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 Rafe Jadrosich - Bank of America Merrill Lynch Camilo Lyon - Canaccord Genuity Seth Sigman - Credit Suisse Dan Wewer - Raymond James Peter Benedict - Robert W. Baird Rick Nelson - Stephens David Magee - SunTrust Jim Duffy - Stifel Sam Poser - Susquehanna Mark Smith - Feltl and Company

Ladies and gentlemen, thank you for standing by and welcome to the Hibbett Sports Second Quarter Fiscal 2017 Conference Call. During the presentation all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Friday, August 19, 2016. I would now like to turn the conference over to Pat Watson, Corporate Communications. Please go ahead.

Thank you for joining Hibbett Sports to review the company's financial and operating results for the second quarter of fiscal 2017, which ended on July 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 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 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, August 19, 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 Jeff Rosenthal, Chief Executive Officer. Please go ahead, Jeff.

Thank you, and good morning, everyone. Welcome to the Hibbett Sports second 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 ending July 30, 2016 increased 3.9% to $206.9 million, compared to $199.3 million for the same 13-week period last year ending August 01, 2015. Comparable store sales increased 0.8%. We were pleased with our overall results and encouraged by our progress of our major initiatives. Footwear continued to show significant strain driven by our differentiated assortment and continued improvement in allocations and our in-stock positions. We also continue to see improvement in our merchandise margins rate driven by improved systems and promotional management. During the second quarter, Hibbett opened 14 new stores, expanded one high-performing store and closed 8 underperforming stores, bringing the store base to 1,059 in 33 states as of July 30, 2016. We continue to believe in our small market strategy and going where we are needed by our consumers, our landlords and our vendors. This strategy continues to put us in a unique position to grow for years to come. We continue to make significant progress in our digital strategy. We have picked Demandware as our strategic partner in this opportunity. We have hired our internal digital team which is working to get this project over the top. This omni-channel approach we believe will become over 10% of our revenue over time. Our employees have worked diligently on making sure that we are successful as we move through all of these initiatives. I would like to thank all of them for their hard work and success that we have started to see and will continue to see in the future. I will now turn the call over to Jared Briskin, Senior VP, Chief Merchant to talk about our merchandise trends.

Thank you, Jeff. Good morning. We are pleased with our second quarter performance as we are able to achieve a comp store gain in the historically challenging quarter while improving product margin. Our merchants did a good job of capitalizing on current footwear trends and maximizing key drivers in other areas. Our apparel business was down low single digits for the quarter. Challenges surrounding performance product continued throughout quarter and offset the improvements we have made to our lifestyle offering. The men's business was up mid singles as investments in denim twill and polos offset declines in performance notably compression. Kid's business was down low single digits with boys performing much better than girls. Our women's business continues to be our biggest challenge down high single digits. Sales of lifestyle tops and bottoms were very strong, while performance product, especially compression showed significant weakness. Accessories were up low singles driven by hot items in hydration offsetting declines in socks and sunglasses. The license business was down low single digits. NBA business was very strong across all categories from the Cavs' Championship as well as the Warriors' run to the championship game. These games were offset by difficult comparison college and major league baseball where our largest volume team has the worst record in the majors. Team sports business was down low single digits. Cleated business was positive up low single digits with baseball, softball, soccer, track and football all positive. Equipment was soft across all categories down high single digits. Tackle football and fitness had the most significant declines. Footwear was up low single digits. All genders were positive led by our kid's business up mid-single digits. From a category perspective, our basketball business was up double-digits led by strong performances of Retro Jordan, Steph Curry from Under Armour and Nike's Signature including the LeBron Low and KD IX. Our lifestyle footwear business continued its strong run with a mid-single digit comp. Nike business was very solid in this category with the Rockies, Air Force 1, Juvenate all performing very well. Adidas also showed significant strength in this category as multiple originals platforms sold exceptionally well including the new NMD and Superstar. Puma and New Balance also showed significant gains in our lifestyle area. Performance running was soft down high single digits. The early part of the quarter was very challenged, but improve significantly as our back-to-school investments arrived. Adidas showed very strong results with its Boost platform and the early response to AlphaBounce has been exceptional. New products from Under Armour also delivered in the latter part of the quarter and early response to the Slingride and Bandit are extremely solid. From an inventory perspective we wanted to ensure that our back-to-school deliveries arrived on time and were in stores to ensure adequate stock levels for the peak of our back-to-school business. We executed well to this plan and are very confident that our inventory growth will be aligned with sales growth in future quarters. I will now turn the call over to Scott Bowman to discuss our financial results.

