Pat Watson - Corporate Communications Jeff Rosenthal - Chief Executive Officer Scott Bowman - Senior Vice President and Chief Financial Officer Jared Briskin - Senior Vice President and Chief Merchant Cathy Pryor - Senior Vice President of Store Operations

Stephen Tanal - Goldman Sachs Dan Wewer - Raymond James Anthony Lebiedzinski - Sidoti & Company Rafe Jadrosich - Bank of America Seth Sigman - Credit Suisse David Magee - SunTrust Peter Benedict - Robert W. Baird Camilo Lyon - Canaccord Genuity Rick Nelson - Stephens Sam Poser - CRT Capital Mark Smith - Feltl and Company

Welcome to the Hibbett Sports First Quarter Fiscal 2017 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded Friday, May 20, 2016. I would now like to turn the conference over to Mr. Pat Watson with Corporate Communications. Please go ahead, sir.

Thank you for joining Hibbett Sports to review the company's financial and operating results for the first quarter of fiscal year 2017, which ended on April 30, 2016. Before we begin, I would like to remind everyone that management's comments during this conference call, not based on historical facts, including those in response to your questions, are forward-looking statements. These statements, which reflect the company's 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 earlier this morning, in the company's annual report on Form 10-K and in other filings with the Securities and Exchange Commission. We refer you to these 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, May 20, 2016. Because of the 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 over two Jeff Rosenthal, Chief Executive Officer. Please go ahead, Jeff.

Thank you, and good morning, everyone. Welcome to the Hibbett Sports first quarter earnings call. I have with me this morning Scott Bowman, Senior VP and CFO; Jared Briskin, Senior VP and Chief Merchant; and Cathy Pryor, Senior VP of Store Operations. Net sales for the 13-week period ended April 30, 2016 increased 4.6% to $282.1 million, compared with $269.8 million for the 13-week period ended May 2, 2015. Comparable store sales increased 1.1%. During the quarter, we showed improvement in performance in our apparel assortment and believe that our strategy is gaining traction in this area. Footwear also posted positive results driven by strong performance in our lifestyle category. We were also very pleased with the increase in the gross margin rate, driven by solid management of markdowns and promotions, while reducing our inventory levels to be more in line with sales. During the first quarter, Hibbett opened 17 new stores, expanded one high-performing store and closed 8 underperforming stores bringing the store base to 1,053 in 33 states as of April 30, 2016. Our small market strategy continues to be our strength as we grow across the country. We believe as we continue executing this strategy, we will become even stronger. It is very important to go to markets where we are needed. There are plenty of markets that we see opportunities for growth for the future. Our strategic initiatives are well underway. We are in pilot for our new store systems that will give us the ability to see actual in-stock inventory across all stores and help us convert more customers. This is just the beginning of our digital strategy that will tie our stores and our digital presence to all of our customers. We believe that with our store strength and our ability to execute this will provide growth in new stores and our digital strategy. Our small market strategy continues to be key with our vendors as we grow in the future. They have made significant investments in the future of Hibbett's. I would like to thank all our associates for their hard work and dedication to Hibbett Sports. I will now turn the call over to Jared Briskin, Senior VP, Chief Merchant, to talk about our merchandise trends.

