual security breach that affects our systems or results in the unauthorized release of
personally identifiable information could:
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materially damage our reputation and negatively affect customer satisfaction and loyalty;
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expose us to negative publicity, individual claims or consumer class actions, administrative, civil or criminal investigations or actions; and
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cause us to incur substantial costs, including but not limited to, costs associated with remediation for stolen assets or information, litigation costs, lost revenues
resulting from unauthorized use of proprietary information or the failure to retain or attract customers following an attack, and increased cyber protection costs.
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We plan to initiate a strategic realignment, which includes an accelerated store closure plan, that may not yield the
economic results expected.
As the retail environment continues to evolve, the Company is focused on improving the productivity of the store base while continuing to
grow its omni-channel business to serve customers where and when they want to shop. In an effort to adapt to changing shopping patterns, the Company has decided to initiate a strategic realignment that will include the closure of approximately
95 underperforming Hibbett stores in Fiscal 2020, while opening approximately 10 to 15 new Hibbett Sports and City Gear stores. We cannot guarantee that this strategic realignment will result in an economic benefit for the company. Our results
of operations could be adversely affected by the underperforming stores’ liquidation process through reduced gross margin rates and increased operating costs.
We rely heavily on information systems to conduct our business. Problems with our information systems could disrupt
our operations and negatively impact our financial results and materially adversely affect our business operations.
Our ability to manage and operate our business depends significantly on information technology systems. Specifically, we rely on our
information systems to effectively manage our sales, logistics, merchandise planning and replenishment, to process financial information and sales transactions and to optimize our overall inventory levels. We could experience adverse events
relating to our information systems, including, among other things, system failures, problems with integrating various data sources, challenges in transitioning to upgraded or replacement systems or difficulty in integrating new systems.
Although we attempt to mitigate the risk of possible business interruptions through change control protocols and a disaster recovery plan, which includes storing critical business information off-site, the failure of these systems to operate
effectively and support growth and expansion could materially adversely impact the operation of our business.
Most of our information system infrastructure is centrally located, and we rely on third-party service providers for certain system
applications that are hosted remotely or in cloud-based applications. There is a risk that we may not have adequately addressed risks associated with using third-party providers or cloud-based applications. Such risks include security issues
such as adequate encryption and intrusion detection; user access control; data separation; the impact of technical problems such as server outages; their disaster recovery capabilities; and exit strategies. A service provider disruption or
failure in any of these areas could have a material adverse effect on our business.
Integration of technology and systems related to the acquired City Gear business could be more difficult or costlier than anticipated.
In addition, insufficient investment in technology, inadequate preventive maintenance, investment in the wrong technology, delayed
replacement of obsolete equipment, shifts in technology, the failure to attract and retain highly-qualified IT personnel and inadequate policies to identify our technology needs could have a material adverse effect on our business.
Our failure to effectively manage our real estate portfolio may negatively impact our operating results.
Effective management of our real estate portfolio is critical to our omni-channel strategy. All of our stores are subject to leases and,
as such, it is essential that we effectively evaluate a range of considerations that may influence the success of our long-term real estate strategy. Such considerations include but are not limited to:
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changing patterns of customer behavior from physical store locations to online shopping in the context of an evolving omni-channel retail environment;
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the appropriate number of stores in our portfolio;
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the formats, sizes and interior layouts of our stores;
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the locations of our stores, including the demographics and economic data of each store;
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the local competition in and around our stores;
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the primary lease term of each store and occupancy cost of each store relative to market rents; and
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distribution considerations for each store location.
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If we fail to effectively evaluate these factors or negotiate appropriate terms or if unforeseen changes arise, the consequences could
include, for example:
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having to close stores and abandon the related assets while retaining the financial commitments of the leases;
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incurring costs to remodel or transform our stores;
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having stores or distribution channels that no longer meet the needs of our business; and
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bearing excessive lease or occupancy expenses.
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These consequences could have a materially adverse impact on our profitability, cash flows and liquidity. The financial impact of
exiting a leased location can vary greatly depending on, among other factors, the terms of the lease, the condition of the local real estate market, demand for the specific property and our relationship with the landlord. It is difficult for us
to influence some of these factors, and the costs of exiting a property can be significant. In addition to rent, we could still be responsible for the maintenance, taxes, insurance and common area maintenance charges for vacant properties until
the lease commitment expires or is terminated.
Our success depends substantially on the value and perception of the brand name merchandise we sell.
Our success is largely dependent on our consumers’ perception and connection to the brand names we carry, such as Nike, Under Armour,
Reebok, adidas, Easton, The North Face, etc. Brand value is based in part on our consumer’s perception on a variety of subjective qualities so that even an isolated incident could erode brand value and consumer trust, particularly if there is
considerable publicity or litigation. Consumer demand for our products or brands could diminish significantly in the event of erosion of consumer confidence or trust, resulting in lower sales which could have a material adverse effect on our
business, financial condition and results of operations.
We would be materially and adversely affected if all or a significant portion of our primary wholesale and logistics
facility were shut down.
Our primary wholesale and logistics facility is located in Alabaster, Alabama, a suburb of Birmingham, where we receive and ship a
significant portion of our merchandise. Any natural disaster or other serious disruption to this facility would damage a portion of our inventory and could impair our ability to adequately stock our stores and process returns of products to
vendors and could adversely affect our net sales and profitability. In addition, we could incur significantly higher costs and longer lead times associated with shipping our products to our stores during the time it takes for us to reopen or
replace the facility.
Further, because we rely heavily on our primary wholesale and logistics facility, our growth could be limited if the facility reaches
full capacity. Such restraint could result in a loss of market share and our inability to execute our business strategy and could have a material adverse effect on our business, financial condition and operating results.
A disruption in the flow of imported merchandise or an increase in the cost of those goods could significantly
decrease our net sales and operating income.
Many of our largest vendors source a majority of their products from foreign countries. Imported goods are generally less expensive than
domestic goods and contribute significantly to our favorable profit margins. Our ability to provide quality imported merchandise on a profitable basis may be subject to political and economic factors and influences that we cannot control.
National or international events, including changes in government trade or other policies, could increase our merchandise costs and other costs that are critical to our operations. If imported merchandise becomes more expensive, we may find it
difficult to pass the increase on to customers. If imported merchandise becomes unavailable, the transition to alternative sources by our vendors may not occur in time to meet our demands or the demands of our customers. Products from
alternative sources may also be more expensive or may be of lesser quality than those our vendors currently import. Risks associated with reliance on imported goods include:
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increases in the cost of purchasing or shipping foreign merchandise resulting from, for example:
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import tariffs, taxes or other governmental actions affecting trade, including the United States imposing antidumping or countervailing duty orders, safeguards, remedies
or compensation and retaliation due to illegal foreign trade practices;
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foreign government regulations;
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rising commodity prices;
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increased costs of oceanic shipping;
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changes in currency exchange rates or policies and local economic conditions; and
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trade restrictions, including import quotas or loss of “most favored nation” status with the United States.
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disruptions in the flow of imported goods because of factors such as:
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raw material shortages, work stoppages, labor availability and political unrest;
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problems with oceanic shipping, including blockages or labor union strikes at U.S. or foreign ports; and
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economic crises and international disputes.
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In addition, to the extent that any foreign manufacturer from whom our vendors are associated may directly or indirectly utilize labor
practices that are not commonly accepted in the United States, we could be affected by any resulting negative publicity.
Disruptions in the economy and in financial markets could adversely affect consumer purchases of discretionary items,
which could reduce our net sales.
In general, our sales represent discretionary spending by our customers. Discretionary spending is affected by many factors that are
outside our control, including, among others, general business conditions, interest rates, inflation, household income, consumer debt levels, the availability of consumer credit, tax rates and tax refunds, sales tax holidays, energy prices,
unemployment trends, home values and other matters that influence consumer confidence and spending. Disruptions in the U.S. economy, financial markets or other economic conditions affecting disposable consumer income may adversely affect our
business. A reduction in customer traffic to our stores or a shift in customer spending to products other than those sold by us or to products sold by us that are less profitable could result in lower net sales, decreases in inventory turnover
or a reduction in profitability due to lower margins.
Increases in transportation or shipping costs, climate change regulation and other factors may negatively impact our
results of operations.
We rely upon various means of transportation, including ship and truck, to deliver products to our primary wholesale and logistics
facility, our stores and our customers. Consequently, our results can vary depending upon the price of fuel. The price of oil has fluctuated significantly over the last few years. In addition, governmental efforts to combat climate change
through reduction of greenhouse gases may result in higher fuel costs through taxation or other means. Any increases in fuel costs would increase our transportation costs.
In addition, general labor shortages or strikes in the transportation or shipping industries could negatively affect transportation and
shipping costs and our ability to supply our stores in a timely manner. We also rely on efficient and effective operations within our primary wholesale and logistics facility to ensure accurate product delivery to our stores. Failure to
maintain such operations could adversely affect net sales.
We may face difficulties in meeting our labor needs to effectively operate our business.
We are heavily dependent upon our labor workforce in the geographic areas where we conduct our business. Our compensation packages are
designed to provide benefits commensurate with our level of expected service. However, within our retail and logistics operations, we face the challenge of filling many positions at wage scales that are appropriate to the industry and
competitive factors. In addition, there is the risk that prevailing wage rates for our labor workforce will increase in the future and that the costs of employee benefits will rise, resulting in increased expenses that could adversely affect our
profitability. We also face other risks in meeting our labor needs, including competition for qualified personnel and overall unemployment levels. Changes in any of these factors, including a shortage of available workforce in areas in which
we operate, could interfere with our ability to adequately service our customers or to open suitable locations and could result in increasing labor costs.
Our operating results are subject to seasonal and quarterly fluctuations. Furthermore, our quarterly operating
results, including comparable store net sales, will fluctuate and may not be a meaningful indicator of future performance.
We experience seasonal fluctuations in our net sales and results of operations. We typically experience higher net sales in early spring
due to spring sports and annual tax refunds, late summer due to back-to-school shopping and winter due to holiday shopping. In addition, our quarterly results of operations may fluctuate significantly as a result of a variety of factors,
including the timing of new store openings, the amount and timing of net sales contributed by new stores, weather fluctuations, merchandise mix, demand for merchandise driven by local interest in sporting events, and the timing of sales tax
holidays and annual tax refunds. Any of these events, particularly in the fourth quarter, could have a material adverse effect on our business, financial condition and operating results for the entire fiscal year.
Comparable store net sales vary from quarter to quarter, and an unanticipated decline in comparable store net sales may cause the price
of our common stock to fluctuate significantly. Factors which could affect our comparable store net sales results include:
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shifts in consumer tastes and fashion trends;
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calendar shifts of holiday or seasonal periods;
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the timing of income tax refunds to customers;
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increases in personal income taxes paid by our customers;
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calendar shifts or cancellations of sales tax-free holidays in certain states;
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the success or failure of college and professional sports teams within our core regions;
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changes in or lack of tenants in the shopping centers in which we are located;
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pricing, promotions or other actions taken by us or our existing or possible new competitors; and
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unseasonable weather conditions or natural disasters.