Thanks Jared and good morning. For the second quarter total sales increased $7.7 million to $206.9 million, an increase of 3.9% over the prior year. Comp sales increased 0.8%. By month, comp sales were negative 2.7% in May, positive 4.9% in June, and negative 0.5% in July. Gross profit rate increased 27 basis points in the quarter. Product margin increased 23 basis points due to continued systems improvements and promotional management. Warehouse and store occupancy expenses decreased 4 basis points as a percent of sales. SG&A expenses increased 6.6% in the quarter and increased 67 basis points as a percent of sales. This was partially due to deleverage associated with lower comp sales as well as expenses associated with our omni-channel initiatives. Depreciation and amortization increased 10 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 35.3% which compares to last year's rate of 34%. Operating income of $10.1 million decreased 5.6% from last year and was 4.89% of sales versus 5.38% last year a decrease of 49 basis points. Diluted earnings per share came in at $0.29 per share versus $0.28 last year an increase of 3.6%. From a balance sheet perspective the company ended the quarter with $45.9 million in cash versus $85.3 million last year with no borrowings outstanding on our revolving credit facilities. Inventories increased 16.5% over last year and were 11.6% higher on per store basis. We spent $5.9 million in CapEx for the quarter. Also for the quarter the company bought back 620,000 shares for a total of $21.4 million. At quarter end we have approximately 271 million remaining under the existing purchase authorization. Based on these results for the first quarter Based on these results for the first quarter - for the second quarter, we are updating our full year guidance as follows: for the year, we expect earnings per share to be in the range of $2.93 to $3.02 from the previously reported range of $2.90 to $3.04. Additionally, merchandise margin is expected to be flat to slightly positive compared to a previously reported expectation of relatively flat versus the prior year. With that update, operator, we are now ready for questions.

Thank you. [Operator Instructions] Thank you. Our first question comes from Stephen Tanal of Goldman Sachs. Please go ahead.

Hey, good morning guys. Thanks for taking my question.

Good morning.

Good morning.

I guess just for starters, if you could give us some color on traffic and ticket in the quarter how that looked that would be helpful?

Yes, average ticket was up by mid-single digits and transactions were down mid-singles, so fairly similar to prior quarters.

Got it, I appreciate that. And looking at the SG&A line and, I guess, D&A as well, kind of a two-part question, I guess, I'd ask, is the investment spending to be back-half weighted? It sounds like Demandware is probably just recently signed up, so maybe that would make some sense. But D&A also, I think, we have talked about maybe 30%, 35% deleverage looking a lot better than that. Can you just parse that out and give us some color on how that happened?

Yes, sure Steve. I think it will definitely be more back-half weighted and I think what we'll see my original guidance was an impact of $0.14 to $0.16 per share. And so, I think what we'll see is it will probably be weighted a little more towards SG&A versus D&A. And the reason for that is more SG&A because Demandware is more of a SaaS model and we'll expense more of that development and integration costs with that model. And on the D&A side, it will be slightly less, the rollout of our POS and the timing really will dictate that. So I see a little less impact there, a little more on SG&A, but the overall guidance should be good.

Got it, that's helpful and I guess last one for me just on inventory, it sounds like you guys are well prepared for back-to-school. If you could maybe help us understand how big of the average [ph] that was, obviously a big number, but how we should maybe think about that?

