HIBB - Earnings call transcript Q1 2020

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Operator

Greetings and welcome to the Hibbett Sports First Quarter 2020 Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded on Friday, May 24, 2019. I’d now like to turn the conference over to Pat Watson with Corporate Communications. ahead. go Please

Patrick Watson

joining and for fiscal to the XXXX. review XXXX, Thank results Hibbett for financial X, May operating ended of the company’s which you on Sports first year quarter

financial reliance would we are in conference Harbor It of views uncertainties forward-looking made from which in reflect the Safe are These on this based performance, Act response like Before your anticipated materially provisions not events differ respect that risks. I those the to the everyone the statements. to are comments Reform company’s and call Litigation of and including that may facts, in historical future current should statements, questions, the with noted Private remind subject Securities future on to be XXXX company’s during management’s results those and and to statements. begin, forward-looking discussed

or described Securities earlier these such in XX-K more of Commission. could for to Report on the other differences the and issued you refer We release Exchange contribute sources information. news Form in been cause filings have this company’s the Annual with that factors and the Some to morning in

like conference of webcast go Interim this of policy information to Skold, information, is that call Lastly, I time-sensitive of of a Christine. call Officer. to the XX, the replay based nature like date, during and of to Financial Please conference I’d the this over this archived Sports Chief now XXXX. XX it turn to Hibbett the out limit would May remarks period to ahead, call days. Christine understandings management’s today’s believed point as on are accurate Because of

Christine Skold

Jeff first and Hibbett Welcome and President Pat, Merchant; good VP Chief Rosenthal, have quarter us and Cathy and with fiscal XXXX Pryor, Thank everyone. to Jared CEO; Senior call. Today, we by Jared Briskin, on prepared the earnings you, the morning, along Sports merchandising of with with cover Store and followed general first today’s a will call quarter, then the I’ll update. quarter, start VP the with Jeff review business Operations. remarks of from Senior highlights

extension combined As City the a a reminder, the basis. as on results treat Hibbett and be will reported of Gear business we an

not metrics our or fourth business incorporated until the business. gross I City As specific Gear however, is this margin, comp year. revenue City in such expense to the the other intent for provide into of sales starting for it’s will, consolidated provide actual profitability the it quarter Gear

for not e-commerce quarter, were year positive months, were total all continue margin XX sales to Consolidated For we City quarter. increased million with have increased progressed. the respect $XXX.X which strong sales business. charge results trends basis Gear, With the to and comp $XX.X the prior comps Overall, Gear as from X.X% months to the $XXX,XXX and XX.X%. related includes quarter Gross in decreased in year a sales our the the points e-commerce been acquisition. stronger would sales of This total Consolidated for e-commerce City increased XX% see prior X.X% includes sales million. to quarter. first

basis e-commerce with gross freight to sales. Excluding XX due decreased margin non-GAAP this points margin principally year’s charge, Product prior quarter. associated declined first from

expenses. of occupancy strong this year prior position sales to prior quarter. expense with sales year. City clearance store Gear to pleased We’re due experienced our predominantly and from performance the less Logistics as the addition first primarily improved inventory expenses sales and year SG&A of than percent increased the a

our impairment XX rate of sales, charge improved XX includes to in basis improvement percent SG&A related close stores. million and points. $XXX,XXX plan to $X.X a This a non-recurring underperforming costs asset As acquisition

basis improved reduction XX.X% due in Depreciation also and Excluding compared leverage due from departure performance. expense $XXX,XXX year’s a addition strong expense first $X the Depreciation fixed quarter to to compensation to includes SG&A principally basis of points points last stock sales million related Gear sales. these tax employees. rate was SG&A charges, of the increased an rate improved City the assets. of XXX some amortization to percentage as XX.X%. for quarter income of rate XX the The approximate

increased be expect XX.X% and $XX.X differences. last this We sales versus income XX.X% the Section to Operating rate year last year slightly due of was to higher XXX(m) of permanent from million year. XX%

