Hibbett Sports 2005 Annual Report Download - page 18

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERAT I O N S
• We experienced a 5.7% increase in comparable store net sales for the 52 weeks ended
January 29, 2005. Higher comparable store net sales contributed $15.6 million to the
increase in net sales.
The increase in comparable store sales was driven by an increase in sales in footwear and equipment.
•Apparel was negative in comp stores due to a weakness in the pro-licensed and college apparel categories.
• Footwear was led by women's performance, primarily running shoes, and the children's shoe
categories. Performance and retro styles such as Nike Shox, Nike Air Force 1, Nike Impax,
Nike Miler, K-Swiss and New Balance styles were the most popular in the period.
• Equipment sales were positively impacted by team sports, particularly by baseball and softball
as our premium focus began to take effect. These positive gains were somewhat offset by a
decline in the demand for fitness equipment and individual sports equipment.
Comparable store net sales data for the period 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.
Gross profit. Cost of goods sold includes the cost of inventory, occupancy costs for stores and occupancy
and operating costs for the distribution center. Gross profit was $122.3 million, or 32.4% of net sales,
in the 52 weeks ended January 29, 2005, compared with $104.0 million, or 32.4% of net sales, in the
same period of the prior fiscal year. This year's gross margin is primarily attributable to strong footwear
sales which carry a somewhat lower gross margin than apparel and the leveraging of occupancy and
warehouse cost and improved inventory turn. Product margin rate decreased somewhat due to a shift
toward lower margin footwear and markdowns in licensed apparel. Occupancy, as a percent of net sales,
improved by 9 basis points year over year due to above average comparable store sales gains.
Warehouse costs improved by 11 basis points, primarily due to the leveraging of salaries and benefits.
Store operating, selling and administrative expenses. Store operating, selling and administrative expenses
were $72.9 million, or 19.3% of net sales, for the 52 weeks ended January 29, 2005, compared with
$63.5 million, or 19.8% of net sales, for the comparable period a year ago. We attribute this decrease
in store operating, selling and administrative expenses as a percentage of net sales to the following factors:
• Labor and benefits expenses accounted for a decrease as a percent of net sales of 36 basis
points as compared to the same period last year.
• Business insurance expense experienced a decrease as a percent of net sales of 9 basis
points as compared to the same period last year.
• Returned check expense and net advertising expense accounted for a decrease as a percent
of net sales of 7 and 6 basis points, respectively, as compared to the same period last year.
The decrease in store operating, selling and administrative expenses was somewhat offset by a 22 basis
point increase in professional fees related to Sarbanes-Oxley compliance and testing and a 5 basis point
increase in credit card fees as a result of an increase in Visa and MasterCard interchange rates.
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