Yes, I think one of our goals for this year was certainly to reset some of the peaks of our inventory. We did that at the end of our fiscal year preparing for the February taxes peak. We've also done at that, preparing for the back-to-school peak in August. We're very comfortable to where the inventory is today and feel very good about the management of that inventory more closely to sales in future quarters. It really came down to two significant peaks in our business that we wanted to ensure we were prepared for and reset the inventory.

Got it, thanks a lot.

Thank you.

Thank you. Our next question comes from Rafe Jadrosich of Bank of America Merrill Lynch. Please go ahead.

Hi, good morning. Thanks for taking my questions.

Good morning.

Good morning. I just wanted to ask first on just the trend in basketball I think from last quarter, you saw a nice sequential acceleration in 2Q. Can you talk about kind of what are the key drivers there?

Yes, I think the big key driver was the Retro Jordan business for the quarter. It was very strong with very iconic strong models as well as the Steph Curry business from Under Armour. It certainly enhanced the stores with that offering, so we feel very good about that. And we did have a somewhat of a resurgence from the Signature side from Nike, a little stronger cost value proposition with regard to KD and LeBron Low as well. So had some fairly significant products that performed better than they did in the prior period.

Okay, thank you that's helpful and then, can you just update us on the timing of the POS system? Are you still planning a 3Q launch and then kind of what benefits we can expect from that?

Sure the POS rollout, where we currently stand we're still in pilot mode for that project. And by the end of Q3 we expect to be well into the rollout. We're – but right now we're kind of in the iteration phase. It is active in several stores right now and we're looking at the system taking feedback from the stores, working with Oracle to make updates, but once we make an update then it takes some time to test that, make sure it's good. So it is in the iteration process, but we are definitely making good progress. And so we think we'll be well into the rollout at the end of the quarter. So that is Phase 1. And then Phase 2 is the store-to-home capability, which we think will be the bigger inflection point. We're still trying to get into pilot by the end of the year for that functionality, but I think on our next call as we get into early fourth quarter, we'll have better visibility to where we stand there.

Great, thank you.

Okay.

Thank you. Our next question comes from Camilo Lyon of Canaccord Genuity. Please go ahead.

Thanks, good morning, guys. I wanted to get your thoughts on the women's business a little bit. Jared, you talked about a little bit of the weakness there. I know you've been working on transitioning some of the product out of it to be more fashionable in performance. If you could just shed a little light there on what's driving the weakness and where you see the opportunity from a margin perspective?

Yes, I think, absolutely thank you. I think we're certainly making progress on the shift from performance to more lifestyle. Unfortunately, the gains that we're getting on the lifestyle side are not offsetting the continued declines on the performance side. If you look at the women's business as a whole and we look at our footwear business, which is performing very well, we are certainly a little further ahead with that shift. So that gives us some confidence that as we continue to shift the apparel business, we can get better. But at the same time, apparel business in general is somewhat challenged, particularly on the performance side and certainly, distribution of athletic based women's products are everywhere. So, I think there are some challenges in the general apparel market. Some of the signs that we're seeing from some of the shifts we've made are starting to pan out for us. We have to assure that those are around more significant piece our business as we go forward.

Would you say that that ubiquity of product is more category-specific or is there actually a brand-specific issue that you're seeing in the marketplace?

No, today for us it's really more category driven. We don't see it as a brand issue at this time. It's really a category issue, particularly around performance.

Okay, and then just shifting gears, could you help us think about what the impact of Florida and the tax shift will do to the third quarter if that's very meaningful for your business?

Yes, Camilo, we don't really think that's going to be a big impact for us at all.

Okay and then just lastly, is there any commentary you could provide, it looks like your - it looks like things slowed into July from a very strong June. Has that trend turned as we get into August and we're getting more into that into the true heart of the back-to-school shopping season?

Yes, that's basically what we saw and it was really more into late June, in fact the last few days of July, rather. Prior to the last few days of July, we were positive comp in the month. And so it's so difficult to reconcile all of the school starting dates and everything, so it is quite volatile during that period. But what we saw in early August is that, that leveled out, the softness we saw in those last couple of days in July.

Okay, perfect. Good luck guys for the rest of the season.

Thank you.

Thanks.

