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Edited Transcript of HIBB earnings conference call or presentation 22-Nov-19 3:00pm GMT

Q3 2020 Hibbett Sports Inc Earnings Call

BIRMINGHAM Nov 25, 2019 (Thomson StreetEvents) -- Edited Transcript of Hibbett Sports Inc earnings conference call or presentation Friday, November 22, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jared S. Briskin

Hibbett Sports, Inc. - Senior VP & Chief Merchant

* Jeffry O. Rosenthal

Hibbett Sports, Inc. - President, CEO & Director

* Scott Randall Humphrey

Hibbett Sports, Inc. - Interim CFO

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Conference Call Participants

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* Alexander Thomas Perry

BofA Merrill Lynch, Research Division - Equity Research Analyst

* David North

* James Andrew Chartier

Monness, Crespi, Hardt & Co., Inc., Research Division - Security Analyst

* Peter Sloan Benedict

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Samuel Marc Poser

Susquehanna Financial Group, LLLP, Research Division - Senior Analyst

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Presentation

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Operator [1]

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Greetings, and welcome to the Hibbett Sports Third Quarter 2020 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded, Friday, November 22, 2019.

I would now like to turn the conference over to [Jason Fruchtl], Director of Finance and Investor Relations. Please go ahead.

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Unidentified Company Representative, [2]

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Thank you for joining Hibbett Sports to review the company's financial and operating results for the third quarter and first 9 months of fiscal year 2020, which ended on November 2, 2019.

Before we begin, I would like to remind everyone that management's comments during this conference call, which are not based on historical facts, including those in response to your questions, are forward-looking statements. These statements, which reflect the company's current views with respect to future events and financial performance are made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to uncertainties and risks.

It should be noted that the company's future results may differ materially from those anticipated and discussed in the forward-looking statements. Some of the factors that could cause or contribute to such differences have been described in the news release issued this morning and the company's annual report on Form 10-K and in other filings with the Securities and Exchange Commission. We refer you to those sources for more information.

Lastly, I would like to point out that management's remarks during this conference call are based on information and understandings believed accurate as of today's date, November 22, 2019. Because of these time-sensitive nature of this information, it is the policy of Hibbett Sports to limit the archived replay of this conference call webcast to a period of 30 days.

I'd now like to turn the call over to Scott Humphrey, our Interim Chief Financial Officer.

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Scott Randall Humphrey, Hibbett Sports, Inc. - Interim CFO [3]

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Thanks, Jason, and good morning, everyone. Welcome to the Hibbett Sports Fiscal 2020 Third Quarter Earnings Call. Today, we have with us Jeff Rosenthal, President and CEO; Jared Briskin, Senior VP and Chief Merchant; and Cathy Pryor, Senior VP of Store Operations. I'll start today's call with the prepared remarks on the third quarter followed by Jared with a review of merchandising, and then Jeff will cover highlights from the quarter, along with a general business update.

As a reminder, we treat City Gear as an extension of the Hibbett business, and the results will be reported on a combined basis. As such, it's not our intent to provide specific gross margin expense or other profitability metrics for the City Gear business. However, I will provide actual revenue for City Gear until it is incorporated into consolidated comp sales starting in the fourth quarter of this year.

For the third quarter, total net sales increased 27% to $275.5 million, and overall comp sales increased 10.7% compared to last year's third quarter of 0.1%. This was our fourth consecutive quarter of positive comparable sales. Net sales includes $43.7 million for City Gear. Our e-commerce sales continue to accelerate, representing 10.5% of consolidated sales for the quarter. We also successfully migrated City Gear's online platform to the Hibbett digital platform during the third quarter.

Year-to-date net sales increased 24% to $871.2 million through the first 9 months of the year compared to $702.7 million last year during the same period. Year-to-date, comp sales increased 5.4%. City Gear sales account for $145.2 million of this increase.

Gross margin increased 20 basis points in the quarter. The increase was principally attributable to lower occupancy cost as a percent of sales due to the store closures we have completed this year. The occupancy cost reductions more than offset a decrease in product margin percentage driven by higher e-comm sales, which tend to run at a lower product margin percentage than store sales.