sales. earnings $XX.X million, the Excluding per excluding non-recurring earnings to operating non-GAAP non-recurring increased items to mentioned, of XX.X% increased the of diluted share Diluted share $X.XX. per or items was $X.XX, impact income XX.X% XX% the

sheet. to facilities compared on credit of $XXX to to related quarter We balance the Gear million the with $XXX year. million We last our revolving City $XX cash, ended Turning borrowings the million acquisition. in had

spent quarter, to to the per paid On last the continue decreased three to stores new two off expect year. comparable Gear We basis, one Hibbett inventory store and stores, of end $X.X that CapEx stores. in to store million which We fiscal of by City be for expansion a the first of the year. included quarter conversions compared

approximately XX for impact we years, guidance. our rate to but on both to basis basis to excluding as We sales. of XX items XX margin, we to fiscal we basis points in XX percentage decrease of of margin consolidated basis now X.X% range a to costs an With we increase is non-GAAP expect non-recurring the results, store expect XX in of the XX the overall gross gross quarter Based non-GAAP follows: in expect the respect years, for an comparable to excluding positive first sales non-recurring points, SG&A XX rate, points. to be SG&A improvement range to as flat Turning guidance expect to our both positive points; to expect decline to be updated X%;

to earlier, mentioned expect I XX%. full-year we rate our As tax be

non-recurring costs earnings to plan City costs productivity expect improve associated for with per share closing the which store with in of base XX to approximately and of associated of we to stores this the $X.XX to be the $X.XX, integration Finally, diluted our share per our range year. by $X.XX includes Gear $X.XX

in is to $X.XX. per of expected share the turn non-recurring to call $X be non-GAAP diluted the over merchandising. now review a of earnings Excluding for I’ll now range Jared to costs,

Jared Briskin

Thank you, morning. Christine. Good

a As not store trends. prepared This comparable remarks until of reflective City reminder fourth will are Gear include my the quarter.

From business kids During sales and digits, posting up a the new Heritage our double at Nike VaporMax of first Day campaign Max Have XX Nike, Men’s quarter, digits, mid-single as our increased as our comp Max genders. Air Air month footwear growth was consecutive all around Max high-single seventh such across XXX, drivers. Air such and the women’s quarter highlighted all models by growth were Air and digits. Max drove Collection were XXX along with creations significant XX, gains.

We the Force franchise, also Air as from results had basics as well X including fashion stellar executions.

Adidas Additional and Balance, Jordan, platforms drivers and from from retro and from Brooks New quarter Swift franchises retro-inspired Yeezy, Champion. significant for Boost the and growth included

period. Strong business soft, Our was Focus to business and sizes was in our strong expected. investment were apparel footwear expected. quarter business our high-single as remains down positive positive was was Team down high-single within was on increased quarter. along sports digits digits Kids digits. and but ago also seen bag improvement. track, low-single connectivity and sneaker up including apparel high-single significant baseball low-single digits. Accessories than inflatables. and year by big as exited apparel across and the sock fresher the mid-single digits in tall. declines with women’s connectivity were License excellent football, Men’s in results softer, shape business digits. and the up digits categories, with exceptionally drove offset Apparel low-single volleyball are bats other well, quarter for down the softball, We business turned and in up plus our performed inventory

now improving to our and sneaker Rosenthal. turn a in is our connecting our on experience working scaling markets. focus and Our the and over call while differentiated business Jeff business presenting accessory apparel I’ll

Jeffry Rosenthal

Jared. you, Thank

We’re quarter. new customers. our excited as in see from growth as in up existing growth members from to growth loyalty Sales continued – the from XX% our sales coming for as from channels The well digital in both is well our store customers. and omni-channel were growth customers in shopping increased existing as

stores quarter, XX%. number sales of grew growth and members versus The XX% grew year-over-year, in to combination of This The grew and the existing at loyalty year-over-year. members to program with shoppers XXX% new revenue digital at our growing XX% omni-channel new of year. the loyalty XX% prior growing members XX%

continue channel, with Regarding this our we growth comp sales XX% quarter. to see digital robust online a

area growth for very engine continue digital One our company. Gear, opportunity we the there timelines channels this to is e-commerce Our quickly is and specific have advance plans penetration low City be and to business. the will

forward. are we improved is we as our integration move as progressing and Gear inventory City Our encouraged position by planned

