MAY 20, 2005 -- Hibbett Sporting Goods' 1Q net sales increased 19.0% to $114.8 million. Comp-store sales increased 8.2%. Net income increased 33.9% to $10.7 million compared to restated net income of $8.0 million. EPS increased 39.4% to 46¢ compared to restated earnings of 33¢ in the prior year.
Hibbett opened 15 new stores and closed four during 1Q, bringing the store base to 493 in 22 states. The company plans to open a net of approximately 73 new stores in FY06, including a net of 16 to 19 stores in 2Q06. CEO Mickey Newsome said that the stores opened in 4Q and 1Q are exceeding expectations. The company's decision to hire a lease-negotiation team has paid dividends. The company is already ahead of last year by more than a dozen leases. By next year, the team will be expanded to eight.
Newsome stated, "We are pleased to exceed the $100 million mark in revenue for the second consecutive quarter. Footwear and team equipment led the way once again with double-digit and high single-digit increases, respectively. The performance footwear category continues to show positive momentum with the strongest increases in ladies and youth. Although the apparel category remains below prior-year periods, we saw several bright spots with ladies activewear, technical apparel and urban brands.
"We have remained focused on translating this continued sales growth into much higher earnings growth. The first quarter is another example of our continued improvement in operating margin. With an approximate 150-basis point increase to 14.6% of sales in the quarter, we benefited from improved product margin due to increased sell through and a reduction in aged inventory. We were also able to again leverage occupancy, operating and administrative costs."
Hibbett's licensed business has been soft. It is already reducing NBA apparel for next fall. 1Q sales of pro apparel were down double digits. The company said it could survive a lockout. Collegiate apparel was off low-single digits. The company's fortunes with the category depend on the success of local teams. The company did note that collegiate apparel is over-distributed. While it works with vendors who keep a lid on distribution, the availability of other products affects Hibbett's sales. Success of branded apparel has offset the decline in licensed. The category was up double digits. Women's was led by Nike, Adidas, Under Armour and other technical products. Men's was led by Under Armour and Nike. The company does a successful urban business with specialty brands such as ENYCE.
Footwear was up double digits. Leading brands are Nike, Asics, K-Swiss and Reebok. There is still a good Classics business at Hibbett's, especially in urban markets.
Equipment sales rose high-single digits. Top sellers include Easton bats and Nike baseball gloves.
Inventory is up 11.3%, but is down about 2% on a per-store basis. The company emphasized its inventory is very clean. Hibbett is sitting on $60.9 million in cash vs $44.4 million a year ago. It could have as much as $90 million year-end.
Asked by an analyst what keeps him up at night, Newsome said it was the hiring and training of good store managers. At the time of the call, 20 new and potential managers were in headquarters for training. This is an ongoing program.
For 2Q, Hibbett expects to report EPS of approximately 17¢-21¢ and a comp-store sales increase in the mid-single-digit range compared to restated earnings of 12¢. Guidance for FY06 is estimated at approximately $1.32 to $1.38 and a comp-store sales increase in the mid-single-digit range.
Newsome concluded, "Based upon the strong growth in earnings and comparable store sales in the quarter, we believe fiscal 2006 will be another record year for Hibbett. Footwear and team equipment are posting very positive trends because of exceptional product, presentation and customer service. With the anniversary of the decline in licensed apparel in the second quarter, we expect apparel to begin contributing to our overall performance in the second half of the year along with continued year-over-year improvement in gross and operating margins from very efficient logistics and store operations."
In August 2004, the board authorized the repurchase of up to $30.0 million of the company's common stock. In November 2004, the board increased this maximum authorization to $40.0 million. During 1Q, Hibbett repurchased 16,000 shares bringing the total shares repurchased to 861,400 shares for a total expenditure of approximately $19.5 million.