Good morning, thank you, Jeff. We are pleased with our Q1 performance as we were able to achieve a comp store gain, while improving margins in a very challenging environment. Our merchants and vendors also did an incredible job of limiting our inventory risk by aligning our inventory more closely with sales. I am very pleased to report that our apparel business was up low-single-digits. We continue to see momentum from the changes in our assortment focusing on more premium fashion items. Gains in apparel were driven by our men's business, which was up high-single-digits. The women's and kid's business was more challenged, down low-single-digits. Bottoms continue to be the driver of the business with athletic bottoms and denim posting significant gains. Accessories were down low-single-digits as continued challenges in the [sock] [ph] category offset strong gains in hydration. The licensed business was down low-single-digits. Assortment changes in headwear are seeing strong results and the Panther's run to the Super Bowl was very impactful. Difficult compares included the University of Kentucky Final Four appearance in the year ago period led to continued declines in licensed apparel sales. Our team sports business was down low-single-digits. Cleated business was positive, up mid-single-digits led by strong performances in spring football, track, and soccer. Softness in baseball as well as fitness equipment led to a low-single-digit decline in equipment. Footwear was up low-single-digits. All genders were positive with the men's and women's business up low-single-digits and our kid's business up mid-singles. From a category perspective our lifestyle and casual business continue to post our healthiest gains, up double-digits as we continue to invest. In this category we are seeing strong results from Nike sportswear, adidas originals, Puma, and Timberland. Basketball was up low-single-digits led by continued strength from Jordan Retro and Under Armour Steph Curry One. Our biggest challenge continues to be performance running, which was down double-digits. From an inventory perspective we were successful in managing our inventory levels to be appropriate with sales. We will continue to make what we feel are appropriate investments in our sneaker business and bring in inventory earlier to ensure that we can take advantage of the back-to-school business. Although the environment has its challenges today, we are excited about the response to our updated assortments. As these updated assortments continue to reach additional stores across our small markets we expect continued improvement. I will now turn the call over to Scott Bowman to discuss our financial results.

Thanks, Jared. For the first quarter total sales increased $12.3 million to $282.1 million, an increase of 4.6% over the prior year. Comp sales increased 1.1%. By month comp sales were 6.9% in February, negative 3.2% in March, and negative 0.3% in April. Gross profit rate increased 27 basis points in the quarter. Product margin increased 20 basis points, due to continuing improvements in our markdown optimization system and management of promotions as we reduced excess inventory. Warehouse and store occupancy expenses decreased 7 basis points as a percent of sales. SG&A expenses increased 8.3% in the quarter and increased 69 basis points as a percent of sales. This is partially due to deleverage associated with lower comp sales, as well as expenses associated with our omni-channel initiative. Depreciation and amortization increased 9 basis points as a percent of sales in the quarter, mainly due to the capitalization of IT projects and the addition of new stores. The income tax rate for the quarter was 37%, which compared to last year's rate of 37.3%. Operating income of $44.3 million increased 1.2% from last year and was 15.7% of sales versus 16.2% last year, a decrease of 51 basis points. Diluted earnings per share came in at $1.22 per share versus $1.09 last year, an increase of 12%. From a balance sheet perspective the company ended the quarter with $73 million in cash versus $119 million last year with no borrowings outstanding on our revolving credit facilities. Inventories increased 7.9% over last year and were 2.6% higher on a per store basis. We spent $6.8 million in CapEx for the quarter. Also for the quarter the company bought back 237,000 shares for a total of $8.3 million. At quarter end, we have approximately $292 million remaining under the existing purchase authorization. Based on these results for the first quarter, we are maintaining our full-year guidance. For the year, we expect comparable store sales to increase in the low-single-digit range, expect earnings per share to be in the range of $2.90 to $3.04, and expect product margin to be approximately flat. With that update, operator, we are now ready for questions.

[Operator Instructions] And our first question comes from the line of Stephen Tanal with Goldman Sachs. Please proceed with your question.

Good morning guys. Thanks for taking the question. I guess just to start, I’d love to understand the impact of the tax refund timing on the overall quarter. I know that was talked about into February.

Yes. It definitely did help February as we came out pretty strong in the quarter. It’s hard to parse out exactly how much that did affect us. So, it’s hard to give you exactly how much from a comp standpoint, but it definitely helped us coming into February.

Fair enough. And traffic ticket in the quarter was?

So ticket was up low-single and traffic or transactions for us was down low-single. So we did see a little bit narrowing of that gap. And I think from a transaction standpoint it’s one of the better quarters we have had in a long while. And I think a lot of that goes back to the apparel traction that we are getting.

Got it. That’s good to hear. And just lastly, I’m a little bit surprised by the occupancy number in the margins. What’s the leverage point for occupancy these days and any color there would be great?