SG&A expenses predominantly increased from the addition of City Gear expenses. On a GAAP basis, SG&A as a percent of sales increased approximately 35 basis points versus last quarter. Included in SG&A is a charge from the contingent earn-out valuation for the City Gear acquisition of $4.1 million in the quarter, which added 148 basis points to the calculation.

As we discussed in Note 3 of our 10-K, the City Gear acquisition purchase agreement included 2 contingent earn-out payments based on City gear's achievement of certain EBITDA thresholds for fiscal 2020 and 2021. The preliminary fair value of the liability was included in other liabilities in the fiscal 2019 year-end consolidated balance sheet. Subsequent changes in the liability are recorded through current period earnings. And based on current forecasts for City Gear performance for fiscal 2020 and 2021, the earn-out liability was increased $4.1 million, as I mentioned previously. We expect some continued volatility in this expense as we continue to realize the City Gear business opportunities.

Additionally, we incurred a net charge of $0.7 million related to the finalization of the CEO retirement agreement. This amount was not removed from non-GAAP SG&A and represents an additional 25 basis points to SG&A and $0.04 to consolidated EPS in the quarter.

Consolidated earnings per share for the quarter was $0.13 per share compared with $0.08 per share last year. Including non-GAAP adjustments, our normalized consolidated earnings per share is $0.32 in the quarter compared to $0.14 per share last year. On a year-to-date basis, we have delivered fully diluted earnings per share of $1.18 through the first 9 months versus $1.15 for the first 3 quarters of last year. After non-GAAP adjustments, our normalized diluted earnings per share is $1.82 for the first 9 months versus $1.21 for the same period last year.

Turning to the balance sheet. The company ended the quarter with $77.4 million in cash versus $121.2 million at the end of last year's third quarter. We had borrowings on our revolving credit facilities of $8 million related to the City Gear acquisition, and we continue to expect that to be paid off by the end of the fiscal year.

Inventory increased 12.5% from last year's third quarter, but last year's number does not include City Gear's inventory. Our aged inventory has improved as a percent of total inventory to 15.3% versus 18.3% at the end of the third quarter last year.

We spent $5.2 million in CapEx as we opened 4 stores, rebranded 4 Hibbett stores to City Gear and made further progress on other capital initiatives. Also, the company purchased approximately 372,000 shares for a total of $7 million in the quarter under our share repurchase program. At quarter-end, we had about $167 million remaining under the existing authorization.

So turning to our guidance. Based on the strength of the first 9 months of fiscal 2020 and our fourth quarter expectations, we're updating our full year guidance with the following changes: We now expect full year comparable sales to increase in the mid-single digits; for gross margin, we expect the change in our overall rate to be in a range of flat to up 20 basis points; excluding the impact of nonrecurring items in both fiscal years, we expect non-GAAP gross margin to fall within a range of down 10 basis points to an increase of plus 10 basis points. This estimate includes an assumption of liquidating additional store inventories late in the fourth quarter.

With respect to the SG&A rate as a percent of sales, we expect an increase in the range of 60 to 80 basis points. However, excluding nonrecurring costs for both years, we expect non-GAAP SG&A rate to improve 60 to 80 basis points from the last fiscal year. As a reminder, GAAP SG&A includes an estimate for additional contingent earn-out fair value adjustments.

And finally, we expect diluted earnings per share to be in the range of $1.55 to $1.65, which includes $0.75 to $0.85 per share for nonrecurring costs associated with the acquisition and integration of City Gear and costs with our accelerated store closure plan. Excluding nonrecurring costs, non-GAAP diluted earnings per share is now expected to be in the range of $2.30 to $2.50. The company has not included the $0.13 reduction in EPS for onetime executive compensation costs related to the CEO's transition in its non-GAAP add-backs to net income for these projections.

For CapEx, we now expect to spend between $15 million and $18 million compared with previous guidance of $18 million to $20 million.