Thank you. Our next question comes from Seth Sigman of Credit Suisse. Please go ahead.

Thanks, good morning guys. Just a follow up on the comps question, did you guys update the comp guidance for the year, is it still expected to be up low singles? And would you expect kind of a similar level in the second half of the year as we saw in the first half?

We were yes, the guidance is still low single. So I just updated the items that changed in the guidance in the release, so everything else is the same and so we are still shooting for low singles for the year.

Okay and any more on just the cadence in the back half? Do you see bigger opportunities in the third quarter or the fourth quarter?

Yes, I think certainly we have some soft numbers in the back half with regard to apparel and particularly in the seasonal categories, so we certainly are hoping to recapture some of that business. There are some headwinds in the fourth quarter with regard to the license business around the Panthers' run to the Super Bowl last year and the Alabama Championships. So we do have some headwinds from that perspective in the fourth quarter. But obviously, the business in seasonal categories was very light a year ago, so we're hopeful that that's an opportunity to capitalize on.

You know we also have some opportunity as we've done the store typing on really getting proper assortments in proper doors. And as we see the allocations in some of the products that come in at the second half of the year, we do have some opportunity there to get a little sharper of what each store gets.

Okay, that's helpful. And then my follow-up is on gross margin, so when you look at the merchandise margin up 20 basis points or so in the first half of the year, which has been a change in trend, I know for a while, you guys have been focused on markdown management, but what's changed more recently that's driven that improvement? And I don't know if there's a way to quantify how much of that is an improvement in the initial or pure merchandise margin maybe due to mix versus the actual selling margin improving because of systems and the promotional strategy as you alluded to?

Yes, we think it's a combination of a lot of the things. I think, first and foremost, some of the systems implementations that we've done with regard to markdown managements are certainly helping. The way we're managing our promotions more holistically is, without question, helping. But I also think, the improvements that we are making from an assortments and allocation perspective are also limiting some of the markdown exposure. Some of it is certainly due to mix, the improvements that we are seeing on the footwear business are helping the margins as well. So it's a combination of quite a few things. It's not one thing. And we'll continue to try and execute across all of them to maintain the improvements that we've seen on the margin line.

Okay, thank you.

Thank you.

Thank you. Our next question comes from Dan Wewer of Raymond James. Please go ahead.

Thanks. The weakness in performance apparel is that due to the growing market share from online competition? That seems to be a product that is selling very well online. Is that the key challenge?

That's certainly a possibility. I think that the general amount of product that's in the marketplace through all channels with regards to performance and certainly compression even down at the mass level has had an impact. It is also not new anymore. And I think today's consumer is looking for new and fresh and things that are a little bit different. So I think there is a lot of reasons for it. Is it one channel that's hurting our business? I can't specifically say that. We did know that business continues to be challenged and we are trying to reset our investments in those categories and take advantage of the other categories that are performing for us.

You talked about the growth in lifestyle in both footwear and apparel. What portion of your revenues is now comprised of lifestyle product and how would that have compared to a year ago?

It's growing and I think as far as the percentage of lifestyle, different categories tend to perform better for a lifestyle. I think, our real initiative is through our store typing lends and ensuring that the assortment is correct for each of our consumer types across the three store types that we are driving. So we do continue to see the opportunity for lifestyle to improve. But at the same time, we want to ensure that we have a strong performance based business as well. So if the trend does shift back to performance, we can take advantage of that as well. So we're really looking at it more from a perspective of what's the right product, what's the right store, and then building it from the bottom up as much as we can.

Okay and I think the last question I have, Jeff in your prepared comments noted that online revenues could grow to 10% of Hibbett's revenues someday. Which product categories do you envision being most important in reaching that 10% contribution?

Sure. I think there's quite a few that, I think, we could definitely expand assortments. We believe footwear is a huge opportunity just the in-stock in conversion levels, which we think would be a big driver. We also think some of our equipment business really is a big opportunity as we think about the team or cleats, if you want to a purple-colored cleat or green or something like that. And we also think size extensions, the 13s, 14s and 15s. So really I think the biggest opportunity is between footwear and the team sports. Maybe a little bit in apparel, but I really think those are the two big drivers.

