Hibbett Sports 2007 Annual Report Download - page 22

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consumer demands in the future. Accordingly, our business, financial condition and results of operations could be
materially and adversely affected if:
• we are unable to identify and respond to emerging trends, including shifts in the popularity of certain products;
• we miscalculate either the market for the merchandise in our stores or our customers’ purchasing habits; or
• consumer demand unexpectedly shifts away from athletic footwear or our more profitable apparel lines.
In addition, we may be faced with significant excess inventory of some products and missed opportunities
for other products, which could decrease our profitability.
If we lose any of our key vendors or any of our key vendors fail to supply us with merchandise, we may not
be able to meet the demand of our customers and our sales could decline.
Our business is dependent to a significant degree upon close relationships with vendors and our ability to
purchase brand name merchandise at competitive prices. The loss of key vendor support could have a material adverse
effect on our business, financial condition and results of operations. We cannot guarantee that we will be able to acquire
such merchandise at competitive prices or on competitive terms in the future. In this regard, certain merchandise that is
in high demand may be allocated by vendors based upon the vendors’ internal criterion which is beyond our control.
In addition, we believe many of our largest vendors source a substantial majority of their products from
China and other foreign countries. Imported goods are generally less expensive than domestic goods and indirectly
contribute significantly to our favorable profit margins. A disruption in the flow of imported merchandise or an increase
in the cost of those goods may significantly decrease our sales and profits.
We may experience a disruption or increase in the cost of imported vendor products at any time for reasons
that may not be in our control. If imported merchandise becomes more expensive or unavailable, the transition to
alternative sources by our vendors may not occur in time to meet our demands or the demands of our customers.
Products from alternative sources may also be more expensive than those our vendors currently import. Risks
associated with reliance on imported goods include:
• disruptions in the flow of imported goods because of factors such as:
• raw material shortages, work stoppages, strikes and political unrest;
• problems with oceanic shipping;
• economic crises and international disputes; and
• increases in the cost of purchasing or shipping foreign merchandise resulting from:
• foreign government regulations;
• changes in currency exchange rates and local economic conditions; and
• trade restrictions, including import duties and import quotas.
Our sales and profitability could decline if vendors are unable to promptly replace sources providing equally
appealing products at a similar cost.
Problems with our information system software could disrupt our operations and negatively impact our
financial results and materially adversely affect our business operations.
The efficient operation of our business is dependent on the successful integration and operation of our
information systems. In particular, we rely on our information systems to manage effectively our sales, distribution,
merchandise planning and replenishment, to process financial information and sales transactions and to optimize our
overall inventory levels. Most of our information systems are centrally located at our headquarters, with offsite backup
at other locations. We continue to focus on enhancements to the inventory management systems and point-of-sale
systems and have upgraded to the JDA Merchandising System. Any material disruption, malfunction or other similar
problems in or with our information systems could negatively impact our financial results and materially adversely
affect our business operations.
Pressure from our competitors may force us to reduce our prices or increase our spending, which would
lower our revenue and profitability.
The business in which we are engaged is highly competitive. The marketplace for sporting goods remains
highly fragmented as many different retailers compete for market share by utilizing a variety of store formats and
merchandising strategies. Hibbett Sports stores compete with national chains that focus on athletic footwear, local
sporting goods stores, department and discount stores, traditional shoe stores and mass merchandisers. Many of our
competitors have greater financial resources than we do. In addition, many of our competitors employ price discounting
policies that, if intensified, may make it difficult for us to reach our sales goals without reducing our prices. As a result of
this competition, we may also need to spend more on advertising and promotion than we anticipate. We cannot