I'll now turn the call over to Jared for a review of merchandising.

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Jared S. Briskin, Hibbett Sports, Inc. - Senior VP & Chief Merchant [4]

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Thank you, Scott. Good morning. As a reminder, my prepared remarks are reflective of comparable store trends. This will not include City Gear stores until the fourth quarter.

We're very excited about the momentum in the business, posting our fourth consecutive comp store gain. Q3 was exceptionally strong as it delayed back-to-school period, impactful launch calendar and early fall apparel selling drove double-digit comp improvement. Our results have been clearly influenced by improved engagement with our consumers, investments in the footwear business and sharp focus on connecting our other categories back to footwear.

During the third quarter, our footwear business increased mid-teens, posting our ninth consecutive quarter of comp sales gains. Men's, women's and kids were all up double digits, with strength coming from a strong launch calendar as well as strong results in our non-launch business. Nike sportswear was exceptionally strong during the quarter, led by Air Force 1 and numerous Max Air franchises. A strong launch calendar on Jordan Retro in sportswear also led to significant gains. Adidas business was driven by Yeezy, UltraBoost and NMD. Strong results were also achieved by Vans, Brooks, Champion and an improvement in Under Armour footwear for back-to-school.

Apparel was up low single digits. All genders in activewear were positive, including a double-digit gain in men's activewear. T-shirts and shorts were exceptionally strong early in the quarter, while fleece and base layer were strong in the latter part of the quarter. License business was down double digit. Much of this decrease was planned as we have moved investment dollars to other categories.

Accessories were positive mid-single digits, strong results around key back-to-school categories such as backpacks, lunch totes, bags and socks drove our results. Team sports business was down low single digits, but was on plan. Baseball, softball, volleyball and wrestling performed well and were positive. Soccer and football were negative during the quarter.

As we head into the fourth quarter, we have momentum and confidence in our business. We are heavily invested in categories and products that are driving growth and have reduced our investments in declining categories. Inventory remains significantly fresher than the year-ago period, and our assortments are more focused and connected than ever before.

I'll now turn the call over to Jeff Rosenthal.

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Jeffry O. Rosenthal, Hibbett Sports, Inc. - President, CEO & Director [5]

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Thanks, Jared, and good morning. We are quite pleased with our third quarter results. Our 10.7% increase in comparable sales in the third quarter represents our strongest quarter increase since the first quarter of fiscal '13, and our fourth consecutive quarter with positive comparable sales.

The business continues to perform very well, as evidenced by the positive comparable performance in both our brick-and-mortar locations and our e-commerce business. The sales grows -- growth has been made possible by our team's execution of our strategic focus to lead with sneakers and connect toe-to-head concepts within our apparel team and team sports.

City Gear has now been part of the Hibbett for 1 year, and the acquisition will continue to enhance results through synergies as we complete the integration. We are very enthusiastic about our business going forward and are pleased to increase our annual sales and earnings guidance.

Our e-commerce business continues to outperform expectations as the business is now delivering over 10% of total sales. Third quarter was very busy as we continue to diligently transform our company, including, but not limited to large improvements to e-commerce, marketing and omnichannel programs. In the last 90 days, we have refreshed our entire website and apps, combined Hibbett and City Gear e-commerce, added additional payment flexibility for our customers, launched same-day delivery in several markets and grown our ability to communicate with our customers by double digits across all marketing channels.

The changes we are making have resonated with our customers. Both store and digital comps saw sizable growth this quarter with our digital channel growing the fastest at a 52% comp. Not only are the changes we are making resonating with the existing customers, we are also attracting new customers. This quarter, we saw a 68% increase in loyalty enrollments over the prior year.