Okay, thank you.

Thank you.

Thank you. Our next question comes from Peter Benedict - Robert Baird. Please go ahead.

Yes, hey guys. First question is on the product margin outlook for the back half of the year. Clearly, it's been a strong first half. Do you think that the cadence of improvement should continue at that similar pace or do you guys have any thought of maybe investing some of that product margin in trying to drive a stronger top line?

Yes, I think it's a combination of both and we see some expansion opportunities. We also understand the pressures in the marketplace around some of our softer categories, primarily apparel and the team sports category. So we do see some opportunity for expansion. At the same time, we want to balance that expansion we're driving top line as well. So there's a balance there. Some of it will be dictated on how - certainly how our assortments perform and the level of conversion we get from our consumer, but we still see some opportunity. We just want to make sure we're conservative based off of some market pressures around the apparel business.

Okay, thanks. Sure, that makes sense. And then just moving to the warehouse and distribution component of COGS, can you let us know how that did in the quarter relative to sales, whether that was a source of margin improvement?

It was. So we did leverage on that line item, and we deleveraged a bit on store occupancy because of a little bit lower comp sales. So the warehouse logistics function continues to be very efficient and it continues to prove that the automation that we put in that facility and the leadership we have there is really paying off for us.

So Scott, do you do you think that if comps are similar in the second half of the year, call it, low single-digit level, that would continue to drive some leverage and I think historically we thought about a 2% leverage point for that item, is that now lower?

I don’t think it is much lower than that, but I think if we can get close to that number, we should see some slight leverage.

Okay, perfect. Thanks so much.

Thank you.

Thank you.

Thank you. Our next question comes from Rick Nelson of Stephens. Please go ahead.

Okay, I would just like to ask about store growth. We've got 15 net new stores year-to-date. I think at this time last year, you were 26 net stores. How do you feel about the 40 to 50 net store target?

We still feel comfortable that we're in that net range40 to 50. As of today, we still feel comfortable that that's correct as we move throughout the year. Sometimes, it just shifts when they open.

Okay, all right. So I am curious about TSA [ph] and their liquidation sales this quarter, if you thought that to have any impact at all on your business? And how do you see them going away, potential positive impacts that that has with your vendors?

Yes, I think in some cases for us in general, probably didn't affect us that much. There are some categories though, that there was an awful lot of product that was already made that was out there, so it may have affected us a little bit from the equipment standpoint. But what it had done is definitely, the level of importance that we are with the vendors we definitely see a significant uptick there. And we also have found a few locations that Sports Authority was there, and now we can go into the market and feel very comfortable that we could do some volume in some of those markets. So we've actually done a few deals on Sports Authority closure areas. So I think, it's kind of a mixed bag right now, but really didn't have that much impact being across the street from them. We really weren’t in many locations with them.

Okay, thanks a lot Jeff and good luck.

Thanks Rick.

Thank you. Our next question comes from David Magee of SunTrust. Please go ahead.

Yes hi, good morning.

Good morning.

Jared, thanks for the call off for the Atlanta Braves. We were expecting a strong September.

I hope you are right.

With regard to the apparel and the performance piece of it, how do you see that commercial playing out over the next year or so? Do you see something coming down the pipe that might replace performance to a degree in terms of the newness and the technology?

Yes. Again, I think, when it comes down to it, the balance between performance and lifestyle and, I think, the ability to find truly what I would consider to be special apparel products has become a little bit more challenged. So we’re working very hard as a team to try and find some of those more specialized product that as a consumer sees them on the floor, they're really attracted to them. And I think for the performance based business and I think we have to keep in mind the primary colors that you sell in one, two or three or black, black and grey. And I think it's to some degree it becomes somewhat boring on the floor. So I think we are very focused on some of those excitable prints, more novelty type product even though they may be performance fabrications. And as we started to shift to some of those things, we've seen some pretty significant less than our sell-throughs. So it's certainly balance between performance and lifestyle, but it's not just a fabrication story. Its prints, it’s the novelty aspect, and it's truly just about what's excitable product for a consumer to see.