– Gear exceptional the of fundamentals teams the to to building believe parts in executed differentiated experience of win all we and driving Hibbett, committed a can are and and come. City With best-in-class years customer for we many We that presenting the executed business.

over up and Although, be customer Hibbett to year exceed next capabilities, has enhancements Hibbett expectations. pipeline to bar will raised experiences business the its expectations. and the are that improvement and digital the the our robust innovation. its In on meet has continuous we ground omni-channel committed continues made in to customers’ create retail, more on

ahead opportunities Hibbett We both are Sports the many and very encouraged that for lie Gear. still with City

most us specialty athletic advantage. specialty a positioning gives can markets. We in space secondary and the the city sneakers, innovative our apparel in and Our the and tertiary equipment have strategic space

will both stores, We in our in digitally new concept we to a for be Hibbett. will and store continue and the innovate fall testing

to making and working of we the to both will would be turn at and now the hard We associates, consumers Gear very call sure are to get that over City thank more also operator. speeding to up I how Hibbett innovations that on dedicated our are products on on efficiently. I all successful. like

Operator

line with Suisse. Instructions] Sigman first the of comes Thank from you. proceed. Seth Please [Operator The question Credit

Lavesh Hemnani

Seth morning. good We couple had Lavesh questions. Sigman. for on of a is This Hey,

can price what it And Thank and of growth, City Gear And firstly, in the you’re store you. also, the follow-up. seeing a give online I on have SKUs full the mix Was the currently? online? So of what is clearance doing terms us some you in and on mix? color

Jeffry Rosenthal

Yes.

continue growing. higher first started, to We clearance we we business And full move. the – a are as do price more seeing percentage. was We much

progress too. it’s is in So think And that also we are we’re – improving, seeing we this. clearance huge we as things that less are is starting margins a opportunity. so see inventory since clearance our that our And clean, to as becoming

We’re being a our able of get price. of to much some higher rid goods at

to lower see Gear on penetration particulars, in in we there R-type getting City with and not our – but get them that. technology are So much platform.

that as to We get up, in opportunity an sometime that expect we this that hopefully continue be to be and fall. will

Lavesh Hemnani

Got it. you. Thank

this stores for the can of close I plan transfer Finally, closings seeing in in you QX, share are mean, just as stores year. regarding I you what to sales just especially from of like closed learnings, terms mean, existing sticking to Thank your stores? you. the store these you some the

Christine Skold

the this not there’s we’ve stores, the volume So, are stores a there’s XX stores really lot sales. about of – year, of not typical way the closed Hibbett half Those we place really typically transferability the because and of of store.

and sales running closing And some up expect reason, and we’ll the – online. unproductively of for we’re so that that do we pick they those them were

Lavesh Hemnani

you. Got it. Thank

Operator

Camilo The the of Please question with next proceed. Lyon from Genuity. Canaccord line comes

Camilo Lyon

you, are the Good to start morning. How year. guys? Good

Jeffry Rosenthal

Camilo. morning, Good

Camilo Lyon

questions. A couple of

First, looks flattish. were comps like store it your

opportunity second, year, that do math in you positive And just curious store the regard? could seem of comps outlook given customer balance for if to place on your to of the confirm First, an stores? in the drive is that? my you about turn see to be that person, right your for that It got lot working, a back into I’m so you initiative that that

Christine Skold

Right.