We have made continuing progress in differentiating our retail experience. We will also continue to double down on providing the best merchandise and the most convenient shopping experience for our underserved markets. As an example, we currently offer 6 ways to shop: physical shopping at a store; traditional e-commerce with ship to home; buy online and pick up in store; reserve online and pick up in store; same-day delivery; and using our app process to win the right to purchase coveted launch shoes. Our seventh way to shop will be buying online and shipping to our stores. This will be available in the first half of next year. We will also considering some technology collaborations where we will mix and match ways of shopping to produce new and exciting experiences for our customers. Who knows how long this list will grow in the future. But one thing is for sure, Hibbett will be ready to help our customers however they want or will want to be served.

I cannot thank all the associates enough for their hard work and dedication to seeing our strategic vision come to life. This has never been easy, but we have accomplished so many things together in transforming our company to a true omnichannel retailer.

Thank you all. Operator, we're now ready for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Sam Poser with Susquehanna.

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Samuel Marc Poser, Susquehanna Financial Group, LLLP, Research Division - Senior Analyst [2]

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I have a question on the guidance. It looks as if -- can you give us some idea of how you're thinking about the store versus e-commerce in the fourth quarter? I guess, number one, and then I have a follow-up.

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Scott Randall Humphrey, Hibbett Sports, Inc. - Interim CFO [3]

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Yes. I think we're continuing to see growth in e-comm and have some exciting initiatives planned for fourth quarter. So I think planning on it continuing to be a big part of our growth story.

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Samuel Marc Poser, Susquehanna Financial Group, LLLP, Research Division - Senior Analyst [4]

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Understood. But I mean, do you expect the stores to be positive in Q4 as they were in Q3?

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Scott Randall Humphrey, Hibbett Sports, Inc. - Interim CFO [5]

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Yes.

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Jeffry O. Rosenthal, Hibbett Sports, Inc. - President, CEO & Director [6]

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Yes.

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Samuel Marc Poser, Susquehanna Financial Group, LLLP, Research Division - Senior Analyst [7]

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And then -- so if we -- so just making -- taking the balance and the growth prospects here, it looks as if you could come in towards the low end of the increased same-store sales guidance and still reach close, if not beyond to the top end of your EPS guidance based on the ranges that you provided of gross margin and SG&A. Am I thinking about that wrong?

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Scott Randall Humphrey, Hibbett Sports, Inc. - Interim CFO [8]

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No. I think that's fair. I think we've taken a conservative view on EPS guidance. That fourth quarter is going to be a little volatile. It's certainly different than last year with the holiday schedule and the launch schedule. And so we wanted to add a little conservatism to our outlook.

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Samuel Marc Poser, Susquehanna Financial Group, LLLP, Research Division - Senior Analyst [9]

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And then, Jared, how much has the -- how does the launch calendar for you compared to last year? And how well positioned is City Gear now with the new products from key vendors that may have not been treating them as well prior to your acquisition? And sort of what are the expectations coming out of City Gear for the balance of the year?

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Jared S. Briskin, Hibbett Sports, Inc. - Senior VP & Chief Merchant [10]

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Yes, Sam. The volatility that Scott referenced on the launches is really more date changes, focused really along with the Thanksgiving shift. We certainly have some really, really strong results during the third quarter, and we feel like we're positioned really well when it comes to access to product, along with allocations for both banners. Certainly, a lot of work has been done to reinforce City Gear's positioning. And we feel like we have a very strong plan for Q4.

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Operator [11]

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Our next question comes from Peter Benedict with Baird.

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Peter Sloan Benedict, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [12]

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First question, just around the gross margin. Can you maybe dive a little deeper and help us understand maybe how product margins performed in 3Q? And how you're thinking about the product margin change within that fourth quarter guidance? That's my first question.

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Scott Randall Humphrey, Hibbett Sports, Inc. - Interim CFO [13]

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Yes. So in Q3, strong product margin on the store side, brought down a little bit by the increase in e-commerce sales. E-commerce tends to run a little bit lower on product margin than store sales, but still a positive comp versus the prior year third quarter. If you look at Q4 and -- of last year, you have about 150 basis point drop from where we came in, in Q3 to what the comp is for Q4. And so we feel really good about the things Jared just talked about and our cleaner inventory position going into Q4. So the guidance is really based on -- if all we were able to do was to repeat gross margin from Q3, we'd be in that range that we provided.