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We cannot assure you that comparable store net sales will increase at the rates achieved in prior periods or that rates will not decline.
We are subject to regional risks due to our stores within the South, Southwest, Mid-Atlantic and Midwest regions of
the United States.
Our stores are heavily concentrated in certain regions of the United States. We are subject to regional risks, such as the regional
economy, weather conditions and natural disasters, increasing costs of electricity, oil and natural gas, as well as government regulations specific in the states and localities within which we operate. In addition, falling oil prices may
adversely affect employment and consumer spending in those states that are within our regions that rely on oil revenues as a significant part of the economies of those states. We sell a significant amount of merchandise that can be adversely
affected by significant weather events that postpone the start of or shorten sports seasons or that limit participation of fans and sports enthusiasts.
Unforeseen events, including public health issues and natural disasters such as earthquakes, hurricanes, tornados, snow or ice storms,
floods and heavy rains could disrupt our operations or the operations of our suppliers; significantly damage or destroy our retail locations; prohibit consumers from traveling to our retail locations; or prevent us from resupplying our stores or
wholesale and logistics facility. We believe that we take reasonable precautions to prepare for such events; however, our precautions may not be adequate to deal with such events in the future. If such events occur in areas in which we have our
wholesale and logistics facility or a concentration of retail stores, or if they occur during peak shopping seasons, it could have a material adverse effect on our business, financial condition and results of operations.
We sell a significant amount of licensed team sports merchandise, the sale of which may be subject to fluctuations based on the success
or failure of such teams. The poor performance by college and professional sports teams within our core regions of operations, as well as professional team lockouts, could cause our financial results to fluctuate year over year.
Risks Related to Our Capital Structure
We manage cash and cash equivalents beyond federally insured limits per financial institution and purchase
investments not fully guaranteed by the Federal Deposit Insurance Corporation (FDIC), subjecting us to investment and credit availability risks.
We manage cash and cash equivalents in various institutions at levels beyond federally insured limits per institution, and we purchase
investments not guaranteed by the FDIC. Accordingly, there is a risk that we will not recover the full principal of our investments or that their liquidity may be diminished. In an attempt to mitigate this risk, our investment policy emphasizes
preservation of principal and liquidity. We cannot be assured that we will not experience losses on our deposits or investments.
Our indebtedness could adversely affect our financial condition, limit our ability to obtain additional financing,
restrict our operations and make us more vulnerable to economic downturns and competitive pressures. In addition, we face risk that financial institutions may fail to fulfill commitments under our credit facilities.
In connection with the acquisition of City Gear, we expanded our two credit facilities from $30 million each to $50 million each and
substantially increased our indebtedness, which could adversely affect our ability to fulfill our obligations and have a negative impact on our financing options and liquidity position. As of February 2, 2019, our indebtedness under our
facilities was $35 million. This level of debt could have the following impacts:
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limit our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other general corporate purposes;
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require a substantial portion of our cash flows to be dedicated to debt service payments, instead of other purposes, thereby reducing the amount of cash flows available
for working capital, capital expenditures, acquisition or other general corporate purposes;
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limit our ability to refinance our indebtedness on terms acceptable to us or at all;
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place us at a competitive disadvantage to competitors carrying less debt or limit our ability to withstand competitive pressure; and
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make us more vulnerable to economic downturns and interest rate increases.
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In addition, our financial institutions are committed to providing loans under our credit facilities. There is a risk that these
institutions cannot deliver against these obligations in a timely matter, or at all. If the financial institutions that provide these credit facilities were to default on their obligation to fund the commitments, these facilities would not be
available to us, which could adversely affect our liquidity and financial condition. For discussion of our credit facilities, see “Liquidity and Capital Resources” in Item 7 and Note 6 to our consolidated financial statements.
Risks Related to Ownership of Our Common Stock.
The market price of our common stock, like the stock market in general, is likely to be highly volatile. Factors that could cause
fluctuation in our common stock price may include, among other things:
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actual or anticipated variations in quarterly operating results;
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changes in financial estimates by investment analysts and our inability to meet or exceed those estimates;
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additions or departures of key personnel;
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market rumors or announcements by us or by our competitors of significant acquisitions, divestitures or joint ventures, strategic partnerships, large capital commitments
or other strategic initiatives;
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changes in retail sales data that indicate consumers may spend less on discretionary purchases; and
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sales of our common stock by key personnel or large institutional holders.
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Many of these factors are beyond our control and may cause the market price of our common stock to decline, regardless of our operating
performance.
Significant stockholders or potential stockholders may attempt to effect changes or acquire control over our company,
which could adversely affect our results of operations and financial condition.
Stockholders may from time to time attempt to effect changes, engage in proxy solicitations or advance stockholder proposals. Responding
to proxy contests and other actions by activist stockholders can be costly and time-consuming, disrupting our operations and diverting the attention of our Board of Directors and senior management from the daily operations of our business or
pursuing our business strategies. As a result, activist stockholder campaigns could adversely affect our results of operations and financial condition, and the perceived uncertainty as to our future direction resulting from activist strategies
could also affect the market price and volatility of the Company’s common stock.
There can be no assurance that we will continue to repurchase our common stock or that we will repurchase our common
stock at favorable prices.
In November 2018, our Board of Directors authorized the continuation of our existing stock repurchase program (Program) until January 29,
2022 under which we may purchase up to $300.0 million of our outstanding common stock. The purchases may be made from time to time in the open market (including, without limitation, the use of Rule 10b5-1 plans), depending on a number of
factors, including our evaluation of general market and economic conditions and the trading price of our common stock. The Program may be extended, modified, suspended or discontinued at any time. We expect to fund the Program with existing
cash on hand, cash generated from operations, and/or borrowings under our credit facilities. A reduction in, or the completion or expiration of, our Program could have a negative effect on our stock price. We can provide no assurance that we
will repurchase our common stock at favorable prices, or at all.
Risks Related to Governance, Regulatory, Legislative and Legal Matters.
Provisions in our charter documents and Delaware law might deter acquisition bids for us.
Certain provisions of our certificate of incorporation and bylaws may be deemed to have anti-takeover effects and may discourage, delay
or prevent a takeover attempt that a stockholder might consider in its best interest. These provisions, among other things:
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classify our Board of Directors into three classes, each of which serves for different three-year periods;
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provide that a director may be removed by stockholders only for cause by a vote of the holders of not less than two-thirds of our shares entitled to vote;
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provide that all vacancies on our Board of Directors, including any vacancies resulting from an increase in the number of directors, may be filled by a majority of the
remaining directors, even if the number is less than a quorum;
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provide that special meetings of the common stockholders may only be called by the Board of Directors, the Chairman of the Board of Directors or upon the demand of the
holders of a majority of the total voting power of all outstanding securities of the Company entitled to vote at any such special meeting; and
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call for a vote of the holders of not less than two-thirds of the shares entitled to vote in order to amend the foregoing provisions and certain other provisions of our
certificate of incorporation and bylaws.
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In addition, our Board of Directors, without further action of the stockholders, is permitted to issue and fix the terms of preferred
stock, which may have rights senior to those of common stock. We are also subject to the Delaware business combination statute, which may render a change in control of us more difficult. Section 203 of the Delaware General Corporation Laws
would be expected to have an anti-takeover effect with respect to transactions not approved in advance by the Board of Directors, including discouraging takeover attempts that might result in a premium over the market price for the shares of
common stock held by stockholders.
Changes in federal, state or local laws, or our failure to comply with such laws, could increase our expenses and
expose us to legal risks.
Our Company is subject to numerous laws and regulatory matters relating to the conduct of our business. In addition, certain
jurisdictions have taken a particularly aggressive stance with respect to certain matters and have stepped up enforcement, including fines and other sanctions. Such laws and regulatory matters include:
| · |
The California Consumer Privacy Act (CCPA) and other emerging privacy laws;
|
| · |
The Telephone Consumer Protection Act (TCPA) provisions that regulate telemarketing, auto-dialed and pre-recorded calls as well as text messages and unsolicited faxes;
|
| · |
Labor and employment laws that govern employment matters such as minimum wage, exempt employment status, overtime, family leave mandates and workplace safety regulations,
including the Fair Labor Standards Act proposed rules;
|
| · |
Securities and exchange laws and regulations;
|
| · |
New or changing laws relating to cybersecurity, privacy, cashless payments and consumer credit, protection and fraud;
|
| · |
New or changing laws and regulations concerning product safety or truth in advertising;
|
| · |
The Americans with Disabilities Act and similar state laws that give civil rights protections to individuals with disabilities in the context of employment, public
accommodations and other areas;
|
| · |
New or changing federal and state immigration laws and regulations;
|
| · |
The Patient Protection and Affordable Care Act provisions;
|
| · |
New or changing environmental regulations, including measures related to climate change and greenhouse gas emissions; and
|
| · |
New or changing laws relating to state and local taxation and licensing, including sales and use tax laws, withholding taxes and property taxes.;
|
Our operations will continue to be subject to federal, state and local governmental regulation. Uncertainty with respect to the U.S.
presidential administration and Congress and potential changes that may be made in laws, regulations and policies could exacerbate the risks above. Changes in domestic policy, including significant changes in tax, trade, healthcare and other
laws and regulations could affect our operations. For example, tax proposals may include changes, which could, if implemented, have an adverse or a beneficial impact on our operations, including a “border adjustment tax” or new import tariffs,
which could adversely affect us because we sell imported products. Proposals to modify or repeal the Patient Protection and Affordable Care Act, if implemented, may also affect us. Unknown matters, new laws and regulations or stricter
interpretations of existing laws or regulations may affect our business or operations in the future and could lead to government enforcement and resulting litigation by private litigants. Increasing regulations could expose us to a challenging
enforcement environment or to third-party liability (such as monetary recoveries and recoveries of attorney’s fees) and could have a material adverse effect on our business and results of operations.
Our corporate legal department monitors regulatory activity and is active in notifying and updating applicable departments and personnel
on pertinent matters and legislation. Our Human Resources (HR) Department leads compliance training programs to ensure our field managers are kept abreast of HR-related regulatory activity that affects their areas of responsibility. We believe
that we are in substantial compliance with applicable environmental and other laws and regulations, and although no assurances can be given, we do not foresee the need for any significant expenditures in this area in the near future.
Changes in privacy laws could adversely affect our
ability to market our products effectively.
We rely on a variety of direct marketing techniques, including email, text messages and postal mailings. Any new or emerging
restrictions in federal or state laws regarding marketing and solicitation or data protection laws that govern these activities could adversely affect the continuing effectiveness of email, text messages and postal mailing techniques and could
force changes in our marketing strategies. If this occurs, we may need to develop alternative marketing strategies, which may not be as effective and could impact the amount and timing of our revenues. Further, any new or emerging privacy laws
could include onerous and expensive compliance obligations regarding consent, retention, deletion, and anti-discrimination that could lead to regulatory actions or litigation, and potentially fines and damages for non-compliance.
