| Basis of Presentation and Summary of Critical and Significant Accounting Policies | BASIS OF PRESENTATION AND SUMMARY OF CRITICAL AND SIGNIFICANT ACCOUNTING POLICIES Business Hibbett Sports, Inc. is a leading athletic-inspired fashion retailer primarily located in small and mid-sized communities across the country. References to “we,” “our,” “us”, “Hibbett” and the “Company” refer to Hibbett Sports, Inc. and its subsidiaries as well as its predecessors. Our fiscal year ends on the Saturday closest to January 31 of each year. The consolidated statements of operations for Fiscal 2020, Fiscal 2019 and Fiscal 2018 include 52 weeks, 52 weeks and 53 weeks of operations, respectively. Our merchandise assortment features a core selection of brand name merchandise emphasizing athletic footwear, athletic and fashion apparel, team sports equipment and related accessories. We complement this core assortment with a selection of localized footwear, apparel and accessories designed to appeal to a wide range of customers within each market. Acquisition We acquired City Gear, LLC (City Gear) on November 5, 2018 with an effective date of November 4, 2018 for approximately $88.0 million, including $86.8 million of cash paid. ( See Note 3 – Acquisition ) Principles of Consolidation The consolidated financial statements of our Company include its accounts and the accounts of all wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Occasionally, certain reclassifications are made to conform previously reported data to the current presentation. Such reclassifications have no impact on total assets, total liabilities, net income or stockholders’ investment in any of the years presented. Use of Estimates in the Preparation of Consolidated Financial Statements The preparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (U.S. GAAP) requires management to make certain estimates and assumptions that affect the reported amount of assets and liabilities, revenues and expenses, and the disclosure of intangible assets and contingent liabilities at the date of the financial statements. We believe our estimates are reasonable; however, the assumptions used by management could change significantly in future estimates due to changes in circumstances and actual results could differ materially from those estimates. Reportable Segments Hibbett Sports, Inc., through its subsidiaries, has approximately 1,100 stores operating under the Hibbett Sporting Goods and City Gear brands and an omni-channel platform. We identify our operating segments according to how our business activities are managed and evaluated by our chief executive officer, who is our chief operating decision maker. Our shopping channels primarily include store locations and website or mobile apps. Store sales are primarily filled from the store’s inventory but may also be shipped from a different store location or our logistics network if an item is not available at the original store. Direct-to-consumer orders are generally shipped to our customers from a store, our logistics network or some combination thereof, depending on the availability of the desired item. Given the economic similarity of the store formats, the products offered for sale, the type of customers, the methods of distribution and how our Company is managed, our operations constitute only one reportable segment. Vendor Arrangements We enter into arrangements with some of our vendors that entitle us to a partial refund of the cost of merchandise purchased during the year or reimbursement of certain costs we incur to advertise or otherwise promote their product. Volume-based rebates, supported by vendor agreements, are estimated throughout the year and reduce the cost of inventories and cost of goods sold during the year. This estimate is regularly monitored and adjusted for sales activity and current or anticipated changes in purchase levels. We also receive consideration from vendors through a variety of other programs, including markdown reimbursements, vendor compliance charges and defective merchandise credits. If the payment is a reimbursement for costs incurred, it is recognized as an offset against those related costs; otherwise, it is treated as a reduction to the cost of merchandise. Markdown reimbursements related to merchandise that has been sold are negotiated by our merchandising teams and are credited directly to cost of goods sold in the period received. If vendor funds are received prior to merchandise being sold, they are recorded as a reduction of merchandise cost. Vendor compliance charges and defective merchandise credits reduce the cost of inventories. Marketing We expense marketing costs when incurred. We participate in various marketing cooperative programs with our vendors, who, under these programs, reimburse us for certain costs incurred. A receivable for cooperative marketing to be reimbursed is recorded as a decrease to expense as advertisements are run. The following table presents the components of our marketing expense (in thousands): Fiscal Year Ended February 1, February 2, February 3, Gross marketing costs $ 18,408 $ 17,608 $ 13,356 Marketing reimbursements (2,938) (2,850) (3,010) Net marketing costs $ 15,470 $ 14,758 $ 10,346 Cost of Goods Sold We include merchandise costs, store occupancy costs, logistics-related occupancy and operating costs and ship-to-home freight in cost of goods sold. Stock Repurchase Program In November 2018, our Board authorized the continuation of our existing Stock Repurchase Program (2018 Program) established in November 2015 (2015 Program) until January 29, 2022. The Program authorizes repurchases of our common stock in open market or negotiated transactions, with the amount and timing of repurchases dependent on market conditions and at the discretion of our management. In addition to the 2018 Program, we also acquire shares of our common stock from holders of restricted stock unit awards to satisfy withholding tax requirements due at vesting. Under the 2015 Program, the Board of Directors authorized up to $300.0 million to repurchase our common stock through February 1, 2020. The 2015 Program replaced an existing plan that was adopted in November 2012 (2012 Program). Under the Programs, we repurchased 1.6 million shares of our common stock during Fiscal 2020 at a cost of $35.5 million, including 29,432 shares acquired from holders of restricted stock unit awards to satisfy tax withholding requirements of $0.6 million. We repurchased 0.8 million shares of our common stock during Fiscal 2019 at a cost of $16.5 million, including 18,765 shares acquired from holders of restricted stock unit awards to satisfy tax withholding requirements of $0.4 million. We repurchased 2.8 million shares of our common stock during Fiscal 2018 at a cost of $54.5 million, including 24,432 shares acquired from holders of restricted stock unit awards to