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Peter Sloan Benedict, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [14]

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Okay. And so for the underlying product margins, if we tease out because I know gross margin gets some leverage there on occupancy with the strong comp, but core product margins were -- I assume were down a little bit in the third quarter. And just -- and it sounds like they're going to maybe be up in the fourth quarter. Just want to make sure I've got that trajectory right.

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Scott Randall Humphrey, Hibbett Sports, Inc. - Interim CFO [15]

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Yes. So not down a little, basically flat in Q3.

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Peter Sloan Benedict, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [16]

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Flat, okay. Okay. Okay. That's helpful. And then I guess, my next question is, now that we've got City Gear in the business for a year, how should we think about kind of the pace of SG&A growth going forward? I'm even thinking into maybe the next year, what level of comp is required to kind of either leverage SG&A or really to maintain EBIT margins? I know Jeff mentioned some synergies that are still on tap, but just really trying to figure out what -- how we should be thinking about the expense structure going forward.

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Scott Randall Humphrey, Hibbett Sports, Inc. - Interim CFO [17]

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It's a good question. Our plan is to integrate the City Gear corporate headquarters into Hibbett basically at the end of this fiscal year. And so we should be able to recognize some SG&A cost synergies from that integration. That's what Jeff was mentioning before. I think -- so that, I think, is specific to City Gear. I think we're still in the middle of our budgeting process for next year. And so we're taking a hard look at SG&A. We could certainly have a much deeper discussion on this with you next quarter once we get through that process.

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Operator [18]

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Our next question comes from Jim Chartier with Monness, Crespi, and Hardt.

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James Andrew Chartier, Monness, Crespi, Hardt & Co., Inc., Research Division - Security Analyst [19]

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I was just curious if you could give us a little bit of color on how impactful the shift in back-to-school shopping was for third quarter? And then into the back-to-school, any shift in launches, how impactful that might have been on third quarter as well?

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Jared S. Briskin, Hibbett Sports, Inc. - Senior VP & Chief Merchant [20]

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Yes, there was some launch shifting. We referenced it on the Q2 call. So we did see some of that, but the quarter was really driven by the strength around our back-to-school assortment. We certainly saw some of the business shift from July into August, some of our key back-to-school categories saw their peak weeks change, as we referenced on our last call. But the business in September and October was a strong accelerator in September and then October was very strong as well. So I don't consider the September and October business to be back-to-school related for Hibbett with our early back-to-school. So we feel that was just general strength in our business and execution of our strategy was very sound during that period.

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James Andrew Chartier, Monness, Crespi, Hardt & Co., Inc., Research Division - Security Analyst [21]

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Great. And then on e-commerce, where is profitability for e-commerce today? And then for City Gear, how quickly can that launch? I mean, Hibbett came out of the gate, I think, like a high single-digit e-comm penetration. Is that a reasonable expectation for City Gear now that it's on the Hibbett platform?

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Scott Randall Humphrey, Hibbett Sports, Inc. - Interim CFO [22]

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Yes, I think that's a reasonable expectation. The numbers there are so small. And so the growth percentages may be huge, but it's going to take us a little time to get that to a meaningful number. But yes, I think from a profitability standpoint, what you're talking about on the e-comm business overall, it is profitable. We're making money on e-comm. As I mentioned earlier, the product margin is definitely lower just because you tend to do more clearance online than you do in stores. And I mean, that's really been a driver for our cleaner inventory position this year as well. So it's helping us in other ways.

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Operator [23]

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We have a follow-up question from Sam Poser with Susquehanna.

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Samuel Marc Poser, Susquehanna Financial Group, LLLP, Research Division - Senior Analyst [24]

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I was wondering -- I mean, I don't know if you -- I might have missed at the beginning of the call, did you give the same-store sales increase or the range of increase by month? And if so, can you give it to us?