Litigation may adversely affect our business, financial condition and results of operations.
Our business is subject to the risk of litigation by employees, consumers, suppliers, competitors, stockholders, government agencies or
others through private actions, class actions, administrative proceedings, regulatory actions or other litigation. The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify. We may
incur losses relating to these claims, and in addition, these proceedings could cause us to incur costs and may require us to devote resources to defend against these claims that could adversely affect our results of operations. For a
description of current legal proceedings, see “Part I, Item 3, Legal Proceedings.”
Product liability claims or product recalls can adversely affect our business reputation, expose us to lawsuits or
increased scrutiny by federal and state regulators and may not be fully covered by insurance.
We sell products, particularly athletic equipment, which entails an inherent risk of product liability and product recall and the
resultant adverse publicity. We may be subject to significant claims if the purchase of a defective product from any of our stores causes injury or death. Our merchandise could be subject to a product recall which could reflect negatively on our
business reputation. We cannot be assured that product liability claims will not be asserted against us in the future. Any claims made may create adverse publicity that would have a material adverse effect on our business, reputation, financial
condition and results of operations.
We and our vendors maintain insurance with respect to certain of these risks, including product liability insurance and general liability
insurance, but in many cases such insurance is expensive, difficult to obtain and no assurance can be given that such insurance can be maintained in the future on acceptable terms, or in sufficient amounts to protect us against losses due to any
such events, or at all. Moreover, even though our insurance coverage may be designed to protect us from losses attributable to certain events, it may not adequately protect us from liability and expenses we incur in connection with such events.
We cannot be assured that we will not experience pressure from labor unions or become the target of labor union
campaigns.
While we believe we maintain good relations with our employees, we cannot provide any assurances that we will not experience pressure
from labor unions or become the target of labor union campaigns. The potential for unionization could increase in the United States if federal legislation or regulatory changes are adopted that would facilitate labor organization. Significant
union representation would require us to negotiate wages, salaries, benefits and other terms with many of our employees collectively and could adversely affect our results of operations by increasing our labor costs or otherwise restricting our
ability to maximize the efficiency of our operations.
Changes in rules related to accounting for income taxes, changes in tax laws in any of the jurisdictions in which we
operate or adverse outcomes from audits by taxing authorities could result in an unfavorable change in our effective tax rate.
We operate our business in numerous tax jurisdictions. As a result, our effective tax rate is derived from a combination of the federal
rate and applicable tax rates in the various states in which we operate. Our effective tax rate may be lower or higher than our tax rates have been in the past due to numerous factors, including the sources of our income and the tax filing
positions we take. We base our estimate of an effective tax rate at any given point in time upon a calculated mix of the tax rates applicable to our Company and on estimates of the amount of business likely to be done in any given jurisdiction.
Changes in rules related to accounting for income taxes, changes in tax laws in any of the jurisdictions in which we operate, expiration of tax credits formerly available, failure to manage and utilize available tax credits, or adverse outcomes
from tax audits that we may be subject to in any of the jurisdictions in which we operate could result in an unfavorable change in our effective tax rate.
None.
We own our corporate office building in Birmingham, Alabama and our wholesale and logistics facility in Alabaster, Alabama. In addition,
we lease administrative offices in Memphis, Tennessee and lease all our existing 1,163 store locations and expect that our policy of leasing rather than owning will continue as we continue to expand. Our leases typically provide for terms of
five to ten years with options on our part to extend. Most leases also contain a kick-out clause if projected sales levels are not met and an early termination/remedy option if co-tenancy and exclusivity provisions are violated. We believe this
leasing strategy enhances our flexibility to pursue various expansion opportunities resulting from changing market conditions and to periodically re‑evaluate store locations. See “Risk
Factors.”
As current leases expire, we believe we will either be able to obtain lease renewals for present store locations or to obtain leases for
equivalent or better locations in the same general area. We believe our wholesale and logistics facility is suitable and adequate to support our operations for many years. See “Risk
Factors.”
Store Locations
As of February 2, 2019, we operated 1,163 stores in 35 contiguous states. Of these stores, 254 are in enclosed malls, 33 are
free-standing and 876 are in strip-shopping centers, which are frequently near a major chain retailer such as Wal-Mart. The following shows the number of locations by state as of February 2, 2019:
|
Alabama
|
105
|
Kentucky
|
58
|
Oklahoma
|
40
|
||
|
Arkansas
|
42
|
Louisiana
|
67
|
Pennsylvania
|
6
|
||
|
Arizona
|
8
|
Maryland
|
5
|
South Carolina
|
41
|
||
|
California
|
12
|
Minnesota
|
1
|
South Dakota
|
3
|
||
|
Colorado
|
6
|
Mississippi
|
74
|
Tennessee
|
78
|
||
|
Delaware
|
1
|
Missouri
|
39
|
Texas
|
123
|
||
|
Florida
|
64
|
Nebraska
|
9
|
Utah
|
4
|
||
|
Georgia
|
122
|
New Jersey
|
3
|
Virginia
|
22
|
||
|
Illinois
|
30
|
New Mexico
|
15
|
West Virginia
|
10
|
||
|
Indiana
|
26
|
New York
|
4
|
Wisconsin
|
4
|
||
|
Iowa
|
17
|
North Carolina
|
60
|
Wyoming
|
2
|
||
|
Kansas
|
26
|
Ohio
|
36
|
TOTAL
|
1,163
|
As of April 2, 2019, we operated 1,149 stores in 35 states.
We are a party to various legal proceedings incidental to our business. Where we are able to reasonably estimate an amount of probable
loss in these matters based on known facts, we have accrued that amount as a current liability on our balance sheet. We are not able to reasonably estimate the possible loss or range of loss in excess of the amount accrued for these proceedings
based on the information currently available to us, including, among others, (i) uncertainties as to the outcome of pending proceedings (including motions and appeals) and (ii) uncertainties as to the likelihood of settlement and the outcome of
any negotiations with respect thereto. We do not believe that any of these matters will, individually or in the aggregate, have a material effect on our business or financial condition. We cannot give assurance, however, that one or more of
these proceedings will not have a material effect on our results of operations for the period in which they are resolved. At February 2, 2019 and February 3, 2018, we estimated that the liability related to these matters was approximately $0.7
million and $0.5 million, respectively, and accordingly, we accrued $0.7 million and $0.5 million, respectively, as a current liability in our consolidated balance sheets.
The estimates of our liability for pending and unasserted potential claims do not include litigation costs. It is our policy to accrue
legal fees when it is probable that we will have to defend against known claims or allegations and we can reasonably estimate the amount of the anticipated expense.
From time to time, we enter into certain types of agreements that require us to indemnify parties against third-party claims under
certain circumstances. Generally, these agreements relate to: (a) agreements with vendors and suppliers under which we may provide customary indemnification to our vendors and suppliers in respect to actions they take at our request or otherwise
on our behalf; (b) agreements to indemnify vendors against trademark and copyright infringement claims concerning merchandise manufactured specifically for or on behalf of the Company; (c) real estate leases, under which we may agree to indemnify
the lessors from claims arising from our use of the property; and (d) agreements with our directors, officers and employees, under which we may agree to indemnify such persons for liabilities arising out of their relationship with us. We have
director and officer liability insurance, which, subject to the policy’s conditions, provides coverage for indemnification amounts payable by us with respect to our directors and officers up to specified limits and subject to certain deductibles.
If we believe that a loss is both probable and estimable for a particular matter, the loss is accrued in accordance with the requirements
of ASC Topic 450, Contingencies. With respect to any matter, we could change our belief as to whether a loss is probable or estimable, or its estimate of
loss, at any time.
None.
Our common stock is traded on the NASDAQ Global Select Market under the symbol HIBB. As of April 2, 2019, we had 11 stockholders of
record.
The graph below compares the cumulative five-year total shareholder return on our common stock with the cumulative total returns of the
NASDAQ Composite index and the NASDAQ Retail Trade index. The graph tracks the five-year performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) on January 31, 2014.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Hibbett Sports, Inc., the NASDAQ Composite Index
and the NASDAQ Retail Trade Index
 |
 |
 |
 |
 |
 |
| *$100 invested on 1/31/14 in stock or index, including reinvestment of dividends. | |
|
|
Fiscal year ending January 31.
|
|
1/14
|
1/15
|
1/16
|
1/17
|
1/18
|
1/19
|
|
|
Hibbett Sports, Inc.
|
100.00
|
78.39
|
53.59
|
54.99
|
37.66
|
27.23
|
|
NASDAQ Composite
|
100.00
|
114.30
|
115.10
|
141.84
|
189.26
|
187.97
|
|
NASDAQ Retail Trade
|
100.00
|
112.78
|
142.83
|
174.47
|
261.97
|
289.77
|
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Dividend Policy
We have never declared or paid any dividends on our common stock. We currently intend to retain our future earnings to finance the
growth and development of our business and for our stock repurchase program, and therefore do not anticipate declaring or paying cash dividends on our common stock for the foreseeable future. Any future decision to declare or pay dividends will
be at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as our Board of Directors deems relevant.
Equity Compensation Plans
For information on securities authorized for issuance under our equity compensation plans, see “Part III, Item 12, Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
Issuer Repurchases of Equity Securities
The following table presents our stock repurchase activity for the thirteen weeks ended February 2, 2019 (1):
|
Period
|
Total Number
of Shares
Purchased
|
Average
Price per
Share
|
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Programs
|
Approximate Dollar
Value of Shares that
may yet be
Purchased Under the
Programs (in
thousands)
|
||||||||||||
|
November 4, 2018 to December 1, 2018
|
3,900
|
$
|
16.87
|
3,900
|
$
|
188,000
|
||||||||||
|
December 2, 2018 to January 5, 2019
|
-
|
-
|
$
|
188,000
|
||||||||||||
|
January 6, 2019 to February 2, 2019
|
-
|
-
|
$
|
188,000
|
||||||||||||
|
Total
|
3,900
|
$
|
16.87
|
3,900
|
$
|
188,000
|
||||||||||
(1) In November 2018, our Board authorized the continuation of our existing 2015 Stock Repurchase Program (Program) until January 29,
2022 (Fiscal 2022). The 2015 Program had been scheduled to expire on February 2, 2019. See Part II, Item 8. Consolidated Financial Statements Note 1, “Stock Repurchase Program.”