satisfy tax withholding requirements of $0.7 million. Historically, under all stock repurchase authorizations, we have repurchased a total of 22.3 million shares of our common stock at an approximate cost of $645.2 million as of February 1, 2020 and had approximately $153.1 million remaining under the Program for stock repurchases. Shares acquired from holders of restricted stock unit awards to satisfy tax withholding requirements do not reduce the authorization. Subsequent to February 1, 2020, we repurchased 0.5 million shares of our common stock as of April 3, 2020 at a cost of $10 million, including 30,895 shares acquired from holders of restricted stock unit awards to satisfy tax withholding requirements of $0.4 million. Cash and Cash Equivalents We consider all short-term, highly liquid investments with original maturities of 90 days or less, including commercial paper and money market funds, to be cash equivalents. Amounts due from third-party credit card processors for the settlement of debit and credit card transactions are included as cash equivalents as they are generally collected within three business days. Cash equivalents related to credit and debit card transactions at February 1, 2020 and February 2, 2019 were $5.2 million and $5.5 million, respectively. 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 1, 2020 and February 2, 2019, the accrual was $3.2 million and $4.5 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 1, 2020 and February 2, 2019, the accrual was $1.6 million and $1.6 million, respectively. Inventory Purchase Concentration : Our business is dependent to a significant degree upon close relationships with our vendors. Our largest vendor, Nike, represented 67.7%, 65.4% and 57.9% of our purchases for Fiscal 2020, Fiscal 2019 and Fiscal 2018, respectively. Our second largest vendor, Adidas, represented 7.2%, 10.0% and 11.0% of our purchases for Fiscal 2020, Fiscal 2019 and Fiscal 2018, respectively. Our third largest vendor, Under Armour, represented 3.5%, 5.7% and 10.8% of our purchases for Fiscal 2020, Fiscal 2019 and Fiscal 2018, respectively. Property and Equipment Property and equipment are recorded at cost and at February 2, 2019 included assets acquired through capital leases. At February 1, 2020, finance lease assets are shown as right-of-use (ROU) assets and are excluded from property and equipment. (See Note 7, Leases) . In Fiscal 2020, we initiated a strategic realignment that incorporated the closure of approximately 95 stores. The fixed asset impairment charge related to the strategic realignment was not material in Fiscal 2020. Property and equipment as of February 1, 2020 and February 2, 2019 consists of the following (in thousands): February 1, February 2, Land $ 7,277 $ 7,277 Buildings 21,635 21,311 Buildings under capital lease — 3,363 Equipment 95,100 96,402 Equipment under capital lease — 678 Automobiles under capital lease — 1,829 Furniture and fixtures 37,048 36,980 Leasehold improvements 102,528 101,572 Construction in progress 1,660 2,080 Total property and equipment 265,248 271,492 Less: accumulated depreciation and amortization 164,292 156,098 Total property and equipment, net $ 100,956 $ 115,394 Depreciation on property and equipment is principally provided using the straight-line method over the following estimated service lives: Buildings 39 years Leasehold improvements 3 – 10 years Furniture and fixtures 7 years Equipment 3 – 7 years In the case of leasehold improvements, we calculate depreciation using the shorter of the term of the underlying leases or the estimated economic lives of the improvements. The term of the lease includes option periods when exercise of the option is reasonably certain. We continually reassess the remaining useful life of leasehold improvements in light of store closing plans. Construction in progress has historically been comprised primarily of property and equipment related to unopened stores and amounts associated with technology upgrades at period-end. At February 1, 2020, approximately 74% of the construction in progress balance was comprised of costs associated with technology initiatives. The remaining balance consisted of costs associated with our stores. Maintenance and repairs are charged to expense as incurred. The cost and accumulated depreciation of assets sold, retired or otherwise disposed of are removed from property and equipment and the related gain or loss is credited or charged to net income, net of proceeds received. 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 1, 2020. 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. 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 : We 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. We offer an extended payment option through a third party who assumes all credit risk. On these orders, payment is received by us when the order ships and revenue is recorded when the product is delivered to the customer. Loyalty Program: We offer the Hibbett Rewards program whereby upon registration and in accordance with the terms of the program, 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 $2.7 million and $2.2 million at February 1, 2020 and February 2, 2019, 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 sheets. The net deferred revenue liability for gift cards, customer orders and layaways at February 1, 2020 and February 2, 2019 was $7.7 million and $7.5 million, respectively, recognized in accounts payable on our consolidated balance sheets. In Fiscal 2020 and 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 each year. During Fiscal 2018, 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. During the fiscal year ended February 1, 2020 and February 2, 2019, $1.7 million and $2.1 million of gift card deferred revenue from prior periods was realized, respectively. 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. The return asset and corresponding adjustment to cost of goods sold for our right to recover the merchandise returned by the customer is immaterial. Revenues disaggregated by major product categories are as follows (in thousands): Fiscal 2020 Fiscal 2019 Fiscal 2018 Footwear $ 735,613 $ 579,766 $ 531,552 Apparel 307,600 276,731 269,512 Equipment 141,021 152,185 167,155 $ 1,184,234 $ 1,008,682 $ 968,219 Sales Returns Net sales returns were $48.0 million for Fiscal 2020, $47.7 million for Fiscal 2019 and $43.8 million for Fiscal 2018. The estimated liability for the effect of estimated returns was not material as of February 1, 2020 and February 2, 2019. Store Opening and Closing Costs New store opening costs, including pre-opening costs, are charged to expense as incurred. Store opening costs primarily include payroll expenses, training costs and straight-line rent expenses. All pre-opening costs are included in store operating, selling and administrative expenses as a part of operating expenses. |