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Scott Randall Humphrey, Hibbett Sports, Inc. - Interim CFO [25]

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No, we did not. And again, we're trying to get away from providing monthly comp data because it's -- with the launches moving around from year-to-year, it gets very noisy. And so we'd prefer just to talk about the quarter in general, because it gives you a much better picture of the overall strength in the business.

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Samuel Marc Poser, Susquehanna Financial Group, LLLP, Research Division - Senior Analyst [26]

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Okay. And then was every month above your expectations for the quarter?

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Jeffry O. Rosenthal, Hibbett Sports, Inc. - President, CEO & Director [27]

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Yes.

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Scott Randall Humphrey, Hibbett Sports, Inc. - Interim CFO [28]

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Yes, it was.

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Samuel Marc Poser, Susquehanna Financial Group, LLLP, Research Division - Senior Analyst [29]

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And then can you -- with BOPIS and ROPIS, can you give us some idea of how important that is becoming in your business? What kind of -- how that may have aided the comp, given that they come into the -- given that, that does bring people into the stores?

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Jeffry O. Rosenthal, Hibbett Sports, Inc. - President, CEO & Director [30]

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Yes. Sam, it was running about 7% of the business. The good part of that business is we have 20-plus attachment rates when people do come in. Around the Christmas period, it runs 20% to 30% percent of the business. The other thing that we did too is really the Klarna which -- where you can buy now and pay later. That was also a significant part of our business as we continue to go. We're not going to be separating that out. But it has enhanced our whole capability.

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Samuel Marc Poser, Susquehanna Financial Group, LLLP, Research Division - Senior Analyst [31]

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And then lastly, we're -- like on the continuum through the integration of City Gear and the various digital and omnichannel projects that you're working on, so where do you think you are on the continuum of sort of -- you'll never be exactly where you want to be, but sort of being at a point where you have like the -- at that foundation that you can work off of?

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Jeffry O. Rosenthal, Hibbett Sports, Inc. - President, CEO & Director [32]

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Yes, we feel like we have the foundation. Now it's just how do we serve the customer better. It's really about really how can we take away friction points for shopping. We really have the foundation laid for the business to continue. So it's not really about continuing to build that. We're just continuing to add and trying to stay ahead of the market. Such as we have same-day delivery now. Those are the type of things that -- who knows what it's going to be in the future, but it gives us so much -- we have so much capability now that we have best-of-class technology that is very easily able to bolt-on or do other things. And we have lots of ideas, and we'll continue to always advance it. One of the things that with the strategy that we've been able to accomplish in the last 2 to 3 years is really put that foundation and -- so that this company can grow not just their digital business, but that store business with a full omnichannel. And we're being very far behind. We're now the leader in some of those things and we contend to -- we intend to stay there.

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Samuel Marc Poser, Susquehanna Financial Group, LLLP, Research Division - Senior Analyst [33]

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And then, Jared, lastly, you mentioned in your prepared remarks regarding Under Armour and their footwear business for back-to-school. Can you give us some more color on that overall business? Or was that mostly kids shoes?

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Jared S. Briskin, Hibbett Sports, Inc. - Senior VP & Chief Merchant [34]

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No, it was across gender. It's actually -- it was across gender, more focused men's and kids than women's. But we had a nice assortment compared to the prior year from Under Armour in footwear. It resonated with our consumer particularly well. It was nice to see some stabilization in that business on the footwear side with Under Armour.

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Samuel Marc Poser, Susquehanna Financial Group, LLLP, Research Division - Senior Analyst [35]

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How about on the other side, on the apparel side, which I assume is bigger?

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Jared S. Briskin, Hibbett Sports, Inc. - Senior VP & Chief Merchant [36]

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Yes. Well, it is bigger. And I think I referenced it in my commentary around base layer. The Under Armour apparel for us historically has been stronger as we get to cooler weather. We did see some of that towards the latter part of the quarter. But we have seen some stabilization in that business. The business has been in decline for the last couple of years, which we've talked through but we are seeing some stabilization in the apparel business as well, particularly in men's and kids.

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Operator [37]

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Our next question comes from Alexander Perry with Bank of America Merrill Lynch.

