Hibbett Sports 2007 Annual Report Download - page 32

- 20 -
been included in the comparable store net sales comparison because we have not opened a superstore since
September 1996 nor do we plan to open additional superstores in the future.
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 $173.1 million, or 33.8% of net sales, in the 53 weeks
ended February 3, 2007, compared with $146.9 million, or 33.4% of net sales, in the 52 week period of the prior fiscal
year. We attribute this increase in gross profit primarily to a reduction in markdown rate. Occupancy, as a percent of
net sales, improved by 31 basis points year over year due to decreases in common area maintenance and rental
expenses as a percentage of sales. Offsetting these decreases were distribution center costs by 10 basis points,
primarily due to the increased repair and maintenance expenses and a decrease in vendor violations.
Store operating, selling and administrative expenses. Store operating, selling and administrative expenses
were $100.5 million, or 19.6% of net sales, for the 53 weeks ended February 3, 2007, compared with $85.1 million, or
19.3% of net sales, for the 52 weeks ended January 28, 2006. These expenses increased as a percentage of net
sales between periods primarily due to the implementation of 123R which added 53 basis points in stock based
compensation. Other trends experienced included:
• an increase in legal fees as a percent of net sales of 8 basis points related to pending litigation;
• an increase in credit/debit card fees as a percent of net sales of 7 basis points related to the
increased use of these tenders by our customers over cash; and
• decreases as a percent of net sales in insurance costs of 11 basis points and freight and
shipping costs of 5 basis points.
Depreciation and amortization. Depreciation and amortization as a percentage of net sales was 2.1% in the
53 weeks ended February 3, 2007, and 2.3% in the 52 weeks ended January 28, 2006. We experienced a slight
trend upwards in the terms of our new store leases which contributed to the leveraging of depreciation expense as
leasehold improvements were expensed over the longer lease term which, in most cases, is less than the estimated
useful life of the asset. Our average lease term of leases added in fiscal 2007 was 7.44 years compared to 7.15
years for leases added in fiscal 2006.
Provision for income taxes. Provision for income taxes as a percentage of net sales was 4.8% in the 53
weeks ended February 3, 2007, compared to 4.4% for the 52 weeks ended January 28, 2006. The combined federal,
state and local effective income tax rate as a percentage of pre-tax income was 39.2% for fiscal 2007 and 36.4% for
fiscal 2006. The increase in rate over last year is primarily the result of the permanent difference related to incentive
stock options arising as a result of applying the provisions of SFAS No. 123R.
Fiscal 2006 Compared to Fiscal 2005
Net sales. Net sales increased $62.7 million, or 16.6%, to $440.3 million for the 52 weeks ended January 28,
2006, from $377.5 million for the 52 weeks ended January 29, 2005. We attribute this increase to the following
factors:
• We opened 73 Hibbett Sports stores and 1 Sports Additions store and closed 7 Hibbett Sports
stores for net stores opened of 67 stores in the 52 weeks ended January 28, 2006. New stores and
stores not in the comparable store net sales calculation accounted for $44.2 million of the increase
in net sales.
• We experienced a 5.6% increase in comparable store net sales for the 52 weeks ended January 28,
2006. Approximately 2.0% of this increase was the result of an increase in transactions with the
remainder due to an increase in price. Higher comparable store net sales contributed $18.5 million
to the increase in net sales.
• We believe sales pick-up related to the Quarter 3 hurricanes contributed 0.6% to 0.8% of the
increase in comparable sales.
The increase in comparable store sales was driven by an increase in sales in all three of our product
categories; apparel, footwear and equipment.
• Apparel was positive in comp stores due to strong performance in urban and activewear which
offset a weakness in the pro-licensed category.
• Footwear was positive in all major categories, led by Nike, Fila, Asics, Mizuno and K-Swiss.
Children’s categories, performance and cleats were particularly strong performers.
• Equipment sales were positively impacted in all major hardgood categories, particularly baseball,
football, soccer and basketball.