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Flash Player 9 or higher is required to view the chart Click here to download Flash Player now See all Bulls Reasons Bulls: Reasons To Buy Sole retailer of high-end products 0% agree Sole retailer of high-end products Because most Hibbett concentrates on lowly-populated areas, its stores are often times the only retailer of high-end products. View or Edit Reason 0 votes 0% agree High operating margin 0% agree High operating margin In recent years, Hibbett has always topped other sporting goods retailers in terms of operating margin. Its emphasis on business in rural regions, in addition to efficient distributing strategies, have helped the company to operate at low costs. View or Edit Reason 0 votes 0% agree Add your own Bulls Reason See all Bears Reasons Bears: Reasons To Sell Seasonality of Sales May Hurt Company's Performance 0% agree Seasonality of Sales May Hurt Company's Performance Since HIBB's products are primarily used during the warmer months of the year, its sales are quite seasonal. Furthermore, HIBB heavily relies on holiday sales of goods for upcoming sports seasons. Since the holiday season of 2008 is expected to be dismal for retailers, HIBB's overall 2008 outlook seems dimmer. View or Edit Reason 0 votes 0% agree Declining U.S. economy 0% agree Declining U.S. economy The declining U.S. economy has squeezed out consumers' wallets. Consequently, many potential customers do not have the luxury to buy Hibbett's non-discounted products. View or Edit Reason 0 votes 0% agree Add your own Bears Reason Send the authors a comment or suggestion Be the first to make a suggestion See All Suggestions

Top Contributors Shunsuke Aonuma Robert Plaza www.zacks.com Related Articles Big 5 Sporting Goods (BGFV) Dick's Sporting Goods (DKS) Foot Locker (FL) Nike (NKE) Oakley (OO)

In 2007, Hibbett sold over $521 million in products, with Nike goods accounting for approximately 48.5% of total purchases, at an operating income of $48 million.^[2][3] Hibbett's profit margins are at the top of its industry - its margin in 2007 was 9.3%, significantly better than the next competitor, Dick's Sporting Goods, which had a 6.9% margin.^[4]

Hibbett mainly competes with local independent sporting goods stores rather than national chains because of its small store size, and its lack of discount offerings. Hibbett depends on discretionary income to build its sales - its products are not necessary commodities. As such, the company is exposed to a hurting U.S. economy, the credit crunch, and seasonal fluctuations.

[edit] Business Overview

Hibbett Sports sells soft goods (athletic and sport apparel/footwear) and hard goods (durable items such as baseball bats, footballs, etc.), all of which are circulated from the company's 220,000 square foot distribution center in Birmingham, Alabama.^[5] Hibbett sells its products at individual stores, through its website, hibbett.com, and through its team sales division, Hibbett Team Sports, Inc. The company emphasizes team sports and is a leading supplier of customized athletic apparel, equipment, and footwear to athletic and youth programs primarily in Alabama.

Unlike other sporting goods chains who offer discounted merchandise, Hibbett sells all of its products at full price. With an average store space of 5,000 square feet, Hibbett stores are much smaller than other sporting goods venues--Big 5 stores average 11,000 square feet, while a typical Dick's Sporting Goods store measures 50,000 square feet.^[6][7][8] The size and location of Hibbett stores deliver low operating costs and allow the company to target counties that represent between 30,000 and 100,000 people--something its larger competitors cannot do.^[9] The company relies on strategically located distribution centers to move new products to its rural locations.

Hibbett primarily operates in strip centers, anchored by Wal-Mart and enclosed malls. Although Hibbett seeks the Wal-Mart customer, the two companies' strategies greatly differ. Wal-Mart sells hunting, fishing, and camping equipment, in addition to food and household appliances, while Hibbett focuses on equipment for team sports. Wal-Mart carries about 30 types of baseball gloves; Hibbett carries about 80. Wal-Mart focuses on discounted items as a self-service store, whereas Hibbett offers fully-priced products as a full-service store.