Typically for occupancy it’s in the 3% range or slightly less. We did see a little bit of favorability in utilities versus the prior year. And so, that did help us leverage a little more than usual.

All right, makes sense. Thanks, guys.

Okay thank you.

Our next question comes from the line of Dan Wewer with Raymond James. Please proceed with your question.

Thanks. Scott, first, I just wanted to ask if you had a chance to look at the new overtime rules for pay for managers and how you are going to manage around that and what the SG&A expense impact will be going forward?

Yes, Dan, we are all looking at those new regulations and working with the team internally to understand all the regs and understand what changes may come from that. So, it’s a little bit too early to have all of the details on that. But as we kind of look through it and look through some of the options, we don't think it’s going to be a significant impact on SG&A, but we will certainly have more details as time goes on and on the next call.

Is that because managers typically are not asked to provide much overtime?

Yes, yes, I mean that’s part of it. And so, as we work through the details we will give you more on that. But, yes, that is part of it.

The second question I have is when you are looking at some of your stronger categories that you called out, such as denim and lifestyle footwear, those are categories that are not really traditional sporting goods. When you look at Hibbett's total revenue mix nowadays how much of that would you say is outside that traditional definition of sporting goods and it's more lifestyle apparel and footwear?

Yes, Dan, it is Jared. Without --

Hi, Jared.

-- number on it, our focus is absolutely on less sporting goods and more on lifestyle. There is certainly significant opportunity there. But what it really comes down to is diversification of the assortments across our types of stores. So, we still are very focused on sporting goods business in our sporting goods stores, but outside of that we are extremely focused on the lifestyle business that seems to be where we have the 17-year-old influencer shopping with us for product.

What’s the – I mean, what’s the upside in focusing on lifestyle instead of that kind of legacy sporting goods business that Hibbett was known for?

Yes, I mean, we have been in the lifestyle businesses for a significant amount of time and we have grown them fairly fast over the last four to five years. But there's still significant store growth opportunity in many of those lifestyle categories and products and we are very excited about that opportunity.

And then the last question I have, I know in recent months you've been talking about your relationship with Nike and they're I guess changing the way that they view Hibbett also, I guess evolving more to a specialty retailer and less on sporting goods. And that could benefit you in allocation of Nike product. How many stores would actually benefit from that change in definition with that brand and would be on the receiving end of better allocations?

Yes, Dan, as we become more important with Nike or adidas or Under Armour, a lot of those products we probably have an opportunity to expand to about two-thirds of our chain. So there is significant upside to being in some of those categories. Now it will take us a little bit of time to get there, but the investments that our vendor partners are putting into us and, as Jared talked about, who is that core customer, that 17-year-old influencer, these are the products that they desire. And that’s what we are trying to do is make sure that we have the right products for them and these are unique iconic products that these kids are after and we are getting more access to that throughout our chain.

Okay, great. Thank you.

Thank you.

Our next question comes from the line of Anthony Lebiedzinski with Sidoti & Company. Please proceed with your question.

Hi, good morning, again, and thank you for taking the questions. First, as far as the monthly same-store sales, the March decline, was that mostly because of maybe some pull forward into February and the Easter impact?

A lot of that, Anthony, was just based on the strong comps we had to last year in March. It was an 8.6% positive comp last year. And really what happened last year is we came into the year with weaker comps and then we had some recovery in March. So it is just based on the prior year compare.

Got it, okay, thanks for that. And also just to clarify, as far as the guidance in your initial guidance for this fiscal year back in March you also gave some metrics as far as the omni-channel spending impact, store growth and CapEx, are all of those metrics still unchanged as far as how you see it for the year?

Yes, they are, Anthony, so really no major change there.

Got it, got it, okay. Okay, that’s all I had. Thank you.

Thank you.

Thanks, Anthony.

Our next question comes from the line of Rafe Jadrosich with Bank of America. Please proceed with your question.