The following selected consolidated financial data has been derived from the consolidated financial statements of the Company. The
data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our “Consolidated Financial Statements and Supplementary Data” and “Notes to Consolidated Financial Statements” thereto.
|
(In thousands, except per share amounts)
|
||||||||||||||||||||
|
Fiscal Year Ended
|
||||||||||||||||||||
|
February 2,
2019
(52 weeks)
|
February 3,
2018
(53 weeks)
|
January 28,
2017
(52 weeks)
|
January 30,
2016
(52 weeks)
|
January 31,
2015
(52 weeks)
|
||||||||||||||||
|
Statement
of Operations Data:
|
||||||||||||||||||||
|
Net sales
|
$
|
1,008,682
|
$
|
968,219
|
$
|
972,960
|
$
|
943,104
|
$
|
913,486
|
||||||||||
|
Cost of goods sold
|
679,947
|
655,502
|
634,364
|
610,389
|
586,702
|
|||||||||||||||
|
Gross margin
|
328,735
|
312,717
|
338,596
|
332,715
|
326,784
|
|||||||||||||||
|
Store operating, selling and administrative expenses
|
264,142
|
231,832
|
222,785
|
203,673
|
192,648
|
|||||||||||||||
|
Depreciation and amortization
|
27,052
|
24,207
|
19,047
|
17,038
|
15,990
|
|||||||||||||||
|
Operating income
|
37,541
|
56,678
|
96,764
|
112,004
|
118,146
|
|||||||||||||||
|
Interest (income) expense, net
|
(17
|
)
|
231
|
268
|
292
|
293
|
||||||||||||||
|
Income before provision for income taxes
|
37,558
|
56,447
|
96,496
|
111,712
|
117,853
|
|||||||||||||||
|
Provision for income taxes
|
9,137
|
21,417
|
35,421
|
41,184
|
44,269
|
|||||||||||||||
|
Net income
|
$
|
28,421
|
$
|
35,030
|
$
|
61,075
|
$
|
70,528
|
$
|
73,584
|
||||||||||
|
Basic earnings per share
|
$
|
1.52
|
$
|
1.72
|
$
|
2.75
|
$
|
2.95
|
$
|
2.90
|
||||||||||
|
Diluted earnings per share
|
$
|
1.51
|
$
|
1.71
|
$
|
2.72
|
$
|
2.92
|
$
|
2.87
|
||||||||||
|
Basic weighted average shares outstanding
|
18,644
|
20,347
|
22,240
|
23,947
|
25,369
|
|||||||||||||||
|
Diluted weighted average shares outstanding
|
18,826
|
20,450
|
22,427
|
24,129
|
25,620
|
|||||||||||||||
Note: No dividends have been declared or paid.
(In thousands, except Other Data and Selected Store Data)
|
Fiscal Year Ended
|
||||||||||||||||||||
|
February 2,
2019
(52 weeks)
|
February 3,
2018
(53 weeks)
|
January 28,
2017
(52 weeks)
|
January 30,
2016
(52 weeks)
|
January 31,
2015
(52 weeks)
|
||||||||||||||||
|
Other Data:
|
||||||||||||||||||||
|
Net sales increase (decrease)
|
4.2
|
%
|
-0.5
|
%
|
3.2
|
%
|
3.2
|
%
|
7.2
|
%
|
||||||||||
|
Comparable store sales
|
2.2
|
%
|
-3.8
|
%
|
0.2
|
%
|
-0.4
|
%
|
2.9
|
%
|
||||||||||
|
Gross margin (as a % to net sales)
|
32.6
|
%
|
32.3
|
%
|
34.8
|
%
|
35.3
|
%
|
35.8
|
%
|
||||||||||
|
Store operating, selling and administrative expenses (as a % to net sales)
|
26.2
|
%
|
23.9
|
%
|
22.9
|
%
|
21.6
|
%
|
21.1
|
%
|
||||||||||
|
Depreciation and amortization (as a % to net sales)
|
2.7
|
%
|
2.5
|
%
|
2.0
|
%
|
1.8
|
%
|
1.8
|
%
|
||||||||||
|
Provision for income taxes (as a % to net sales)
|
0.9
|
%
|
2.2
|
%
|
3.6
|
%
|
4.4
|
%
|
4.8
|
%
|
||||||||||
|
Net income (as a % to net sales)
|
2.8
|
%
|
3.6
|
%
|
6.3
|
%
|
7.5
|
%
|
8.1
|
%
|
||||||||||
|
Balance
Sheet Data:
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$
|
61,756
|
$
|
73,544
|
$
|
38,958
|
$
|
32,274
|
$
|
88,397
|
||||||||||
|
Average inventory per store
|
$
|
241
|
$
|
235
|
$
|
260
|
$
|
271
|
$
|
243
|
||||||||||
|
Working capital
|
$
|
194,583
|
$
|
231,207
|
$
|
242,192
|
$
|
225,178
|
$
|
253,373
|
||||||||||
|
Total assets
|
$
|
546,065
|
$
|
461,846
|
$
|
458,854
|
$
|
442,372
|
$
|
452,397
|
||||||||||
|
Long-term capital lease obligations
|
$
|
1,994
|
$
|
2,522
|
$
|
2,857
|
$
|
3,149
|
$
|
3,029
|
||||||||||
|
Stockholders’ investment
|
$
|
336,049
|
$
|
319,596
|
$
|
334,040
|
$
|
310,846
|
$
|
324,781
|
||||||||||
|
Treasury shares repurchased
|
776
|
2,843
|
1,236
|
2,236
|
1,206
|
|||||||||||||||
|
Cost of treasury shares purchased
|
$
|
16,540
|
$
|
54,506
|
$
|
43,058
|
$
|
91,332
|
$
|
60,971
|
||||||||||
|
Selected
Store Data:
|
||||||||||||||||||||
|
Stores open at beginning of period
|
1,079
|
1,078
|
1,044
|
988
|
927
|
|||||||||||||||
|
Stores acquired
|
136
|
-
|
-
|
-
|
-
|
|||||||||||||||
|
New stores opened
|
32
|
44
|
65
|
71
|
80
|
|||||||||||||||
|
Stores closed
|
(84
|
)
|
(43
|
)
|
(31
|
)
|
(15
|
)
|
(19
|
)
|
||||||||||
|
Stores open at end of period
|
1,163
|
1,079
|
1,078
|
1,044
|
988
|
|||||||||||||||
|
Stores expanded during the period
|
7
|
11
|
8
|
16
|
9
|
|||||||||||||||
|
Estimated square footage (in thousands)
|
6,542
|
6,140
|
6,141
|
5,974
|
5,649
|
|||||||||||||||
As you read the MD&A, please refer to our consolidated financial statements, included in “Item 8. Financial Statements and
Supplementary Data” and “Item 6. Selected Consolidated Financial Data” of this Form 10-K. This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. See Part I. Item 1. “Cautionary Statement Regarding Forward-Looking
Statements” and Part I, Item 1A. “Risk Factors.”
Key Events and Recent Developments
In Fiscal 2019, we experienced key events that impacted our operations and for which we are still assessing future impacts on our
business. Included in those events are:
| · |
The acquisition of City Gear;
|
| · |
The launch of our new mobile app as well as Buy Online, Pick Up in Store (BOPIS) and Reserve in Store (ROPIS);
|
| · |
The expansion of our credit facilities to facilitate the purchase of City Gear; and
|
| · |
The continuation of our Stock Repurchase Program through January 2022.
|
City Gear results and data are presented as of the November 4, 2018 acquisition closing date.
In addition, in Fiscal 2020, we expect to initiate a strategic realignment that will include the closure of approximately 95 stores,
while opening approximately 10 to 15 new Hibbett Sports and City Gear stores.
General Overview
Hibbett Sports, Inc. is a leading athletic-inspired fashion retailer primarily located in small and mid-sized communities across the
country. Founded in 1945, Hibbett stores have a rich history of convenient locations, personalized customer service and access to coveted footwear, apparel and equipment from top
brands like Nike, Under Armour and Adidas. Consumers can browse styles, find new releases or shop looks by visiting their nearest store or by visiting www.hibbett.com. Follow us @HibbettSports. We became a public company in October 1996. As of February 2, 2019, we operated a total of 1,163 retail stores in 35 states composed of 1,007
Hibbett Sports stores, 138 City Gear stores and 18 Sports Additions athletic shoe stores.
Our Hibbett Sports stores average 5,700 square feet and are located primarily in strip centers which are usually near a major chain
retailer such as Wal-Mart. Our City Gear stores average 5,000 square feet and are located primarily in strip centers. Our store base consisted of 876 stores located in strip centers, 33 free-standing stores and 254 enclosed mall locations as
of February 2, 2019.
Hibbett operates on a 52- or 53-week fiscal year ending on the Saturday nearest to January 31 of each year. The consolidated
statements of operations for Fiscal 2019, Fiscal 2018 and Fiscal 2017 included 52 weeks, 53 weeks and 52 weeks of operations, respectively. Fiscal 2020 will include 52 weeks of operations.
Executive Summary
Following is a highlight of our financial results over the last three fiscal years:
|
Fiscal 2019
(52 weeks) |
Fiscal 2018
(53 weeks) |
Fiscal 2017
(52 weeks) |
||||||||||
|
Net sales (in millions)
|
$
|
1,008.7
|
$
|
968.2
|
$
|
973.0
|
||||||
|
Operating income, percentage to net sales
|
3.7
|
%
|
5.9
|
%
|
10.0
|
%
|
||||||
|
Comparable store sales
|
2.2
|
%
|
-3.8
|
%
|
0.2
|
%
|
||||||
|
Net income (in millions)
|
$
|
28.4
|
$
|
35.0
|
$
|
61.1
|
||||||
|
Net income, percentage decrease
|
-18.9
|
%
|
-42.6
|
%
|
-13.4
|
%
|
||||||
|
Diluted earnings per share
|
$
|
1.51
|
$
|
1.71
|
$
|
2.72
|
||||||
During Fiscal 2019, Hibbett acquired 136 City Gear stores, opened 32 new stores and closed 84 underperforming stores, bringing the
store base to 1,163 in 35 states as of February 2, 2019. Inventory on a per store basis increased 2.6% compared to the prior fiscal year. Hibbett ended Fiscal 2019 with $61.8 million of available cash and cash equivalents on the consolidated
balance sheet. As of February 2, 2019, Hibbett had $35.0 million in debt outstanding, mainly due to the acquisition of City Gear, and $65.0 million available under its unsecured credit facilities.