In 2007, Hibbett sold over $521 million in products at an operating income of $48 million:

^[10]

^[11]

Despite slow sales growth in 2007, Hibbett has consistently produced high operating margins compared to other public sporting goods companies:

^[12][13][14]

[edit] Key Trends and Forces

[edit] Hibbett's small store size and target markets secure its high margins

A store size of 5,000 square feet allows Hibbett to operate in lowly populated counties where operating costs are cheaper than even small metropolitan or suburban areas. Opening a new store typically requires an investment of less than $200,000, and past history shows that first year total sales are about $681,000.^[15] The majority of Hibbett stores are anchored by Wal-Mart, since the superstore is likely to be the center of retail in the area.

In its first 10 years as a public company, Hibbett achieved an increase in same-store sales for all quarters except for two (one being 3Q of 2001, when the 9/11 attacks occurred). The company, however, has posted negative same-store sales for 4 of the last 8 quarters due to the declining U.S. economy. In 2008, the company will strive to continue its clustered expansion program, which calls for developing new stores within a two-hour drive from an existing one, by opening approximately 85 of the potential 350 sites it has identified. The program ensures that residents in rural areas of the Southwest can shop for a full line of products at Hibbetts without having to commute long distances.^[16]

^[17]

[edit] Hibbett's geographic focus- on both the size of the community in which it operates and the region in the U.S. where it is located-creates opportunity for rapid growth

Hibbett thrives in regions where the population is as few as 30,000, something its larger competitors cannot match because of their dependency on a large consumer base. Focusing on rural areas provides Hibbett many expansion opportunities in limited competitive environments while strengthening customer and vendor relationships. Small counties have less access to a full line of products, but Hibbett's existing system of distribution centers allows the company to expand into these markets at low cost; meanwhile, high supply but low real estate demand in these markets means landlords are seeking reliable tenants so Hibbett can pay low property costs. As a result, the company's stores are generally the only retailer exclusively focused on sporting goods retailer in many communities. Meanwhile, it keeps fixed costs low, minimizes corporate expenses and has relatively inexpensive distribution costs.^[18]

[edit] Hibbett's distribution system contributes to its industry leading margins

Hibbett's 220,000 square foot distribution center, located in Birmingham, Alabama, can service over 800 stores. Company-owned trucks transfer goods from the warehouse to the individual stores weekly. The company continually strives to perfect this system - a few years ago it often took more than three weeks to place new items on the shelves, where as now it takes less than ten days. Implementing new software systems that simplify the process of allocating goods to the stores have helped Hibbett cut its transferring time. This whole procedure, which proves more efficient that the distribution techniques used by other sporting goods retailers, contributes to Hibbett's low operating costs that increase its operating margin.^[19] In late 2007, Hibbett decided to delay its plan of constructing another distribution center by at least a year because new stores are expected to be opened further east than anticipated. Consequently, operating costs in 2008 should be lower than if a new distribution center had been built, and Hibbett should therefore be able to maintain its high operating margin.^[20]

[edit] An economic decline will disrupt the discretionary spending patterns of Hibbett's core customers

Hibbett is one of the first to get hit by a declining economy because consumers lack the disposable income to purchase its products (department stores like Target and Wal-Mart, who offer goods such as food and household products, are less threatened in such a situation). Not only does the poor economy force Hibbett's core customers to spend more money for gasoline and heating costs, but the subprime mortgage fallout and resulting credit crunch contracts their consumer spending even further, weakening Hibbett's sales.

[edit] Fashion trends and seasonal fluctuations impact Hibbett's sales

As a retailer, Hibbett must anticipate fashion trends and seasonal fluctuations in its choices of inventory. If it makes a mistake in these calculations it will hurt the firm's margins as it cannot sell the goods at high prices. For example, in mid-2003, the company experienced a decline in sales as retro NBA jerseys went out of style, while the company still had an extensive inventory of these products. Hibbett faces a similar problem today as consumers purchase fashionable footwear, available at other specialized stores, rather than the athletic shoes that the company offers.