Hi, good morning. Thanks for taking my questions. Can you guys just talk about maybe how the pilot for the new store systems is going and if there any changes to the outlook for just the point of sale roll out and the timing of e-commerce?

Sure. So as Jeff mentioned, Rafe, we are in pilot with the Phase 1 of the new POS and so it’s still early; it has been a week and a half or so, but they are ringing sales in that pilot store and just working through just the normal course of a roll out, but so far so good. And so, we are encouraged by just the very early read. As we kind of look at the remainder of Phase 1, we are still looking probably in the third quarter is when we will finish that roll out. The bigger inflexion point we think is the store to home capability where we are able to send an item to a customer's home. And so, for that capability we are looking for Q4 of this year to bring that to life. So we are excited about that. And then next year we are looking to go online with our new digital platform and we are looking at the second half of the year for that launch.

Thank you, that is helpful. And then, Jared, I was hoping you can give some more color on what you are seeing in basketball. Can you just talk about the trends between maybe signature and Jordan and then what sort of the outlook is there?

Yes, I think what we’ve been hampered with really for the last year has been a price/value relationship that has not been there on some of the signature products. When you look at the price/value that is there from a current perspective and a [indiscernible] perspective the sales have continued to be very robust. But on some of the higher-priced Lebron KD product the price/value relationship was not there and it wasn't as trend relevant from a color perspective. So based off what we have seen coming with the new KD shoe coming in about another month we feel like the price/value relationship will be much more attainable from a customer perspective. And we will see value in the product at the price and we do believe it is more trend relevant. So we feel like the basketball business can have some sort of a recovery, but we are very focused on just ensuring we have the right shoes overall no matter what category they are in. So we do see, again, a balance hopefully in the back half with regard to basketball, but our focus right now is more on the lifestyle products.

Okay, got it. And then last question, just the inventory looked like it improved a lot from 4Q. Can you just talk about did you get any help from the vendors with kind of clearing that out? Did they take back product? Just any color there would be very helpful.

Yeah, we got very significant help from our vendors. I mean the partnership level that we are getting from our vendors is really unprecedented at this point for us. We are certainly an integral part of their wholesale strategy is where the primary distribution point in a small market. So very pleased, very happy and very appreciative of the levels of support that we are getting from our vendors.

Okay, thank you.

Our next question comes from the line of Seth Sigman with Credit Suisse. Please proceed with your question.

Thanks a lot. Good morning, guys.

Good morning.

So, one of your competitors discussed this morning that footwear was running negative quarter to date in the second quarter and I realize you are not giving any sort of quarter-to-date update necessarily. But is there anything else you can speak to to maybe help us understand how to think about the second quarter?

No, I would think as we go through the second quarter there is definitely a favorable launch calendar as we go throughout the second half of the quarter. I said we weren't going to give out any guidance before that, but we feel very good about the products, the way they are lining up for the back half of the second quarter and through back-to-school and holiday. So feel like we are in good shape.

Okay. And when you guide to low-single-digit comps for the year, is there a major difference across the quarters that we should be considering?

Not really. I mean I think the low-single – there are not really many peaks and valleys that we are looking at from a forecast standpoint. So, there will be some of that, but we don't see any major ups and downs.

Okay. And then just if you take a step back, the business has become more volatile over time it seems. So when you look at your monthly comps, over the last 12 to 18 months it does feel like the monthly volatility has increased. And I am not sure if this ties in with Dan's question earlier about the evolution of the assortment, but any views internally on what may be driving that and what you can do differently to kind of manage through that volatility?

Yes, I mean, I can start off. I mean, it is difficult and I am sure for you guys it is hard to get a read on it, it is for us too because there are so many moving parts out there just based on what is happening in the macro environment, the launch schedules, the tax-free weekends, all of that does cause quite a bit of volatility in our business. So, we recognize that volatility, but at the same time we try to make sure we are doing what’s right for the long-term because that volatility does seem to level out in the long run. And so, we don't get too really excited about the ups and downs as long as we know that we are doing good things internally for the business.

