| Basis of Presentation and Accounting Policies | Basis of Presentation and Accounting Policies The accompanying unaudited condensed consolidated financial statements of Hibbett Sports, Inc. and its wholly-owned subsidiaries (including the condensed consolidated balance sheet as of February 1, 2020, which has been derived from audited financial statements) have been prepared in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) for interim financial information and are presented in accordance with the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. References to “Hibbett,” “we,” “our,” “us” and the “Company” refer to Hibbett Sports, Inc. and its subsidiaries as well as its predecessors. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2020 filed on April 16, 2020. The unaudited condensed consolidated financial statements have been prepared on a basis consistent in all material respects with the accounting policies described in our 2020 Annual Report and reflect all adjustments of a normal recurring nature that are, in management’s opinion, necessary for the fair presentation of the results of operations, financial position and cash flows for the periods presented. Impact of the Novel Coronavirus (COVID-19) COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020 and continues to evolve. The outbreak of COVID-19 and related measures to quell the outbreak have impacted our inventory supply chain, operations and customer demand. The COVID-19 pandemic could further affect the Company's operations and the operations of its suppliers and vendors as a result of continuing or recurring quarantine, shelter-in-place or social distancing measures, limitations on travel, limitations on store or facility operations up to and including closures, and other governmental, business or consumer actions. The extent to which the COVID-19 pandemic will impact the Company’s operations, liquidity or financial results in subsequent periods is uncertain, but such impact could be material. Property and Equipment Property and equipment are recorded at cost. Finance lease assets are shown as right-of-use (ROU) assets and are excluded from property and equipment ( see Note 3, Leases ). Property and equipment consists of the following (in thousands): August 1, February 1, August 3, Land $ 7,277 $ 7,277 $ 7,277 Buildings 21,635 21,635 21,347 Equipment 97,909 95,100 95,098 Furniture and fixtures 37,654 37,048 35,541 Leasehold improvements 104,322 102,528 101,394 Construction in progress 1,515 1,660 1,202 Total property and equipment 270,312 265,248 261,859 Less: accumulated depreciation and amortization 171,738 164,292 157,995 Total property and equipment, net $ 98,574 $ 100,956 $ 103,864 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 unaudited condensed consolidated balance sheets and was $3.2 million, $2.7 million and $2.4 million at August 1, 2020, February 1, 2020 and August 3, 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 unaudited condensed consolidated balance sheets. The net deferred revenue liability for gift cards, customer orders and layaways at August 1, 2020, February 1, 2020 and August 3, 2019 was $9.5 million, $7.7 million and $8.4 million, respectively, and is recognized in accounts payable on our unaudited condensed consolidated balance sheets. Gift card breakage income is recognized in net sales in proportion to the redemption pattern of rights exercised by the customer and was not material in any period presented. During the 13-weeks ended August 1, 2020 and August 3, 2019, $0.5 million and $0.6 million of gift card deferred revenue from prior periods was realized, respectively. During the 26-weeks ended August 1, 2020 and August 3, 2019, $0.8 million and $1.2 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 unaudited condensed 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): 13-Weeks Ended 26-Weeks Ended August 1, August 3, August 1, August 3, Footwear $ 287,010 $ 152,468 $ 474,224 $ 367,543 Apparel 119,748 66,597 178,184 146,154 Equipment 34,849 33,375 59,037 82,038 Total $ 441,607 $ 252,440 $ 711,445 $ 595,735 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 it 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. Due to the macroeconomic impact of the COVID-19 pandemic, we determined that indicators of potential impairment were present during the 13-weeks ended May 2, 2020. As a result, we performed interim impairment testing on goodwill and the City Gear tradename as of April 15, 2020, using updated assumptions around prospective financial information, growth rates, discount rates applied to future cash flows, and comparable multiples from publicly traded companies in our industry. In valuing goodwill, we use a combination of the Discounted Cash Flow methodology and the Guideline Public Company methodology, which require assumptions related to future cash flows, discount rate and comparable public company entities. In the 13-weeks ended May 2, 2020, we determined that goodwill of our City Gear reporting unit was fully impaired and recognized a non-cash impairment charge of $19.7 million. No impairment related to goodwill was recognized during the 13-weeks ended August 1, 2020 or the year ended February 1, 2020. A reconciliation of goodwill from February 1, 2020 to August 1, 2020 consists of the following: (in thousands) Goodwill balance at February 1, 2020 $ 19,661 Impairment losses (19,661) Goodwill balance at August 1, 2020 $ — In valuing the tradename intangible, we use the Relief from Royalty method which requires assumptions related to future revenues, royalty rate and discount rate. In the 13-weeks ended May 2, 2020, we determined that the City Gear tradename was partially impaired and recognized a non-cash impairment charge of $8.9 million in store operating, selling and administrative expenses on our unaudited condensed consolidated statement of operations. No impairment related to the tradename was recognized during the 13-weeks ended August 1, 2020, the year ended February 1, 2020 or the 13 and 26-weeks ended August 3, 2019. A reconciliation of the tradename intangible asset from February 1, 2020 to August 1, 2020 consists of the following: (in thousands) Tradename intangible asset balance at February 1, 2020 $ 32,400 Impairment losses (8,900) Tradename intangible asset balance at August 1, 2020 $ 23,500 |