Due to the 53rd week in Fiscal 2018, each quarter in
Fiscal 2019 started one week later than the same quarter in Fiscal 2018. The charts below present comparable store sales and net sales for Fiscal 2018 as originally reported and as adjusted to represent the same 13-week period as the Fiscal
2019 quarters:
|
Fiscal 2018
|
||||||||||||||||||||
|
|
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
Full Year
|
|||||||||||||||
|
Comparable store sales increase (originally reported)
|
-4.9
|
%
|
-11.7
|
%
|
-1.3
|
%
|
1.6
|
%
|
-3.8
|
%
|
||||||||||
|
Comparable store sales increase (adjusted for week shift)
|
-4.8
|
%
|
-11.0
|
%
|
0.3
|
%
|
1.0
|
%
|
-3.6
|
%
|
||||||||||
|
Impact of week shift
|
0.1
|
%
|
0.7
|
%
|
1.6
|
%
|
-0.6
|
%
|
0.2
|
%
|
||||||||||
|
Fiscal 2018
|
||||||||||||||||||||
|
|
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
Full Year
|
|||||||||||||||
|
Net sales (originally reported)
|
$
|
275.7
|
$
|
188.0
|
$
|
237.8
|
$
|
266.7
|
$
|
968.2
|
||||||||||
|
Net sales (adjusted for week shift)
|
$
|
275.2
|
$
|
206.0
|
$
|
220.6
|
$
|
265.8
|
$
|
967.6
|
||||||||||
|
Impact of week shift
|
$
|
(0.5
|
)
|
$
|
18.0
|
$
|
(17.2
|
)
|
$
|
(0.9
|
)
|
$
|
(0.6
|
)
|
||||||
For Fiscal 2019, total company-wide square footage increased 6.6%. Our plan for Fiscal 2020 is to decrease total company-wide square
footage by approximately 7.0% as we continue to optimize our store base and maximize return on invested capital. To supplement new store openings, we continue to expand high performing stores, increasing the square footage in 7 existing stores
in Fiscal 2019 for an average increase in square footage of 48.0%.
In Fiscal 2019, comparable store sales increased 2.2%. For Fiscal 2020, comparable store sales are expected to be in the range of
-1.0% to 1.0%. We expect overall gross margin rate to decrease in the range of 25 to 45 basis points, driven by a lower gross margin in our City Gear stores, and a slight increase in logistics expenses as a percentage of net sales due to
increased fulfillment costs. We see an opportunity for improvement in gross margin as we work through the City Gear integration. Store occupancy expenses are expected to be relatively flat as a percentage of net sales.
We expect operating, selling and administrative expenses to increase in the range of 10 to 20 basis points as a percentage of net sales
in Fiscal 2020. This is primarily due to non-recurring costs related to store closures and acquisition integration costs. We also expect to continue to generate sufficient cash to enable us to expand and remodel our store base, to enable
capital expenditures including technology upgrade projects and to repurchase our common stock under our stock repurchase program.
As the retail environment continues to evolve, the Company is focused on improving the productivity of the store base while continuing
to grow its omni-channel business to serve customers where and when they want to shop. As a result, subsequent to the year ended February 2, 2019, the Company has decided to close approximately 95 Hibbett stores in Fiscal 2020, while opening
10 to 15 new Hibbett and City Gear stores. This will result in non-recurring impairment and store closure charges in the range of $0.15 to $0.20 per diluted share in Fiscal 2020. Associates will be extended opportunities to transition to
similar positions at other Hibbett stores wherever possible.
Comparable store sales data for the periods presented reflects sales for our traditional format Hibbett Sports and Sports Additions
stores open throughout the period and the corresponding period of the prior fiscal year, and e-commerce sales. City Gear stores and e-commerce sales will not be presented in comparable store sales data until the fourth quarter of Fiscal 2020.
If a store remodel, relocation, or expansion results in the store being closed for a significant period, its sales are removed from the comparable store sales base until it has been open a full 12 months. In addition, re-branded stores will be
treated as a new store and not presented in comparable store sales until they have been open a full 12 months under the new banner.
About Non-GAAP Measures
This MD&A includes certain non-GAAP financial measures, including adjusted net income, earnings per share, gross margin and
SG&A expenses as a percentage of net sales. Management believes that non-GAAP net income, earnings per share, gross margin and SG&A expenses as a percentage of net sales, which exclude the effects of non-recurring expenses related to
the acquisition of City Gear and our accelerated store closure plan, are useful measures for providing more accurate comparisons of our current financial results to historical operations, forward looking guidance and the financial results of
peer companies. The non-recurring costs related to the acquisition of City Gear include amortization of inventory step-up value and professional service fees and expenses consisting primarily of investment banking, legal and accounting fees
and expenses. In future periods, such acquisition-related costs may include one or more of the following categories of expenses: (i) transition and integration costs, (ii) professional service fees and expenses and (iii) acquisition-related
adjustments. Future non-recurring costs related to the accelerated store closure plan may include: (i) lease and equipment impairment costs, (ii) third party liquidation fees, (iii) store exit costs, and (iv) residual lease costs.
While we use these non-GAAP financial measures as a tool to enhance our understanding of certain aspects of our financial performance,
our management does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial statements. Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers
of our financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial statements, allows for greater transparency in the review of our financial and operational performance. It should
be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies.
Recent Accounting Pronouncements
See Note 2 of Item 8 of this Annual Report on Form 10-K for the fiscal year ended February 2, 2019, for information regarding recent
accounting pronouncements.
Results of Operations
The following table sets forth the percentage relationship to net sales of certain items included in our consolidated statements of
operations for the periods indicated.
|
Fiscal Year Ended
|
||||||||||||
|
February 2,
2019
(52 weeks) |
February 3,
2018
(53 weeks) |
January 28,
2017
(52 weeks) |
||||||||||
|
Net sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||
|
Cost of goods sold
|
67.4
|
67.7
|
65.2
|
|||||||||
|
Gross margin
|
32.6
|
32.3
|
34.8
|
|||||||||
|
Store operating, selling and administrative expenses
|
26.2
|
23.9
|
22.9
|
|||||||||
|
Depreciation and amortization
|
2.7
|
2.5
|
2.0
|
|||||||||
|
Operating income
|
3.7
|
5.9
|
10.0
|
|||||||||
|
Interest income (expense), net
|
-
|
-
|
-
|
|||||||||
|
Income before provision for income taxes
|
3.7
|
5.8
|
9.9
|
|||||||||
|
Provision for income taxes
|
0.9
|
2.2
|
3.6
|
|||||||||
|
Net income
|
2.8
|
%
|
3.6
|
%
|
6.3
|
%
|
||||||
Note: Columns may not sum due to rounding.
Fiscal 2019 Compared to Fiscal 2018
Net sales. Net sales increased $40.5
million, or 4.2%, to $1.0 billion for Fiscal 2019 from $968.2 million for Fiscal 2018. Furthermore:
| · |
We acquired 136 City Gear stores, opened 32 Hibbett Sports or City Gear stores while closing 84 underperforming Hibbett Sports stores for a net addition of 84 stores in
Fiscal 2019. We expanded 7 high performing stores.
|
| · |
Comparable store net sales for Fiscal 2019 increased 2.2% compared to Fiscal 2018. Stores not in the comparable store net sales calculation accounted for $97.1 million
of net sales of which $49.1 million was attributable to the acquisition of City Gear.
|
During Fiscal 2019, 950 stores were included in the comparable store sales comparison. Comparable store net sales were driven by gains
in footwear, activewear and cleats, offset by declines in licensed product and equipment. Significant increases were achieved in lifestyle footwear, men’s and women’s activewear, and cleats. Significant declines were experienced in college
apparel, MLB apparel, socks, hydration, and football equipment. In Fiscal 2019, we saw an increase in average ticket and a decrease in items per transaction.
Gross margin. Cost of goods sold includes
the cost of merchandise, occupancy costs for stores, occupancy and operating costs for our wholesale and logistics facility and ship-to-home freight. Gross margin was $328.7 million, or 32.6% of net sales, in Fiscal 2019, compared with $312.7
million, or 32.3% of net sales, in Fiscal 2018. Furthermore:
| · |
Merchandise gross margin increased 15 basis points as a percentage of net sales due to promotional markdowns resulting from lower levels of aged inventory, and an
approximate $0.9 million non-recurring charge from last year related to our Team Division. This was partially offset by a higher percentage of e-commerce sales and a non-recurring charge of approximately $1.9 million to amortize an
inventory step-up value related to the City Gear acquisition.
|
| · |
Wholesale and logistics expense was relatively flat increasing two basis points as a percentage of net sales.
|
| · |
Store occupancy expense decreased 16 basis points as a percentage of net sales mainly due to the closure of 84 lower volume stores and growth in e-commerce sales.
|
Store operating, selling and administrative
expenses. Store operating, selling and administrative expenses were $264.1 million, or 26.2% of net sales, for Fiscal 2019, compared with $231.8 million, or 23.9% of net sales, for Fiscal 2018. Furthermore:
| · |
Total salary and benefit costs increased 70 basis points as a percentage of net sales due to increased wages for store associates, increases in incentive compensation
and health care costs, and severance costs related to a workforce reduction.
|
| · |
Expenses associated with our omni-channel initiative increased 98 basis points as a percentage of net sales due to increased operational and marketing costs to support
increased sales, and the development and rollout of new functionality such as BOPIS, ROPIS and a new mobile app.
|
| · |
Overall expenses increased 43 basis points due to non-recurring costs associated with the City Gear acquisition and increased 30 basis points due to a $3.1 million
non-recurring gain last year from the sale of our Team Division.
|
| · |
We expect overall store operating, selling and administrative expenses to increase slightly as a percentage of net sales in Fiscal 2020 mainly due to non-recurring
costs related to the integration of City Gear.
|
Depreciation and amortization. Depreciation
and amortization as a percentage of net sales was 2.7% in Fiscal 2019 and 2.5% in Fiscal 2018. In Fiscal 2019, depreciation expense increased mainly due to the capitalization of omni-channel and other IT investments and the acceleration of
depreciation for stores likely to close. We expect depreciation expense to decline slightly as a percentage of net sales in Fiscal 2020.
Provision for income taxes. The combined
federal, state and local effective income tax rate as a percentage of pre-tax income was 24.3% for Fiscal 2019 and 37.9% for Fiscal 2018. The decrease in rate was primarily due to the Tax Cuts and Jobs Act, which lowered the statutory federal income tax rate from 35% to 21%. We do not expect major changes in our state and local income tax rates in Fiscal 2020.
Non-GAAP financial measures. The following
table provides a reconciliation of our consolidated statement of operations for the fifty-two weeks ended February 2, 2019, as reported on a GAAP basis, to a statement of operations for the same period prepared on a non-GAAP basis. For more
information regarding our non-GAAP financial measures, see “Executive Summary – About Non-GAAP Measures” above.