Okay, thank you for the color.

Our next question comes from the line of David Magee with SunTrust. Please proceed with your question.

Good morning, guys, good quarter.

Thank you.

Thank you.

A couple of things. One is, are you happy at this point with what you are seeing with the in-stocks coming from the expanded DC? And is there more to be realized there over the next year?

Yes, we definitely are seeing an uptick in the service level and in-stock levels. I mean our inventory management group is doing a fantastic job with that. So, we still see upside there as well as we see very significant upside with our Save the Sale initiatives as we start rolling those out through the balance of this year. So many, many opportunities still to enhance our conversion at this point.

Is that primarily in the footwear side?

It is footwear and apparel primarily, but there is opportunities in every category. We do expect to get the most significant gains from a revenue perspective out of the footwear category, without question.

Okay. And, Scott, is it still fair to assume that, based on what you have been working on with all these investments, that by 2016 is still the peak year and then we see some sort of step down in 2017 as far as incremental investments?

Yes, that is still what I am seeing, David. Next year should be about the same and, if not, a slightly reduced impact. So that outlook has not changed.

And then last thing and I think I know the answer to this, but what are your thoughts with regards to the impact of the liquidations that are going on out there as far as risk and/or opportunity?

Yes, from our perspective, I think one of the advantages of having less players out there, we become more important with our vendors. And I think that definitely has helped. There will be some categories that will get affected a little bit in the second half of the year, that there will be maybe a little bit too much product out there. But we feel overall it will be a strength to us as we become more important. Overall lap of going against a lot of those, we don't have that many stores that we would completely compete against, but it may give us some opportunities as we look at some of our real estate portfolio to expand in some markets in the future.

Great, thanks, Jeff. Good luck.

Thank you.

Our next question comes from the line of Peter Benedict with Robert W. Baird. Please proceed with your question.

Hi, guys. First, just curious any kind of regional tone to the business in the quarter? Any pockets of strength or weakness in what you might think drove those?

Yes, sure, Peter. So as we kind of look at our geographies, we really had a lot of strength in kind of the core Southeast states that we do business in. As I look at the weaker areas, the Southwest did show some weakness. If you look at Texas, Oklahoma, Louisiana, New Mexico, that was a little bit weaker. And then kind of the Northern Tier was kind of in the middle. And I think if you look at the Southwest, it’s kind of a continuing trend that we have seen over the last few quarters with the oil patch activity and things like that, I think that does have some effect. So longer-term I think that will be a very strong region for us as it has been in the past. I think we just have to lap some of this oil patch activity. We really saw that decline starting in about midyear last year and that has continued. Over the last couple quarters we have seen it stabilize, but it is still below our average run rate.

Okay, that is helpful, Scott. And then just – the first quarter you grew the earnings about 11% on a 1% comp. In the second quarter, help us think about that, lower volume quarter, what level of comp I guess is required to kind of hold earnings flat? Could you do that on a 1% comp or do you need something more than that?

I would say it would be a little bit more than that, especially with new investments that we are making. So it would be a little bit more than that for this second quarter.

Okay, that makes sense. And then, Jared, just good to hear the progress with the apparel. What remains to be done from here? Can you help us understand maybe how the assortment will really look different this back-to-school and then holiday? Just kind of curious what is more to go there? Thanks.

Yes, I think from an apparel standpoint I think we are finding a successful formula on the men's side of the business. Now it is a question of taking that formula and improving the store distribution with that as far as getting to more stores with that correct formula of men's apparel. So, we do see that getting better quickly as we head into the summer season and back-to-school season. On the women's side, we've been very focused on more of the lifestyle consumer as well – this lifestyle product. And where we put that focus in play we’ve seen very nice results. We are still not at a level yet where it is a meaningful part of our assortment. So as we go through the year we will see that become more meaningful and get that into additional stores as well. And our kid's business seems to be a little bit more impacted and trends similarly to the team sports business. So we still have some work to do in kids on developing more of these lifestyle relevant assortments. But overall, I definitely feel like we are making progress, I definitely feel like we are finding the successful formulas. Now it is just to get those formulas into additional stores where we can really take advantage of it.

