Hibbett Sports 2012 Annual Report Download - page 25

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with Item 6, “Selected Consolidated Financial Data” and our
consolidated financial statements and related notes appearing elsewhere in this report. This Annual Report on Form 10-K contains
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. See “Forward-Looking
Statements” and Part I, Item 1A. “Risk Factors”.
Overview
Hibbett Sports, Inc. operates sporting goods stores in small to mid-sized markets, predominantly in the Southeast,
Southwest, Mid-Atlantic and Midwest regions of the United States. We believe Hibbett Sports stores are typically the primary
sporting goods retailers in their markets due to the extensive selection of quality brand name merchandise and a high level of
customer service. As of January 28, 2012, we operated a total of 832 retail stores in 26 states composed of 812 Hibbett Sports stores,
19 Sports Additions athletic shoe stores and 1 Sports & Co. superstore.
Our primary retail format and growth vehicle is Hibbett Sports, a 5,000-square-foot store located primarily in strip centers,
which are usually influenced by a Wal-Mart store. Approximately 77% of our Hibbett Sports store base is located in strip centers,
which includes free-standing stores, while approximately 23% of our Hibbett Sports store base is located in enclosed malls. Over the
last several years, we have concentrated and expect to continue our store base growth in strip centers versus enclosed malls. We do
not expect that the average size of our stores opening in Fiscal 2013 will vary significantly from the average size of stores opened in
Fiscal 2012.
The volatile global economic conditions experienced in Fiscal 2010 improved somewhat in Fiscal 2011 and Fiscal 2012,
and we saw an increase in comparable store and total net sales. We were able to further enhance net income through continued
effective management of expenses. In Fiscal 2011 and Fiscal 2012, footwear and apparel experienced strong comparable store sales
gains. In Fiscal 2012, footwear and apparel experienced mid-single digit comparable store sales increases. Apparel sales were led
by double-digit gains in activewear.
We historically have increases in comparable store net sales in the low to mid-single digit range. Fiscal 2012 experienced
a total company-wide square footage increase of 4.3%. Our plan for Fiscal 2013 is to increase total company-wide square footage
over 5%, which is at the lower end of our historical range of 3% to 12% but an improvement from the last two fiscal year square
footage increases. To supplement new store openings, we continue to expand high performing stores, increasing the square footage
in 15 existing stores in Fiscal 2012. Generally, our expansions involve an increase in square footage of 40% to 50%. We expect to
expand an additional 15 stores in Fiscal 2013. Total comparable store sales percentage growth is expected to be in the low to mid-
single digits in Fiscal 2013. Over the past several years, we have increased our gross profit through improved vendor discounts,
fewer retail price reductions and increased efficiencies in logistics. We expect an improvement in gross profit rate in Fiscal 2013 as
we continue to benefit from improved inventory age year over year and increased efficiencies from our investment in systems.
In Fiscal 2012, we began an active search for a new distribution facility or site to support our expected growth over the
next several years with an expected operations date in mid Fiscal 2015. We plan to build and own our new facility versus lease and
expect that the new facility will cost approximately $25.0 million.
Although the macroeconomic environment has presented many challenges in the last three years, our management believes
that our business fundamentals remain strong and that we are well-positioned for the future. We are a leader in the markets in which
we compete and we will continue to benefit from our comparatively low operating costs compared to the costs of our competitors.
We continue to manage our costs and inventories prudently as dictated by the current economic environment, and we intend to
continue to invest in initiatives to prepare our infrastructure for continued long-term growth.
Our management expects that the uncertainty and volatility of global economic conditions experienced over the last three
years will continue. Any further negative impact on customer discretionary spending could negatively impact our net sales and level
of profitability in Fiscal 2013.
Due to our increased net sales, we have historically leveraged our store operating, selling and administrative expenses.
Based on projected net sales, we expect operating, selling and administrative rates to increase slightly in Fiscal 2013, primarily due to
investments in technology. We also expect to continue to generate sufficient cash to enable us to expand and remodel our store base,
to provide capital expenditures for both distribution center and technology upgrade projects and to repurchase our common stock
under our stock repurchase program.
We utilize a merchandise management system that allows us to identify and monitor trends. However, this system does
not produce U.S. Generally Accepted Accounting Principles (U.S. GAAP) financial information by product category. Therefore, it
is impracticable to provide U.S. GAAP net sales by product category.