Hibbett Sports 2007 Annual Report Download - page 19

- 7 -
Our continued growth largely depends upon our ability to open new stores in a timely manner, to operate them
profitably and to manage them effectively. Additionally, successful expansion is subject to various contingencies, many
of which are beyond our control. See “Risk Factors.”
Our Distribution
We maintain a single 220,000 square foot distribution center in Birmingham, Alabama, which services our
existing stores. The distribution process is centrally managed from our corporate headquarters, which is located in the
same building as the distribution center. We believe strong distribution support for our stores is a critical element of our
expansion strategy and is central to our ability to maintain a low cost operating structure. Due to improved technology
and vendor assistance with cross-docking, we believe we can service approximately 850 stores out of our current
distribution center.
We receive substantially all of our merchandise at our distribution center. For key products, we maintain
backstock at the distribution center that is allocated and distributed to stores through an automatic replenishment
program based on items that are sold. Merchandise is typically delivered to stores weekly via Company-operated
vehicles.
Because of our continued expected growth, we plan to add another distribution center in or around Dallas,
Texas within fiscal year 2008. This new facility will service primarily those stores west of the Mississippi River and
enhance our expansion strategy in that region and beyond. We expect to be able to service an additional 500 to 700
stores from this new facility.
Our Merchandising Strategy
Our merchandising strategy is to provide a broad assortment of quality brand name footwear, athletic
equipment, and apparel at competitive prices in a full service environment. Historically, as well as for fiscal 2007, our
most popular consumer item is athletic footwear, followed by performance apparel and team sports equipment, ranked
according to sales.
We believe that the breadth and depth of our brand name merchandise selection generally exceeds the
merchandise selection carried by local independent competitors. Many of these branded products are highly technical
and require considerable sales assistance. We coordinate with our vendors to educate the sales staff at the store level
on new products and trends.
Although the core merchandise assortment tends to be similar for each Hibbett Sports store, important local or
regional differences frequently exist. Accordingly, our stores regularly offer products that reflect preferences for particular
sporting activities in each community and local interests in college and professional sports teams. Our knowledge of
these interests, combined with access to leading vendors, enables Hibbett Sports stores to react quickly to emerging
trends or special events, such as college or professional championships.
Our merchandising staff, operations staff and management analyze current sporting goods trends primarily
through the gathering and analyzing of detail daily sales activity available through point-of-sale terminals located in the
stores. We also visit Hibbett and competitor store locations, maintain close relationships with vendors and other retailers,
monitor product selection at competing stores, communicate with district and store managers and review industry trade
publications in an effort to recognize trends. The merchandising staff works closely with store personnel to meet the
requirements of individual stores for appropriate merchandise in sufficient quantities.
Our success depends in part on our ability to anticipate and respond to changing merchandise trends and
consumer demand on a store level in a timely manner. See “Risk Factors.”
Our Vendor Relationships
The sporting goods retail business is very brand name driven. Accordingly, we maintain relationships with a
number of well known sporting goods vendors to satisfy customer demand. We believe that our stores are among the
primary retail distribution avenues for brand name vendors that seek to penetrate our target markets. As a result, we are
able to attract considerable vendor interest and establish long-term partnerships with vendors. As our vendors expand
their product lines and grow in popularity, we expand sales and promotions of these products within our stores. In
addition, as we continue to increase our store base and enter new markets, the vendors have increased their brand
presence within these regions. We also emphasize and work with our vendors to establish favorable pricing and to
receive cooperative marketing funds. We believe that we maintain good working relationships with our vendors. For the
fiscal year ended February 3, 2007, Nike, our largest vendor, represented approximately 46.6% of our total purchases
while our next largest vendor represented approximately 9.4% of our total purchases. For the fiscal year ended January