Okay, thanks for that. Good luck, guys.

Thank you.

Thank you.

Our next question comes from the line of Camilo Lyon with Canaccord Genuity. Please proceed with your question.

Thanks. Good morning guys. Jared, I was hoping to get your take on just what is going on with different shifts between basketball and casual lifestyle. Obviously the casual lifestyle piece for you has been working very well. But you also spoke about signature basketball. While it is weak now, expect it to improve with new product introductions that have a better price value relationship. So the question is, are you shifting your category mix towards more of the casual lifestyle product? Or are you waiting for the signature piece, the signature product to come into kind of reestablish what is represented to the overall piece?

No, we are absolutely shifting to the casual lifestyle piece and have been for the last few at least 12 month period we continue to see very significant opportunity there. We are hopeful that pieces of the basketball business that aren't performing have an opportunity to get better. But we are looking at both of them and needing both of them to continue to improve and to continue to grow to offset the running business. That is our most challenging category currently in looking [indiscernible] influencer the product that is there in the core running business is not resonating with that consumer. So, we do feel like there is some improved product coming throughout this year that could help us a little bit in running. But we absolutely are investing in the casual lifestyle and just trying to ensure that we have the coolest shoes across our different store types.

Do you think that this is the onset of a shift in trend back more towards that casual running silhouette that has got more legs to it than just one would infer from a poor price/value relationship that could be fixed in a couple of quarters? Is there a deeper longer-lasting impact here?

I mean, it is very possible. I think right now that there is a lot of strong sneakers that are selling across all categories [indiscernible] and just ensure we have the ones that the consumers are asking for no matter what category that they fall into. So, I think currently there are without question more cool sneakers that are coming out of that casual lifestyle area and definitely see that continuing. But there are also very cool sneakers coming out at the basketball category. So we see that as well. So, our focus is just to ensure that we’ve got the coolest sneakers in as many stores as we can. I think if we continue to execute to that no matter what category they fall in we should see nice growth.

Okay. And then just a final question on that is what does that mix portend for your ASP composition within the comp? How does that affect your ASPs going forward?

We are still seeing the ASPs grow on the footwear side. And while the signature basketball piece may not be as relevant or as robust as it was, it was not at the levels of our overall business where it impacts the total. We still have significant AUR growth opportunities across all other categories that will offset it.

Okay, thanks so much. Best of luck.

Thank you.

Thank you.

Our next question comes from the line of Rick Nelson with Stephens. Please proceed with your question.

Hi, good morning. So, you are getting $73 million in cash, you got no debt. If you hit your EPS targets for the year, where do you see that cash positioned if the buybacks kind of stay on the same course and the priorities for that cash?

Yes, Rick, this is Scott. First and foremost the priorities for the cash will be to build new stores and remodel existing stores, invest in our major initiatives including the omni-channel initiative and then after that free cash flow will be targeted towards stock buybacks. Last year, we finished the year at about $32 million in cash. We should be at or slightly above that number for this year. So, we still have quite a bit of availability under our authorization and our cash flow to execute a significant buyback for the year. Keep in mind that the first quarter typically is our high water mark in cash. But I would totally expect a fairly sizable buyback for the total year.

Okay, got you. Thanks for that. And, Jeff, how tedious is the real estate market today? There has been a retail weakness, potential shakeout there. Are you seeing that with the rent deals and is there an opportunity potentially to accelerate store growth?

Rick, really the real estate out in the marketplace, there is plenty of markets to go. We still feel that we are going to hit net 40 to 50 new stores. There is a lot of markets still out there, there is still a lot of small towns that we can put stores in so still getting the same type deals. Sometimes a little bit less, sometimes a little bit more. But we still see that there is a lot of space out there for us to grow for a significant number of years. As we look to the West, California is a state that we are looking at that is a huge state, has lots of small towns that fit in exactly what we are doing, especially as Jared talks about that 17-year-old customer and the lifestyle and that it fits right up to what we are doing. And we see that there is some opportunity as we continue to look West.