[edit] Competition

Hibbett operates in rural areas, so its main competitors are not large sporting goods chains like Dick's, Big 5, or Sports Authority, but rather local independent sports shops. Also, about a quarter of Hibbett stores are situated near a Foot Locker. As a retailer of fully priced products, Hibbett has access to high-end products, such as Oakley sunglasses and $120Nike shoes, that some of the smaller stores nearby do not.

Hibbett is part of an industry where the top six sporting goods retailers comprise only 20.6% of the $53.7 billion market.^{[21][22][23][24][25][26][27]}

Presently, there are only four major, publicly traded sporting goods retailers: Dick's Sporting Goods, Hibbett Sports, Sport Chalet, and Big 5. Hibbet's main competitors in the sporting goods market are:

• Dick's Sporting Goods: Dick's Sporting Goods is the nation's top sporting goods retailer and operates 340 stores in 36 states. The company sells a wide range of sporting equipment and apparel, and also runs Golf Galaxy and Chick's Sporting Goods chains.^[28]In 2007, Dick's generated $3.89 billion of revenue, of which $1.16 billion yielded into gross profit.^[29] Its gross margin in 2007 is therefore 29.8%.
• The Sports Authority: The Sports Authority boasts over 400 stores in 45 states and offers a large spectrum of athletic equipment and gear.^[30]
• Academy Sports & Outdoors: Academy operates just under 100 stores throughout the South and Southwest regions of the U.S. The company offers apparel and equipment for outdoor activities such as camping, hunting, fishing and boating.^[31]
• Recreational Equipment, Inc. (REI): REI operates about 90 stores and, like Big 5, runs mostly in the Western half of the U.S. The company sells mostly apparel and equipment used for hiking, climbing, kayaking and other outdoor activities.^[32]
• Big 5 Sporting Goods : Big 5 operates 363 stores, each averaging around 11,000 square feet, in 11 states. The company opens stores in relatively small metropolitan and suburban areas, especially important in the sparsely populated western states that are Big 5's focus. In 2007, Big 5 sold over $898 million in products, for a gross margin of $309 million.^[33]

In terms of market share, Hibbett lags behind five sporting goods businesses:

Note: Market shares calculated with estimated $53.7 billion sporting goods retail market size.^[40]

 Hibbett Sports

	Select All  |  Select None Metrics Revenue by Geography - International Revenue by Geography - US Revenue from Franchises Website and Catalogue Sales Store Operating Expenses Revenue Soft Goods Sales Hard Goods Sales Net Income Gross Profit Sales per Store Sales per Square Foot Number of Stores Square Footage Sales Growth Same Store Sales Growth Cancel

	Select All  |  Select None Companies Gander Mountain Company (GMTN) Golfsmith International Holdings (GOLF) Hibbett Sports (HIBB) The Timberland Company (TBL) Nike (NKE) Sport Chalet (SPCHA) Big 5 Sporting Goods (BGFV) Cabela's (CAB) Columbia Sportswear Company (COLM) Dick's Sporting Goods (DKS) Dover Saddlery (DOVR) Fairchild (FA) Finish Line (FINL) Foot Locker (FL) Genesco (GCO) Pool (POOL) Cancel

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Company	Data From	Revenue	Soft Goods Sales	Hard Goods Sales	Net Income	Gross Profit	Sales per Store	Sales per Square Foot	Number of Stores	Square Footage	Sales Growth	Same Store Sales Growth
Big 5 Sporting Goods (BGFV)	2007	$898M[41]	$419M[42]	$478M[43]	$28.1M[41]	$309M[41]	$2.47M[41]	$233[41]	363[41]	3.86M[41]	2.45%[41]	(1%)[41]
Foot Locker (FL)	2007	$5.44B[44]	$5.07B[44]	Add	$49M[44]	$1.42B[44]	$1.44M[44]	$385[44]	3.79K[45]	14.1M[45]	(5.44%)[44]	Add
Hibbett Sports (HIBB)	2008	$521M[46]	Add	Add	$30.3M[46]	$169M[46]	$757K[46]	Add	688[46]	Add	1.68%[46]	(3.1%)[47]