Do you think it will offer meaningful representation of that by the holidays?

We do, and again I think as we look at our apparel business, we have seen certainly some differences in the performances as we look at our three types of stores. And we're seeing the business come back pretty strong in our fashion stores, where we've really started a lot of those investments, and some of the more novelty based product. As we continue to get that to additional locations, we do feel strongly about it. The big – the back half of the year is certainly going to be predicated on weather. So we feel really good about our assortment. We feel very good about the investments we've made, particularly in transitional fabrications. We feel very strong about that. But the business in the back half is going to be predicated on the weather that we get. So I think from an assortment perspective we're comfortable. I think our preference would be that from an apparel perspective that we could take the leap to lifestyle a little bit faster, but we feel good about our assortment, but we'll need the weather for it to perform.

Thank you. And then just secondly with regard to the conversion in the stores and the improvement that you're seeing in footwear, is that – how much more upside would you say you have there with regard to selling the up stock?

Yes, we're seeing the conversions, the out of stock some certainly improve our inventory management group is doing a fantastic job in ensuring that we’re able to convert certainly the positioning of inventory at the proper time, is helping us with that as well. So we are seeing growth in the conversion rates. We still think that the opportunities there are very, very significant from a true store model, but then certainly as we move towards the say the sale model and digital model we still see even further upside. So we have seen improvement. We are seeing improvement that the DC is operating at a fantastic level and getting product to stores faster, but there's still significant upside for us.

Great. Thank you and good luck.

Thank you.

Thank you. Our next question comes from Jim Duffy of Stifel. Please go ahead.

Thanks, good morning. A few questions for you guys and first, can you talk about the relative performance across the [indiscernible] types the fashion specialty, athletic specialty and sports specialty?

Yes, without getting totally specific, our best performing stores were the fashion stores. The athletic group was a little more moderated, and then our sports stores were our worst performing group for the quarter.

And is the contribution of your inventory balanced with the relative momentum of those work type [ph]?

So, I think as we head into this fall we’ve continued to get more balanced and obviously we've put the strategy in place and we’ve bought to the strategy. So over time the inventory will be, have a proper representation across those types. So we see opportunities across all three types and in all categories. What it really comes out to be is how we execute against those opportunities for each consumer.

Okay. And then my last question is just on the inventory. You’ve talked about growth – the sales growth being more in line in future quarters based on the timeline of the see – kind of what you see right now, can we expect that at the end of the third quarter or are we talking more gradual progression perhaps by year end?

No, we don't see it as a gradual projection. Our expectation is that the inventory will be in line at the end of the third quarter. And then hopefully, as we go forward we'll get some leverage on the inventory, now that it's balanced properly and we're peaking at the right times.

Good to hear. Thank you very much.

Thank you.

Thank you. Our next question comes from Sam Poser of Susquehanna. Please go ahead.

Good morning, thanks for taking my questions. I guess number one just a followup on one of the last questions, the conversion rate, can you give us a specific info where it is running about 60% from where was it in the quarter?

It's up around 62%.

Okay. And what – over time, what would be a target?

I think, we need to be well above 70 over time, but certainly our first hurdle was to get to the 65.

Okay, thanks. What kind of - now that Under Armour and Nike have their offices down there and they've been down there a while and working closely with you, what kind of improvements are you seeing in the product, available product you're getting from them and maybe adidas as well, although they're not there yet?

Yes, I think as we have spoken with all of our vendors with regard to our typing strategy and the way we're very focused on each consumer across the types, the vendors have been very, very supportive. So we're seeing access to products improve across all of our vendors. We're certainly seeing our opportunity to cover additional stores with product improve. The strategy is very sound. The strategy was developed in conjunction with our vendors as well. So I think, as we continue to talk through the store typing, continue to assort that way and look for opportunities, we'll continue to see the benefits and improvements from the vendor side.