the XX% which they’re reserve got else, is the So We’ve store. online, volume a in for digits positive buying pleased quarter, that improvements happening transaction, at pickup are stores. are adding with BOPIS store the very and that. of driving that. that We’ve the for digital comps time we’re walks About of transactions. Feel at BOPIS something were a when got low-single lot someone

the Jeff so And but mentioned, really store we digital see level. very we’re – primary that’s to as driver at for see pleased the growth comps the that sales, being positive

Camilo Lyon

great. That’s

the positive maintain with anticipation there it comps trajectory? as guidance is, that store So is comp a the an

Christine Skold

– in business. built and growth didn’t we will store upside and build back-to-school in we’re the early a potential can subject have the be year, of of side. things level, a customer lot there’s to on the driven whims the QX kind happen. digital the we But say that majority there’s It’s go non-activity would QX the growth the the of base. lot – lot that holiday is into with we’re of still in and a there’s quarter, I the – then has of but where store at of we some watching to

Camilo Lyon

Got think that about you any about it. could could side, Jared, product the side? should comp how maybe launch sort XX we seen that that on have Have differed might days from talk ago? changes And floor anything of influence the you QX

Jared Briskin

I some certainly during quarter. mean, launches there’s the Yes.

a as mentioned, I that’s address think, some to noise plan it’s where around launches And much volatility get we around mindset quarter. our have further with plan second on quarter, as from. our for Christine – that, some comes quarter visibility There’s it. a second a and certainly There’s some some we’ll movements. so smaller of potential historically

Camilo Lyon

mentioned City that you store? one wondering enough time you to now and I’m conversion that converted in if that store. changes the performance And then to Okay, Gear you Hibbett between any see a of store had great.

Jeffry Rosenthal

actually We’ve and Tennessee both done are One we’re And so in performing. stores Yes. one two. on Jackson, how Murfreesboro, far very pleased in Mississippi.

on would results the do we’re many type of those we two encouraged how and the things, stores. analysis right by doing but We’re those very now

Camilo Lyon

over That’s turn great. to queue. That’s it it. guys. Thanks, Good luck. I’ll the

Jeffry Rosenthal

you. Thank

Christine Skold

Thank you.

Operator

Merrill line of The proceed. Lynch. next Rafe with America the of Bank from question comes Jadrosich Please

Rafe Jadrosich

taking good Hi, for question. Thanks morning. my

Jared Briskin

Good morning.

Jeffry Rosenthal

Good morning.

Rafe Jadrosich

the some talk little Jared, trends for that? side, and And just can talk then lifestyle running? what hoping performance and footwear on I that seeing about about the could the product then are basketball in seeing, on versus of was within apparel you if you’re you you apparel versus a just you’re how apparel bit positioning

Jared Briskin

the the of Yes. the some little the From looking of a business – trend bit business. footwear can side the at a category perspective, on think, difficult lens sometimes through I be

what concerned from. little trending about less just a focused more it category what’s on We’re little comes bit,

the Some of the business sportswear very of some specific we’re – to strong. categories the around

– the side models this of sneaker product nice seeing at XXs absolutely business and heritage heritage new frankly. around point, continuing We’re kind seeing also brands results But creation. we’re XXs the some trend out then the of significant improvement even the of on and

sell business our is to business outfit. the focus to we sneaker a So from side, the on to the perspective apparel the hookups apparel trend and continuing that connect our have ensuring right

business. our in change nice certainly we’re as looking We’re business a well that where at accessory seeing in the

really focus stay from We’re to focused versus away just fashion more trying performance and what’s and trending today’s on to relevant what’s consumer.

that performance-based, have So we are have available – sorry, we that as certainly be have consumers trend for they also to for them to some successful. numerous are them well but platforms have our to

Rafe Jadrosich

year? in anything through the the the actually get weren’t constraints seen today hurt move one highlighted better maybe Okay. that availability some or of in of you has key as vendors apparel to able there side. your one apparel of the And one chain and supply your competitors have you first that that products expect you’d on quarter – been then you you Have

Jared Briskin

issues supply been overall. has There some chain Yes.