GAAP to Non-GAAP Reconciliation
(Dollars in thousands, except per share amounts)
|
Fifty-Two Weeks Ended February 2, 2019
|
||||||||||||||||
|
Non-Recurring Costs
|
||||||||||||||||
|
GAAP Basis
(As Reported)
|
Acquisition
Costs
|
Severance
Costs
|
Non-GAAP Basis
February 2,
2019
|
|||||||||||||
|
Net sales
|
$
|
1,008,682
|
$
|
-
|
$
|
-
|
$
|
1,008,682
|
||||||||
|
Cost of goods sold
|
679,947
|
1,911
|
-
|
678,036
|
||||||||||||
|
Gross margin
|
328,735
|
1,911
|
-
|
330,646
|
||||||||||||
|
Store operating, selling and administrative expenses
|
264,142
|
4,299
|
289
|
259,554
|
||||||||||||
|
Depreciation and amortization
|
27,052
|
-
|
-
|
27,052
|
||||||||||||
|
Operating income
|
37,541
|
6,210
|
289
|
44,040
|
||||||||||||
|
Interest income, net
|
(17
|
)
|
-
|
-
|
(17
|
)
|
||||||||||
|
Income before provision for income taxes
|
37,558
|
6,210
|
289
|
44,057
|
||||||||||||
|
Provision for income taxes
|
9,137
|
(1,511
|
)
|
(70
|
)
|
10,718
|
||||||||||
|
Net income
|
$
|
28,421
|
$
|
4,699
|
$
|
219
|
$
|
33,339
|
||||||||
|
Basic earnings per share
|
$
|
1.52
|
$
|
0.25
|
$
|
0.01
|
$
|
1.79
|
||||||||
|
Diluted earnings per share
|
$
|
1.51
|
$
|
0.25
|
$
|
0.01
|
$
|
1.77
|
||||||||
|
Weighted average shares outstanding:
|
||||||||||||||||
|
Basic
|
18,644
|
18,644
|
18,644
|
18,644
|
||||||||||||
|
Diluted
|
18,826
|
18,826
|
18,826
|
18,826
|
||||||||||||
Non-recurring acquisition costs represent costs incurred during the fifty-two weeks ended February 2, 2019, related to the acquisition
of City Gear and consists primarily of amortization of inventory fair-market value step-up and legal, accounting and professional fees. Non-recurring severance costs represent costs incurred during the fifty-two weeks ended February 2, 2019,
related to elimination of 30 positions to streamline operations.
Fiscal 2018 Compared to Fiscal 2017
Net sales. Net sales decreased $4.8
million, or 0.5%, to $968.2 million for Fiscal 2018 from $973.0 million for Fiscal 2017. Furthermore:
| · |
We opened 44 Hibbett Sports stores while closing 43 underperforming Hibbett Sports stores for net addition of 1 store in Fiscal 2018. We expanded 11 high performing
stores.
|
| · |
Comparable store net sales for Fiscal 2018 decreased 3.8% compared to Fiscal 2017. Stores not in the comparable store net sales calculation accounted for $53.4 million
of net sales.
|
During Fiscal 2018, 968 stores were included in the comparable store sales comparison. Comparable store net sales were driven by gains
in footwear, offset by declines in apparel and equipment. Significant increases were achieved in basketball and lifestyle footwear, while accessories, socks, hydration, college apparel, women’s activewear and performance running footwear
experienced significant declines. In Fiscal 2018, we saw an increase in average ticket and a slight decrease in items per transaction.
Gross margin. Cost of goods sold included
the cost of merchandise, occupancy costs for stores, occupancy and operating costs for our wholesale and logistics facility and ship-to-home freight. Gross margin was $312.7 million, or 32.3% of net sales, in Fiscal 2018, compared with $338.6
million, or 34.8% of net sales, in Fiscal 2017. Furthermore:
| · |
Merchandise gross margin decreased 258 basis points as a percentage of net sales due to promotional markdowns, the introduction of e-commerce sales and a one-time
charge of approximately $0.9 million to establish a reserve against the inventory of our Team business.
|
| · |
Wholesale and logistics expense increased eight basis points as a percentage of net sales due to increased data processing costs associated with our omni-channel
initiative and increased transportation costs.
|
| · |
Store occupancy expense decreased 17 basis points as a percentage of net sales mainly due to savings realized in utility costs resulting from cost savings initiatives.
|
Store operating, selling and administrative
expenses. Store operating, selling and administrative expenses were $231.8 million, or 23.9% of net sales, for Fiscal 2018, compared with $222.8 million, or 22.9% of net sales, for Fiscal 2017. Furthermore:
| · |
Total salary and benefit costs increased 67 basis points as a percentage of net sales due to de-leverage associated with lower comparable store sales and hiring to
support our e-commerce business.
|
| · |
Expenses associated with our omni-channel initiative increased 82 basis points as a percentage of net sales due to the launch of our e-commerce business and on-going
operational and marketing costs to support the e-commerce business.
|
| · |
Overall expenses decreased 32 basis points due to a $3.1 million one-time gain resulting from the sale of the Company’s Team Division.
|
| · |
Credit card fees decreased 21 basis points mainly due to the implementation of EMV chip technology in our stores.
|
Depreciation and amortization. Depreciation
and amortization as a percentage of net sales was 2.5% of net sales in Fiscal 2018 and 2.0% of net sales in Fiscal 2017. In Fiscal 2018, depreciation expense increased due to the addition of new stores and the capitalization of omni-channel
and other IT investments.
Provision for income taxes. The combined
federal, state and local effective income tax rate as a percentage of pre-tax income was 37.9% for Fiscal 2018 and 36.7% for Fiscal 2017. The increase in rate was primarily due to an accounting standards change (ASU 2016-09) for stock-based
compensation. This accounting standard stipulated that the income tax effect of fluctuations in the value of stock-based awards between the grant date and vesting date be recorded directly to income tax expense. In the past, this effect was
recorded directly to equity. This change primarily affected the first quarter of Fiscal 2018 due to timing of stock-based awards.
Liquidity and Capital Resources
Our capital requirements relate primarily to new store openings, stock repurchases, facilities and systems to support company growth
and working capital requirements. Our working capital requirements are somewhat seasonal in nature and typically reach their peak near the end of the third and the beginning of the fourth quarters of our fiscal year. Historically, we have
funded our cash requirements primarily through our cash flow from operations and occasionally from borrowings under our credit facilities. We use excess cash on deposit to offset bank fees and to invest in interest-bearing deposits and
securities.
Our consolidated statements of cash flows are summarized as follows (in thousands):
|
Fiscal Year Ended
|
||||||||||||
|
February 2,
2019
(52 weeks) |
February 3,
2018
(53 weeks) |
January 28,
2017
(52 weeks) |
||||||||||
|
Net cash provided by operating activities
|
$
|
73,417
|
$
|
111,926
|
$
|
78,675
|
||||||
|
Net cash used in investing activities
|
(103,871
|
)
|
(22,900
|
)
|
(29,409
|
)
|
||||||
|
Net cash provided by (used in) financing activities
|
18,666
|
(54,440
|
)
|
(42,582
|
)
|
|||||||
|
Net (decrease) increase in cash and cash equivalents
|
$
|
(11,788
|
)
|
$
|
34,586
|
$
|
6,684
|
|||||
Operating Activities.
Cash flow from operations is seasonal in our business. Typically, we use cash flow from operations to increase inventory in advance of
peak selling seasons, such as winter holidays, the spring sales period and late summer back-to-school shopping. Inventory levels are reduced in connection with higher sales during the peak selling seasons and this inventory reduction, combined
with proportionately higher net income, typically produces a positive cash flow.
Net cash provided by operating activities was $73.4 million for Fiscal 2019 compared with net cash provided by operating activities of
$111.9 million and $78.7 million in Fiscal 2018 and Fiscal 2017, respectively. Net cash provided by operating activities for Fiscal 2019 compared to Fiscal 2018 and Fiscal 2017 was impacted by the following:
| · |
Net income provided cash of $28.4 million, $35.0 million and $61.1 million during Fiscal 2019, Fiscal 2018 and Fiscal 2017, respectively.
|
| · |
Ending inventory per store increased 2.6% at February 2, 2019 and declined 9.9% at February 3, 2018, compared to the prior year. Fiscal 2019 inventory increased on a
per store basis mainly due to the acquisition of City Gear. Fiscal 2018 inventory declined on a per store basis mainly due to vendor returns, cancellations and markdowns taken to liquidate excess inventory. The change in inventory
provided cash of $16.8 million, $27.5 million and $2.4 million during Fiscal 2019, Fiscal 2018 and Fiscal 2017, respectively.
|
| · |
The change in accounts payable used cash of $9.9 million in Fiscal 2019, provided cash of $16.4 million in Fiscal 2018 and used cash of $11.4 million in Fiscal 2017.
The decrease in Fiscal 2019 and increase in Fiscal 2018 resulted mainly from the timing of receipts prior to our peak selling seasons.
|
| · |
Non-cash charges included depreciation and amortization expense of $27.1 million, $24.2 million and $19.0 million during Fiscal 2019, Fiscal 2018 and Fiscal 2017,
respectively, and stock-based compensation expense of $4.3 million, $3.9 million and $4.6 million during Fiscal 2019, Fiscal 2018 and Fiscal 2017, respectively. Fluctuations in stock-based compensation generally result from the
achievement of performance-based equity awards at greater or lesser than their granted level, fluctuations in the price of our common stock and levels of forfeitures in any given period. Depreciation expense has increased in each
fiscal year due to investments in facilities and information technology systems, and due to accelerated depreciation taken in Fiscal 2019 resulting from an increase in store closures. Depreciation is expected to decline slightly in
Fiscal 2020.
|
Investing Activities.
Cash used in investing activities in Fiscal 2019, Fiscal 2018 and Fiscal 2017 totaled $103.9 million, $22.9 million and $29.4 million,
respectively. The increase in Fiscal 2019 over previous years was due to the investment in City Gear of $86.8 million. Gross capital expenditures used $17.7 million, $23.1 million and $29.7 million during Fiscal 2019, Fiscal 2018 and Fiscal
2017, respectively. Capital expenditures in all periods primarily consisted of new stores, relocations, remodels and expansions of existing stores and IT projects.
We acquired 136 stores through the acquisition of City Gear in the fourth quarter of Fiscal 2019. In addition, we opened 32 new stores
and expanded and/or relocated 10 existing stores in Fiscal 2019. We opened 44 new stores, expanded 11 existing stores and relocated and/or remodeled six additional existing stores during Fiscal 2018. We opened 65 new stores, expanded eight
existing stores and relocated and/or remodeled two additional existing stores during Fiscal 2017.
We estimate the cash outlay for capital expenditures in the fiscal year ending February 1, 2020 will be approximately $18.0 million to
$22.0 million, which relates to expenditures for:
| · |
The opening of new stores, the remodeling, relocation or expansion of selected existing stores;
|
| · |
Information system infrastructure, projects, upgrades and security (including City Gear integration); and
|
| · |
Other departmental needs.
|
Of the total budgeted dollars for capital expenditures for Fiscal 2020, we anticipate that approximately 51% will be related to the
opening new stores, store expansions and relocations and store remodels. Approximately 30% will be related to information technology, consisting primarily of expenditures for projects and software, City Gear integration, omni-channel,
infrastructure and various system enhancements, upgrades and security. The remaining 19% relates primarily to specific department expenditures and includes facility upgrades, transportation equipment, automobiles, fixtures and security
equipment for our stores.