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See all Sports Goods Stores Industry WikiData

[edit] Notes

1. ↑ HIBB 2007 10K, Item 1:Business, pg.5
2. ↑ HIBB 2007 10K, Item 6:Selected Consolidated Financial Data, pg.18
3. ↑ HIBB 2007 10K, Item 1:Business, pg.7
4. ↑ HIBB 2007 10k, Item 6:Selected Financial Data, pg. 18
5. ↑ HIBB 2007 10K, Item 1:Business, pg.7
6. ↑ HIBB 2007 10K, Item 1:Business, pg.6
7. ↑ BGFV 2006 10K, Item 1:Business, pg.4
8. ↑ DKS 2007 10K, Item 1:Business, pg.7
9. ↑ HIBB 2007 10K, Item 1:Business, pg.5
10. ↑ HIBB 2007 10K, Item 6:Selected Consolidated Financial Data, pg. 18
11. ↑ HIBB 2007 10K, Item 6:Selected Consolidated Financial Data, pg. 18
12. ↑ HIBB 2007 10K, Item 6:Selected Consolidated Financial Data, pg. 18
13. ↑ DKS 2007 10k, Item 6:Selected Consolidated Financial and Other Data, pg. 24
14. ↑ SPCHB 2007 10k, Item 6:Selected Financial Data, pg. 17
15. ↑ HIBB 2007 10K, Item 6:Selected Consolidated Financial Data, pg.18
16. ↑ HIBB 2007 10K, Item 1:Business, pg.6
17. ↑ HIBB 2004-2007 10K, Item 1:Business
18. ↑ HIBB 2004-2007 10K, Item 1:Business, pg. 5
19. ↑ HIBB 2007 10K, Item 1:Business, pg.6
20. ↑ HIBB 2007 10K, Item 1:Business, pg.7
21. ↑ DKS 2007 10k, Item 6:Selected Consolidated Financial and Other Data, pg. 24
22. ↑ Hoovers:The Sports Authority Information
23. ↑ Hoovers:Academy Sports & Outdoors Information
24. ↑ Hoovers:REI Information
25. ↑ BGFV 2007 10k, Item 6:Selected Financial Data, pg. 19
26. ↑ Hoovers:Hibbett Sports Information
27. ↑ Needham Initiate 03/10/08:BGFV
28. ↑ Dick's Sporting Goods (DKS)
29. ↑ DKS 2007 10k, Item 6:Selected Consolidated Financial and Other Data, pg. 24
30. ↑ The Sports Authority:About us
31. ↑ Dick's Sporting Goods (DKS)
32. ↑ Dick's Sporting Goods (DKS)
33. ↑ BGFV 2007 10k, Item 6:Selected Financial Data, pg. 19
34. ↑ DKS 2007 10k, Item 6:Selected Consolidated Financial and Other Data, pg. 24
35. ↑ Hoovers:The Sports Authority Information
36. ↑ Hoovers:Academy Sports & Outdoors Information
37. ↑ Hoovers:REI Information
38. ↑ BGFV 2007 10k, Item 6:Selected Financial Data, pg. 19
39. ↑ Hoovers:Hibbett Sports Information
40. ↑ Needham Initiate 03/10/08:BGFV
41. ↑ ^{41.0 41.1 41.2 41.3 41.4 41.5 41.6 41.7 41.8} 2007 BGFV, 10-k, item 6, Pg 19
42. ↑ 2007 BGFV, 10-k, item 1, Pg 4
43. ↑ 2007 BGFV, 10-k, item 15, F-8
44. ↑ ^{44.0 44.1 44.2 44.3 44.4 44.5 44.6} 2007 FL, 10-k, item 8, Pg 63
45. ↑ ^{45.0 45.1} 2007 FL, 10-k, item 7, Pg 13
46. ↑ ^{46.0 46.1 46.2 46.3 46.4 46.5} 2008 HIBB, 10-k, item 6, Pg 18
47. ↑ 2007 HIBB, 10-k, item 7, Pg 20