working fast done of Our make and business sure incredible to we has an as as much our to with team track our can. product try possibly suppliers covered was that and job

the of we and places did leverage in challenges we did and to Some anticipate try over some compensate.

we’ve of in got certainly the and but really flow, have helped a that newness done customers. team a job strong product our us, we frequently the great ensuring for So has coming

Rafe Jadrosich

which was that anything question. dynamic of first of just about quarter, flattish final deleverage for quarter that growth? first leverage for year. Is would or you for drove terms SG&A that first the of you’re expect full-year, in of the my talk quarter of to sales continue drove – the rest of just in through kind you and sort stronger why Can just the the leverage that in timing it the year? the there then And in guiding imply strong the pretty – the was expenses leverage the rest to the SG&A, don’t

Christine Skold

is. it Yes,

side it lot even fixed. first of are sales our the sales is strength quarter the right, of a the quarter. leverage strongest it’s the our of on labor You’re and primarily

some some at acquisition There stores of bit didn’t We costs. as labor rent have store of lot a is little specs. occupancy much. quite the we incur minimum and is on of the a hours So the timing

a so primarily costs of but quarter on year, the GAAP move will the into opportunity. basis, So best of acquisition remainder the first the the us the strength gives leverage

Rafe Jadrosich

great. you. Thank Okay,

Jared Briskin

Thank you.

Jeffry Rosenthal

Thank you.

Operator

The proceed. Please next Robert question line the with Baird. comes of W. Peter Benedict from

Peter Benedict

the improve that? in pipeline is Hey, it on bit other other more experience. sight, or working guys. enhancements Jeff, to what And can side about change store that then you Is the that referring about that mean you you you’re the talked of things a there on format are have to, side? I the coming are you’re too? talk delivery the little that line

Jeffry Rosenthal

bunch Yes, sure best customer work the working really make lot we’re store. in things the there’s that have of just experience. the overall a a on to experience on more We that we

putting on looking look the store definitely what We’re a like format a for new at new in future. should

a you We we’re also and in customer better, – faster efficient better lots lot much quite and and really always ways, got have and are pay be get the few they and people it. It’s to month expectations payment – to go right and that think $XXX just how customers, to to plans $XX really lot There’s just a there is sneaker, want they opportunity we a every buy and in of There’s pay faster it things more. people talk, our at payments. today’s to think, our faster even up able things and on A to that customer But world, get have able the there. that I looking of to things more and shop to just a maybe how doing on on. for big of a app just working things. how even on financing in improvements for are for lot pay is be

those And things put business, be at or all to play play one that to the least are were. and running has can been I that all very the going things in that a most good of and the the in both four a offense. us with we’re been business. years, behind things And looking last at back, are fighting So exceed in the all infrastructure now we that we’re can efficient think now for we’ve actually were with I behind holding go believe some we what Hibbett And hands. hand tied we five our position back

Peter Benedict

That’s that generate You think we do earnings year? able you’ve second you out positive balance that. in over last wanted In positive Should case, the the of quarter. you the helpful. XQ. Thank quarter, we And variability. City expenses. just but some next from the to shift of Can just and mentioned the over to to the issues that have guys probably hear business the be the year? second in here in Certainly, terms the Christine, the seem Gear couple the sense that as some it look can few cadence of just years, of be you around been volatility us give of can or you. to that the balance impact quarters, not there’s are a doesn’t and then used possible earnings given XQ standpoint I over in calendar that a the cadence you

Christine Skold

Yes. I are Peter. you, quarters. with the agree And X QX smallest would and

fair much be to And them that’s sizeably assumption. it expect it’s it than and has expect we We to but similarly, the be a quarters. QX, opportunity, less more I than middle QX, think will less then a – fairly QX but run

Peter Benedict

Sure.

last around suppliers your ton know And more Christine. my guys a broadly don’t but bring is Thanks, Okay. just directly, in tariffs I you speaking. really question obviously do.

is – kind point? that, the just at Thank where baked wait-and-see? it you’re what – for you. a into this how anything of about So outlook there or thinking tariffs Is

Jared Briskin

today The this and from there’s Yes, Peter, see at looking of as the over to bit be – some that that we’re next I think overall months. can. based learn off a I a as the point. it’s we still feel get more could a we weeks of impacts many few to lot wait-and- moderate. like little detail again, But think still

Peter Benedict

Okay.

a that quarter. sounds good guys. Congrats on Now Thanks, good.