Financing Activities.
Net cash provided by financing activities was $18.7 million in Fiscal 2019 and net cash used in financing activities was $54.4 million
and $42.6 million in Fiscal 2018 and Fiscal 2017, respectively. In Fiscal 2019, net cash provided by financing activities resulted from borrowings against our credit facilities to facilitate the acquisition of City Gear. Historically, the
fluctuation in financing activity between years is primarily the result of repurchases of our common stock. We expended $16.5 million, $54.5 million and $43.1 million on repurchases of our common stock during Fiscal 2019, Fiscal 2018 and
Fiscal 2017, respectively, which included cash used to settle net share equity awards of $0.4 million, $0.7 million and $0.9 million during Fiscal 2019, Fiscal 2018 and Fiscal 2017, respectively.
Financing activities also consisted of proceeds from stock option exercises and employee stock plan purchases. As stock options are
exercised and shares are purchased through our employee stock purchase plan, we will continue to receive proceeds and expect a tax deduction; however, the amounts and timing cannot be predicted.
At February 2, 2019, we had two unsecured credit facilities that allow borrowings up to $50.0 million each, and which expire in October
2021. Under the provisions of both facilities, we do not pay commitment fees. However, both are subject to negative pledge agreements that, among other things, restrict liens or transfers of assets including inventory, tangible or intangible
personal property and land and land improvements. We plan to renew these facilities as they expire and do not anticipate any problems in doing so; however, no assurance can be given that we will be granted a renewal or terms which are
acceptable to us. As of February 2, 2019, a total of $65.0 million was available to us from these facilities.
The following table lists the aggregate maturities of various classes of obligations and expiration amounts of various classes of
commitments related to Hibbett Sports, Inc. at February 2, 2019 (in thousands):
|
Payment due by period
|
||||||||||||||||||||
|
Contractual Obligations
|
Less than 1
year
|
1 - 3 years
|
3 - 5 years
|
More than
5 years
|
Total
|
|||||||||||||||
|
Long-term debt obligations
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||
|
Credit facilities
|
35,000
|
-
|
-
|
-
|
35,000
|
|||||||||||||||
|
Capital lease obligations (1)
|
1,017
|
1,148
|
634
|
212
|
3,011
|
|||||||||||||||
|
Interest on capital lease obligations (1)
|
242
|
244
|
90
|
5
|
581
|
|||||||||||||||
|
Operating lease obligations (1)
|
68,002
|
105,349
|
56,437
|
40,181
|
269,969
|
|||||||||||||||
|
Purchase obligations (2)
|
8,920
|
7,337
|
3,041
|
-
|
19,298
|
|||||||||||||||
|
Other liabilities (3)
|
242
|
9,200
|
-
|
2,540
|
11,982
|
|||||||||||||||
|
Total
|
$
|
113,423
|
$
|
123,278
|
$
|
60,202
|
$
|
42,938
|
$
|
339,841
|
||||||||||
|
(1)
|
See “Part II, Item 8, Consolidated Financial Statements. Note 7 – Leases.”
|
|
(2)
|
Purchase obligations include all material legally binding contracts such as software license commitments and service contracts. The table above also includes a
stand-by letter of credit in conjunction with our self-insured workers’ compensation and general liability insurance coverage. Contractual obligations that are not binding agreements, including purchase orders for inventory,
are excluded from the table above. Store utility contracts, including waste disposal agreements, are also excluded.
|
|
(3)
|
Other liabilities include amounts accrued for various deferred compensation arrangements and contingent earnouts related to the City Gear acquisition. See “Part
II, Item 8, Consolidated Financial Statements. Note 8 – Defined Contribution Benefit Plans” for a discussion regarding our employee benefit plans.
|
Non-current liabilities have been excluded from the above table to the extent that the timing and/or amount of any cash
payment are uncertain. Excluded from this table are approximately $1.2 million of unrecognized tax benefits, which have been recorded as liabilities in accordance with ASC Topic 740, Income Taxes, as the timing of such payments cannot be reasonably determined. See “Part II, Item 8, Consolidated Financial Statements Note 1 – Deferred Rent” for a discussion on our deferred rent
liabilities. See “Part II, Item 8, Consolidated Financial Statements. Note 10 – Income Taxes” for a discussion of our unrecognized tax benefits.
Off-Balance Sheet Arrangements
We have not provided any financial guarantees through February 2, 2019. We have not created, and are not party to, any special-purpose
or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business. We do not have any arrangements or relationships with entities that are not consolidated into the financial statements.
Inflation and Other Economic Factors
Our ability to provide quality imported merchandise on a profitable basis may be subject to political and economic factors and
influences that we cannot control. National or international events, including changes in government trade or other policies, could increase our merchandise costs and other costs that are critical to our operations. Consumer spending could
also decline because of economic pressures. See “Risk Factors.”
We do not believe that inflation has had a material impact on our financial position or results of operations to date. A high rate of
inflation or other increases in the cost of conducting our business in the future may have an adverse effect on our ability to maintain current levels of gross profit and selling, general and administrative expenses as a percentage of net sales
if the selling prices of our merchandise do not increase with these increased costs.
Our Critical Accounting Policies
Our critical accounting policies reflected in the consolidated financial statements are detailed below.
Revenue Recognition. We
recognize revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers, when control of the
merchandise is transferred to our customer. Sales are recorded net of expected returns at the time the customer takes possession of the merchandise. Net sales exclude sales taxes because we are a pass-through conduit for collecting and
remitting these taxes.
Retail Store Sales: For merchandise sold in
our stores, revenue is recognized at the point of sale when tender is accepted and the customer takes possession of the merchandise.
Retail Store Orders: Retail store customers
may order merchandise available in other retail store locations for pickup in the selling store at a later date. Customers make a deposit with the remaining balance due at pickup. These deposits are recorded as deferred revenue until the
transaction is completed and the customer takes possession of the merchandise. Retail store customers may also order merchandise to be shipped to home. Payment is received in full at the time of order and recorded as deferred revenue until
delivery.
Layaways: Some of our stores offer a retail
store program giving customers the option of paying a deposit and placing merchandise on layaway. The customer may make further payments in installments, but the full purchase price must be received by us within 30 days. The payments are
recorded as deferred revenue until the transaction is completed and the customer takes possession of the merchandise.
Digital Channel Sales: For merchandise
shipped to home, customer payment is received when the order ships. Revenue is deferred until control passes to the customer at delivery. Shipping and handling costs billed to customers are included in net sales.
Customer Loyalty Programs: We offer two
customer loyalty programs; the Hibbett Rewards program and the City Gear Reward Points program. Upon registration and in accordance with the terms of the programs, customers earn points on certain purchases. Points convert into rewards at
defined thresholds. The short-term future performance obligation liability is estimated at each reporting period based on historical conversion and redemption patterns. The liability is included in other accrued expenses on our consolidated
balance sheets and was $2.2 million and $0.2 million at February 2, 2019 and February 3, 2018, respectively.
Gift Cards: Proceeds received from the
issuance of our non-expiring gift cards are initially recorded as deferred revenue. Revenue is subsequently recognized at the time the customer redeems the gift cards and takes possession of the merchandise. Unredeemed gift cards are recorded
in accounts payable on our consolidated balance sheet.
The net deferred revenue liability for gift cards, customer orders and layaways at February 2, 2019 and February 3, 2018 was $7.5
million and $6.2 million, respectively, recognized in accounts payable on our consolidated balance sheets. In Fiscal 2019, gift card breakage income was recognized in net sales in proportion to the redemption pattern of rights exercised by the
customer and was $0.6 million. During Fiscal 2018 and Fiscal 2017, income from unredeemed gift cards was recognized on our consolidated statements of operations as a reduction to store operating, selling and administrative expenses when the
likelihood of redemption was deemed remote. Gift card breakage was not material in Fiscal 2018 or Fiscal 2017.
During the fiscal year ended February 2, 2019, $2.1 million of gift card deferred revenue from prior periods was realized.
Return Sales: The liability for return sales
is estimated at each reporting period based on historical return patterns and is recognized at the transaction price. The liability is included in accounts payable on our consolidated balance sheets. We also recognize a return asset and a
corresponding adjustment to cost of goods sold for our right to recover the merchandise returned by the customer. This right to recover the asset is included in net inventory on our consolidated balance sheet at the former carrying value of
the merchandise less any expected recovery costs which was $0.8 million at February 2, 2019.
Inventories. Inventories
are valued using the lower of weighted average cost or net realizable value method. Items are removed from inventory using the weighted average cost method.
Lower of Cost and Net Realizable Value: We
regularly review inventories to determine if the carrying value exceeds net realizable value, and we record an accrual to reduce the carrying value to net realizable value as necessary. We account for obsolescence as part of our lower of cost
and net realizable value accrual based on historical trends and specific identification. As of February 2, 2019 and February 3, 2018, the accrual was $4.5 million and $5.2 million, respectively. A determination of net realizable value
requires significant judgment.
Shrink Reserves: We accrue for inventory
shrinkage based on the actual historical results of our physical inventory counts. These estimates are compared to actual results as physical inventory counts are performed and reconciled to the general ledger. Physical inventory counts are
performed on a cyclical basis. As of February 2, 2019 and February 3, 2018, the accrual was $1.6 million and $1.4 million, respectively.
Inventory Purchase Concentration: Our business is dependent to a significant degree upon close relationships with our vendors. Our largest vendor, Nike, represented
65.4%, 57.9% and 57.0% of our purchases for Fiscal 2019, Fiscal 2018 and Fiscal 2017, respectively. Our second largest vendor, adidas, represented 10.0%, 11.0% and 5.5% of our purchases for Fiscal 2019, Fiscal 2018 and Fiscal 2017,
respectively. Our third largest vendor, Under Armour, represented 5.7%, 10.8% and 16.4% of our purchases for Fiscal 2019, Fiscal 2018 and Fiscal 2017, respectively.
Income Taxes. We estimate the annual tax rate based on projected taxable income for the full year and record a quarterly income tax provision in accordance with the
anticipated annual rate. As the year progresses, we refine the estimates of the year’s taxable income as new information becomes available, including year-to-date financial results. This continual estimation process often results in a change
to our expected effective tax rate for the year. When this occurs, we adjust the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected annual tax rate.
Significant judgment is required in determining our effective tax rate and in evaluating our tax position and changes in estimates could materially impact our results of operations and financial position.
We account for uncertain tax positions in accordance with ASC Subtopic 740-10. The application of income tax law is inherently
complex. Laws and regulations in this area are voluminous and are often ambiguous. As such, we are required to make many subjective assumptions and judgments regarding our income tax exposures. Interpretations of and guidance surrounding
income tax laws and regulations change over time. As such, changes in our subjective assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and statements of operations. See “Part II, Item 8,
Consolidated Financial Statements Note 10 – Income Taxes” for additional detail on our uncertain tax positions.
