Hibbett Sports 2007 Annual Report Download - page 33

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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. If a store
remodel or relocation results in the store being closed for a significant period of time, its sales are removed from the
comparable store base until it has been open a full 12 months. During the 52 weeks ended January 28, 2006, 401
stores were included in the comparable store sales comparison. Our four Sports & Co. stores are not and have never
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 $146.9 million, or 33.4% of net sales, in the 52 weeks
ended January 28, 2006, compared with $122.3 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 the increased product margin in apparel and footwear, the
leveraging of occupancy and distribution center cost and improved inventory turn. Product margin rate increased due
to additional vendor discounts and lower markdowns. Occupancy, as a percent of net sales, improved by 12 basis
points year over year due to decreases in common area maintenance and rental expenses as a percentage of sales.
Distribution center costs improved by 7 basis points, primarily due to the leveraging of salaries and benefits.
Store operating, selling and administrative expenses. Store operating, selling and administrative expenses
were $85.1 million, or 19.3% of net sales, for the 52 weeks ended January 28, 2006, compared with $72.9 million, or
19.3% of net sales, for the comparable period a year ago. These expenses remained consistent as a percentage of
net sales between periods, but experienced the following trends:
• Labor and benefits expenses accounted for a decrease as a percent of net sales of 27 basis
points at the store level as compared to the same period last year. This was somewhat offset by
an increase of 19 basis points in administrative salaries and benefits as compared to the same
period last year as we grew our corporate infrastructure to position ourselves for continued
store growth.
• Professional fees, primarily associated with Sarbanes-Oxley compliance and testing, decreased
14 basis points as compared to the same period last year.
• Legal fees related to pending litigation and debit card expenses related to increased usage over
cash tender both increased 6 basis points as compared to the same period last year.
Depreciation and amortization. Depreciation and amortization as a percentage of net sales was 2.3% in the
52 weeks ended January 28, 2006, and 2.6% in the 52 weeks ended January 29, 2005. The leveraging in
depreciation and amortization expense as a percentage of net sales is due to an increase in sales this year compared
to the same 52 weeks last year as well as an increase in asset lives related to lease terms.
Provision for income taxes. Provision for income taxes as a percentage of net sales was 4.4% in the 52
weeks ended January 28, 2006, compared to 3.9% for the 52 weeks ended January 29, 2005, due to an increase in
pre-tax income. The increase was somewhat offset by a decrease in the effective tax rate for fiscal 2006 as a result of
the resolution of state income tax issues. The combined federal, state and local effective income tax rate as a
percentage of pre-tax income was 36.4% for fiscal 2006 and 37.0% for fiscal 2005.
Liquidity and Capital Resources
Our capital requirements relate primarily to new store openings, stock repurchases and working capital
requirements. Our working capital requirements are somewhat seasonal in nature and typically reach their peak near the
end of the third and the beginning of the fourth quarters of our fiscal year. Historically, we have funded our cash
requirements primarily through our cash flow from operations and occasionally from borrowings under our revolving
credit facilities.
Our Consolidated Statements of Cash Flows are summarized as follows (in thousands):
Fiscal Year Ended
February 3,
2007
January 28,
2006
January 29,
2005
Net cash provided by operating activities: $ 36,462 $ 38,061 $ 46,123
Net cash used in investing activities: (2,997) (28,532) (12,626)
Net cash used in financing activities: (29,042) (41,927) (17,118)
Net increase (decrease) in cash and cash equivalents $ 4,423 $ (32,398) $ 16,379