Okay, great, thanks a lot and good luck.

Thank you.

Our next question comes from the line of Sam Poser with CRT Capital. Please proceed with your question.

Thanks for taking my question. Good morning. I wanted to follow-up on California. Where are you there? When do you think you might enter that market? That is the question.

Yes, [indiscernible] somewhere October/November time period to start putting stores out there.

Okay. And then secondly, the running business that's weak is really your performance running business, correct, not all of running?

Correct, Sam. It is the performance business.

And then lastly, Scott, you talked about the timing of the e-commerce rollout back half of next year. Prior to that you were basically – were you talking fourth quarter – it seemed to me like you were talking about late fourth-quarter fiscal 2018. With your new head of digital, is this looking like e-commerce might be up and running a bit earlier than what you had thought a few months ago?

Yes, Sam, definitely. Bill Quinn came on board and he has really hit the ground running. And so he is giving us the opportunity to move it up a bit.

So when you say back half, I mean are you looking at back-to-school or just after back-to-school? I mean it would be dangerous going in right into back-to-school with a new thing and have it not work. So, is it something that you will probably try to do post back-to-school? Is that sort of framework right now?

It is.

Is that the way to think about it?

Yes, it is, and we will definitely have more color on the next call as we go forward.

Okay, thanks very much. Good luck.

Thanks, Sam. And our next question comes from the line of Mark Smith with Mark Smith, Feltl and Company. Please proceed with your question.

Just looking at specialty running, is this trend being down, is this due to kind of trends within the sports or is this hurt by strengthened specialty running stores or any other insight that you have into that?

I think, Mark, the way you have to look at it, that millennial customer has really kind of shifted on priorities. They are not really – they like to go to a gym, they like to do CrossFit, they are not running like the traditional runners. And I think more and more of our customers want a shoe that looks trend right and that they could use for multiple purposes. They could wear it out or they could wear it to the gym. So, I think you are seeing more of that because people aren't running long distances. Most of these kids today, they want to go to a gym, be done in 30 to 45 minutes or go do some CrossFit. So, I think that performance running piece right now, I think that is what you are starting to see a lot more of. And it is really about having trend right running looking shoes so the kids can use them for multi purposes.

Okay. And then last and I don't know what you guys can really say about this. But what will it take to really get back to consistent double-digit earnings growth? Is it really e-commerce and omni-channel really turning on to really get back to that, getting out of some of the spending phase? Or even ex that can you get back to kind of that consistent growth?

I think it is a combination of things all of which we are working on. From a merchandising standpoint, as we have talked we feel like we are making very good traction there, markdown optimization starting to provide some benefits later this year as we look to go store to home. As we have said, that will significantly help our conversion rate for existing customers coming in. Then we get into our digital online business. So we have a lot of things that we are working on right now and in the near future that we think will help us get back on that trend.

And Mark, for us, all these investment, I know the last couple of years has really built a great foundation. And as we have been able to utilize the DC, utilize markdown optimization, be able to send stuff to the customer's home, we should be able to get back there with all the tools. We were just fighting sometimes with one hand behind our back in not having those tools. And we are about to embark on having all the tools. So, we feel very good about where we sit today.

And I mean we feel like the investments that we are making does cause a temporary dip, but definitely an investment for a better future as we kind of look at our strategy and starting with the store's first, enabling them to fulfill product once we get online. One of the reasons we are doing that is just from a customer experience standpoint. But as we scale up that online business that will give us very good leverage on a fixed cost base that will help us in the out years.

That is helpful. Thanks, guys.

Thank you.

Mr. Rosenthal, there are no further questions at this time. I’ll turn the call back to you. Please continue with your closing remarks.

Yes, I want to thank everyone for being on the call today. We look forward to having you join us again at the end of the second quarter, but we appreciate all your support.

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