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Alexander Thomas Perry, BofA Merrill Lynch, Research Division - Equity Research Analyst [38]

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Congrats on a really strong quarter. Just first, can you give us a sense of the apparel business and sort of what your expectations are for the fourth quarter? And within that, sort of what product categories seem to be working? And then specifically, have you seen a slowdown in sort of the logo wear, street wear-type of product that's been strong for a while?

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Jared S. Briskin, Hibbett Sports, Inc. - Senior VP & Chief Merchant [39]

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Yes, no problem. I mean, our apparel business was exceptionally strong, particularly on the activewear side. Men's business was double digit. The logo wear and some of the trends that have been out there continues to resonate. We are seeing some movement between brands, which is a normal course of business. Our street business was exceptional. Our athletic brand business was exceptional. The fleece business, in particular, was great. And as I referenced, t-shirts and shorts earlier in the quarter were fantastic.

I think the big thing that's really driving our apparel business has really been a sharp point of focus around how we ensure that we are connecting the lion's share of our apparel business back to our sneaker business and how those outfits are coming to life from an in-store perspective. That's the primary driver of our apparel business. We've upgraded our assortment. We're very, very trend relevant and directly connected back to sneakers, and our customers are telling us that they like the direction with the strong results.

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Alexander Thomas Perry, BofA Merrill Lynch, Research Division - Equity Research Analyst [40]

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Got you. That's super helpful. Just a follow-up. Can you give us a sense on how you think the promotional environment will play out this holiday season, I guess, specifically, sort of given the shortened selling season? And is that sort of baked into your guide?

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Jared S. Briskin, Hibbett Sports, Inc. - Senior VP & Chief Merchant [41]

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Yes, it's baked in. I think the marketplace, we expect it to be promotional. I don't -- I wouldn't necessarily comment that it'll be more promotional than last year. Certainly, it feels like it started a little bit earlier. But our direction has been to really reinforce our assortment to stay as far away from a lot of those promotional categories as possible and really create a strong desirability for our apparel business that should not have to be tied to promotional mechanisms. We'll certainly have promotions, but our expectation based off the assortment that we have is that it'll be scarcer than what's out in the marketplace and readily available. It will not be promoted as hard as the rest of the marketplace, and will tie back to our really, really strong sneaker business. So we feel very, very good about our apparel business and where we stand today.

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Alexander Thomas Perry, BofA Merrill Lynch, Research Division - Equity Research Analyst [42]

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Got you. And then just one last one for me here. Just sort of as we look in the fourth quarter, it seems that you're sort of lapping a tough launch calendar and that possibly this year, the launches were more spread out between the third quarter and fourth quarter. Can you give us a sense on sort of how you sort of plan to lap that last year? And any sort of nuances, I guess, between the third and fourth quarters?

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Jared S. Briskin, Hibbett Sports, Inc. - Senior VP & Chief Merchant [43]

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Yes, I'm really not going to comment on nuances. We feel good about the launch calendar, and we feel good about where we're positioned, both from a Hibbett banner perspective as well as City Gear banner perspective. Again, from a nuance perspective, there's always nuance. There's always change. There's always focus on certain models. We feel like we have a very strong plan.

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Operator [44]

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(Operator Instructions) Our next question comes from David North with GMT Capital.

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David North, [45]

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How much did the financing program for customers impact central sales in the third quarter?

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Jeffry O. Rosenthal, Hibbett Sports, Inc. - President, CEO & Director [46]

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It was a good percentage of our e-comm business, but we're not giving out particulars on that.

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Operator [47]

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We have no further phone questions at this time.

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Jeffry O. Rosenthal, Hibbett Sports, Inc. - President, CEO & Director [48]

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Great. I would like to thank everyone for participating on today's call. It's a very exciting time to see our strategy come to fruition and that we're positioned well to continue this into the future. We look forward to having you on our fourth quarter and year-end call in March. Thank you.

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Operator [49]

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That does conclude the conference call for today. We thank you for your participation, and we ask that you please disconnect your lines.