Goodwill and Indefinite-Lived
Intangible Assets. Goodwill and the City Gear tradename are indefinite-lived assets which are not amortized but rather tested for impairment at
least annually, or on an interim basis if events and circumstances have occurred that indicate that is more likely than not that an asset is impaired. Such events or circumstances could include, but are not limited to, significant negative
industry or economic trends, unanticipated changes in the competitive environment and a significant sustained decline in the market price of our stock. If it is more likely than not that an asset is impaired, the amount that the carrying value
exceeds the fair value is recorded as an impairment charge to current income. No impairment of these assets existed as of February 2, 2019.
Long-Lived Assets. We continually evaluate whether events and circumstances have occurred that indicate the carrying amount of long-lived assets may be may not be
recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, our policy is to first compare undiscounted cash flows expected to be generated by that asset or asset group over its remaining life to
its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment loss is recognized as a charge to current income to the extent that the carrying amount
exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Assets or asset groups to be
disposed of are reported at the lower of their carrying value or fair value less any costs of disposition. Evaluation of asset impairment requires significant judgment.
Investment and Credit Availability Risk
We manage cash and cash equivalents in various institutions at levels beyond federally insured limits per institution, and we may
purchase investments not guaranteed by the FDIC. Accordingly, there is a risk that we will not recover the full principal of our investments or that their liquidity may be diminished. In an attempt to mitigate this risk, our investment policy
emphasizes preservation of principal and liquidity.
We also have financial institutions that are committed to provide loans under our credit facilities. There is a risk that these
institutions cannot deliver against these obligations. See “Risk Factors.”
Interest Rate Risk
Our net exposure to interest rate risk results primarily from interest rate fluctuations on our credit facilities, which bears interest
at a rate which varies with LIBOR, prime or federal funds rates. At the end of Fiscal 2019, we had $35.0 million outstanding on our credit facilities. At the end of Fiscal 2018, we had no borrowings outstanding under any credit facility. A
125-basis point increase or decrease in the interest rate on borrowings under our credit facilities would not result in a material impact to our results of operations at current borrowing levels.
There were 95 days during the 52 weeks ended February 2, 2019, where we incurred borrowings against our credit facilities for an
average and maximum borrowing of $45.4 million and $75.0 million, respectively, and an average interest rate of 3.7%.
There were seven days during the 53 weeks ended February 3, 2018, where we incurred borrowings against our credit facilities for an
average and maximum borrowing of $4.1 million and $4.9 million, respectively, and an average interest rate of 2.78%.
Quarterly and Seasonal Fluctuations
We experience seasonal fluctuations in our net sales and results of operations. We typically experience higher net sales in early
spring due to spring sports and annual tax refunds, late summer due to back-to-school shopping and winter due to holiday shopping. In addition, our quarterly results of operations may fluctuate significantly as a result of a variety of
factors, including the timing of new store openings, the amount and timing of net sales contributed by new stores, weather fluctuations, merchandise mix, demand for merchandise driven by local interest in sporting events, and the timing of
sales tax holidays and annual income tax refunds.
Although our operations are influenced by general economic conditions, we do not believe that, historically, inflation has had a
material impact on our results of operations as we are generally able to pass along inflationary increases in costs to our customers. See “Inflation and Other Economic Factors” above.
The following consolidated financial statements and supplementary data of our Company are included in response to this item:
All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial
statements or notes thereto.
To the Stockholders and Board of Directors
Hibbett Sports, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Hibbett Sports, Inc. and subsidiaries (the Company) as of February 2, 2019 and February 3,
2018, the related consolidated statements of operations, stockholders’ investment, and cash flows for each of the fiscal years in the three-year period ended February 2, 2019 and the related notes (collectively, the consolidated financial
statements). We also have audited the Company’s internal control over financial reporting as of February 2, 2019, based on criteria established in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as
of February 2, 2019 and February 3, 2018, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended February 2, 2019, in conformity with U.S. generally accepted accounting principles. Also
in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 2, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
The Company acquired City Gear, LLC (City Gear) during fiscal year 2019, and management excluded from its assessment of the effectiveness of the Company’s
internal control over financial reporting as of February 2, 2019, City Gear’s internal control over financial reporting associated with total assets of $123.8 million and net sales of $49.1 million included in the consolidated financial
statements of the Company as of and for the fiscal year ended February 2, 2019. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of City Gear.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the
Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control
over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
We have served as the Company’s auditor since 2002.
Birmingham, Alabama
April 18, 2019
Hibbett Sports, Inc. and Subsidiaries
(In thousands, except share and per share information)
|
ASSETS
|
February 2, 2019
|
February 3, 2018
|
||||||
|
Current Assets:
|
||||||||
|
Cash and cash equivalents
|
$
|
61,756
|
$
|
73,544
|
||||
|
Receivables, net
|
9,470
|
6,599
|
||||||
|
Inventories, net
|
280,287
|
253,201
|
||||||
|
Prepaid expenses and other
|
16,343
|
13,430
|
||||||
|
Total current assets
|
367,856
|
346,774
|
||||||
|
Property and equipment, net
|
115,394
|
109,698
|
||||||
|
Goodwill
|
23,133
|
-
|
||||||
|
Trade name intangible asset
|
32,400
|
-
|
||||||
|
Deferred income taxes, net
|
2,278
|
2,176
|
||||||
|
Other assets, net
|
5,004
|
3,198
|
||||||
|
Total Assets
|
$
|
546,065
|
$
|
461,846
|
||||
|
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
|
||||||||
|
Current Liabilities:
|
||||||||
|
Accounts payable
|
$
|
107,315
|
$
|
93,435
|
||||
|
Credit facilities
|
35,000
|
-
|
||||||
|
Capital lease obligations
|
1,017
|
663
|
||||||
|
Accrued payroll expenses
|
13,929
|
10,424
|
||||||
|
Deferred rent
|
5,838
|
5,909
|
||||||
|
Other accrued expenses
|
10,174
|
5,136
|
||||||
|
Total current liabilities
|
173,273
|
115,567
|
||||||
|
Capital lease obligations
|
1,994
|
2,522
|
||||||
|
Deferred rent
|
19,522
|
20,291
|
||||||
|
Unrecognized tax benefits
|
1,401
|
1,294
|
||||||
|
Other liabilities
|
13,826
|
2,576
|
||||||
|
Total liabilities
|
210,016
|
142,250
|
||||||
|
Stockholders’ Investment:
|
||||||||
|
Preferred stock, $.01 par value, 1,000,000 shares authorized, no shares issued
|
-
|
-
|
||||||
|
Common stock, $.01 par value, 80,000,000 shares authorized, 38,983,232 and 38,862,929 shares
issued at February 2, 2019 and February 3, 2018, respectively
|
390
|
389
|
||||||
|
Paid-in capital
|
185,752
|
180,536
|
||||||
|
Retained earnings
|
759,677
|
731,901
|
||||||
|
Treasury stock, at cost, 20,686,242 and 19,910,291 shares repurchased at February 2, 2019 and
February 3, 2018, respectively
|
(609,770
|
)
|
(593,230
|
)
|
||||
|
Total stockholders’ investment
|
336,049
|
319,596
|
||||||
|
Total Liabilities and Stockholders’ Investment
|
$
|
546,065
|
$
|
461,846
|
||||
See accompanying notes to consolidated financial statements.
Hibbett Sports, Inc. and Subsidiaries
(In thousands, except per share information)
|
Fiscal Year Ended
|
||||||||||||
|
February 2, 2019
(52 weeks) |
February 3, 2018
(53 weeks) |
January 28, 2017
(52 weeks) |
||||||||||
|
Net sales
|
$
|
1,008,682
|
$
|
968,219
|
$
|
972,960
|
||||||
|
Cost of goods sold
|
679,947
|
655,502
|
634,364
|
|||||||||
|
Gross margin
|
328,735
|
312,717
|
338,596
|
|||||||||
|
Store operating, selling and administrative expenses
|
264,142
|
231,832
|
222,785
|
|||||||||
|
Depreciation and amortization
|
27,052
|
24,207
|
19,047
|
|||||||||
|
Operating income
|
37,541
|
56,678
|
96,764
|
|||||||||
|
Interest income
|
731
|
39
|
24
|
|||||||||
|
Interest expense
|
(714
|
)
|
(270
|
)
|
(292
|
)
|
||||||
|
Interest income (expense), net
|
17
|
(231
|
)
|
(268
|
)
|
|||||||
|
Income before provision for income taxes
|
37,558
|
56,447
|
96,496
|
|||||||||
|
Provision for income taxes
|
9,137
|
21,417
|
35,421
|
|||||||||
|
Net income
|
$
|
28,421
|
$
|
35,030
|
$
|
61,075
|
||||||
|
Basic earnings per share
|
$
|
1.52
|
$
|
1.72
|
$
|
2.75
|
||||||
|
Diluted earnings per share
|
$
|
1.51
|
$
|
1.71
|
$
|
2.72
|
||||||
|
Weighted average shares outstanding:
|
||||||||||||
|
Basic
|
18,644
|
20,347
|
22,240
|
|||||||||
|
Diluted
|
18,826
|
20,450
|
22,427
|
|||||||||
See accompanying notes to consolidated financial statements.
Hibbett Sports, Inc. and Subsidiaries
(In thousands)
|
Fiscal Year Ended
|
||||||||||||
|
|
February 2,
(52 weeks)2019 |
February 3,
2018
(53 weeks) |
January 28,
2017
(52 weeks) |
|||||||||
|
Cash Flows From Operating Activities:
|
||||||||||||
|
Net income
|
$
|
28,421
|
$
|
35,030
|
$
|
61,075
|
||||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||
|
Depreciation and amortization
|
27,052
|
24,207
|
19,047
|
|||||||||
|
Amortization of inventory step-up
|
1,911
|
-
|
-
|
|||||||||
|
Deferred income taxes and unrecognized income tax benefit, net
|
244
|
3,488
|
1,418
|
|||||||||
|
Loss on disposal and write-down of assets, net
|
940
|
597
|
238
|
|||||||||
|
Stock-based compensation
|
4,316
|
3,880
|
4,592
|
|||||||||
|
Other non-cash adjustments
|
(104
|
)
|
-
|
(99
|
)
|
|||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
Receivables, net
|
1,422
|
2,303
|
(1,826
|
)
|
||||||||
|
Inventories, net
|
16,804
|
27,500
|
2,398
|
|||||||||
|
Prepaid expenses and other
|
(501
|
)
|
(3,074
|
)
|
(1,712
|
)
|
||||||
|
Other assets
|
(162
|
)
|
185
|
351
|
||||||||
|
Accounts payable
|
(9,927
|
)
|
16,389
|
(11,410
|
)
|
|||||||
|
Deferred rent
|
(839
|
)
|
(514
|
)
|
3,623 | |||||||