Christine Skold

Thanks.

Jeffry Rosenthal

Thanks, Peter.

Operator

comes Please [Operator proceed. Instructions] the next Poser line Susquehanna. from The question Sam of with

Samuel Poser

for question. Thanks taking morning. my Good

Jeffry Rosenthal

Good morning.

Samuel Poser

us My is, sales tell your can the month were you sales first question changed by since by what month?

Christine Skold

Sure, Sam.

said, And sales as positive variables the on were comps. go-forward gives from – note, X%. can February comps, throughout the in quarter, refrain April. quarterly there’s on around comps digits mid-single a the lot that we for so a you low-single will the but So they quarter. And March impact in a the digits And low-double improved and in some as not of hopefully we monthly just digits for – providing monthly only color trend but basis, then that

Samuel Poser

very then can you And that’s last talk was – year-over-year, last you it’s about we so how you us what ex sort same the can City Gear? idea e-commerce give can an – bit much. revenues and little – can Thank or of for doing of your Gear, a City give penetration sort year’s get you talk about us

Christine Skold

why and have over and to them at City excited City our much platform them year than that Gear’s sales. penetration – to don’t we’re grow is e-commerce get be of that prior The we to Hibbett. help Gear lower That’s business, able

Samuel Poser

Okay.

Jeffry Rosenthal

we about without Gear. asked double-digit were You City e-comm,

Samuel Poser

So it’s double-digit penetration ex City Gear?

Jeffry Rosenthal

Yes.

Samuel Poser

I have – have might Thank it, can then be missed out. might – spacing might you. just And give you I I

what – So just BD&O me for your quarter? margin was and let can merch the you your know the what

Christine Skold

I’ll – occupancy logistics you tell and and XX to the leveraged leveraged it that basis so around XX points. So

down margin total side leverage. So logistics was margin the XX down and was overall occupancy our positive was a store and merch –

XX margin basis then would occupancy at was around be… And total XX. margin the without recognition points was logistics margin gross and the in so Now positive City – store Gear, down the

Samuel Poser

well? was the was what what the merch like as basis, non-GAAP margin, a BD&O what – On was

Christine Skold

– Logistics Replaced positive, sorry, basis, on was points. down creating our XX, would on down on occupancy gross merch probably freight the margin some points were around XX are margin that continued increase XX the the margins they with e-commerce put I’m non-GAAP the digital digital so Right. sales the side, due freight improving, basis margin but basis predominantly and to pressures. side of e-commerce side. a On is

Samuel Poser

think look of leverage you of when – when – the that margin on the way, leverage you pressure about margin BD&O? the the getting on same the for you the And guidance balance do and happening the sort then on see continued year, merch or less deleverage

Christine Skold

get would expected that’s leverage I we’ve the say quarter, so, Again, would in I trend yes. best continue. the we first but the say to

Samuel Poser

right. very to All success. continue Thank you much and

Jared Briskin

Thanks, Sam.

Jeffry Rosenthal

Thanks, Sam.

Operator

back are there turn this Rosenthal, time. over I’ll to further call at no Mr. the you. questions

Jeffry Rosenthal

I come just And to today and many in we great you. we August. having have participating for quarter. call to we thank look forward look look that Thank and had on a to to our more everyone want conference you

Operator

We call thank ask for That your you does please your participation, and line. conference that today. for you disconnect the conclude

Hibbett (HIBB) 24 May 192020 Q1 Earnings call transcript