And two more things; number one, our – is performance and, let's say, fashion lifestyle apparel in women's, that's not mutually exclusive. You can have just really much better, more fashionable performance products, which is what the women is looking for, if I'm thinking about that correctly?

You are absolutely and there are performance fabrications or prints novelty that do lend more to lifestyle, even though they could be in a performance category or a performance fabrication, so you are correct.

So it's not, they are not two different things. It's just basically a variation of making the performance more fashionable, so to speak?

Absolutely correct.

Okay. And then lastly, the timing of back-to-school, I've heard a lot of people talking about despite the fact that there weren't a lot of big moves when people went back to school, that the shopping is happening later, more so very close to and couple of weeks following. Are you seeing any major change in sort of the way people are shopping back-to-school or the kids are shopping now versus prior years? Has anything inflected differently than you might have anticipated?

Yes, the peak of the business by store is getting closer and closer to the actual start date in the market. We are absolutely seeing that. And then certainly after that, I think there is some volatility around start dates. The difference of starting on a Thursday versus the following Monday or vice versa or a week later, we're having significant impact to the volatility over time and it's really on a store-by-store, market-by-market basis.

And I mean, if you compare it to last year, when do you see – when do you foresee that balancing out? I mean, does that mean that like the peak of back-to-school may have, in general, move back 10 days or something for you versus last year? I mean, if we just think about it sort of in a bigger picture?

Yes, at this point, we don't see it moving back that far. I think, it will really take us until we get through Labor Day to really determine what that through peak was and where it peaked by store. But we don't think – I think, 10 days based off on what I'm seeing today is probably a little bit high.

But the peak is still ahead of you, correct?

No, the peak is not.

Okay, all right. Thank you very much, good luck.

Thank you, Sam.

Thank you. Our next question comes from Mark Smith of Feltl and Company. Please go ahead.

Hey good morning guys. First off, a kind of a broad question, can you just talk about the competitive environment, primarily on price? And then what you're seeing from customers today, are you seeing customers cutting spending a bit going into back-to-school or are they still healthy levels?

I believe they are still at healthy levels. Probably the biggest difference we see at a little bit more pronounced this year is that they know exactly what they want. So key styles are really what's driving the business. Maybe it's not as a broad of assortments as before. But if you have the right item, the price really doesn't matter, especially the more special the product is, that makes a huge difference. Where we have seen a little bit of price issues are on some more of the team equipment areas. We're – Sports Authority did have quite a few categories that we're in such as team sports where it has been a little bit more promotional in some of those categories.

And that fits with my next question, which is any insight into early signs in football participation rates this season? And are we seeing that still tick lower? And any negative impact from that?

Yes, we're seeing – and it really depends on the category within football. We're seeing our cleated business be fairly consistent. And certainly from a cleated perspective, I think you need cleats for both tackle football and for flag football, and we do believe that flag football participation is growing. And some of the categories that are specific to tackle football, some of the pads, pants, shoulder pads, helmets, things like that, we're really definitely seeing some compression. So, I think that when we look at the football business as a whole, there's some offsets from tackle football to flag football. But looking at the tackle category specifically, it does feel like there's some compression with regard to the number of players.

Great, thank you.

Thank you.

Thank you. [Operator Instructions] And we do have a followup question from Camilo Lyon of Canaccord Genuity. Please go ahead.

Thanks guys. Just a quick follow up on Signature, Nike Signature. It seems like there's been a little bit of a rebound there. Jared, if you had to say one versus the other, what do you think has been the cause for that uptick in that category? Is it the price reductions or is it the product actually looking better? And on the price reduction, is that something that you are sharing in margin with Nike or is Nike taking that margin hit?

Yes, I mean, the margin complications are below priced, that's a Nike issue. I mean, our margins are not changing with regard to the lower price on some of the product. Yes, I think that some of the product that came out in the second quarter was a little bit more relevant to the market, what was going on first of all with regard to color and style. And then secondly, particularly in both the LeBron shoe and the KD shoe. KD shoe, the price value relationship was much better than what have been there in the prior period. Along with that, we're still seeing very significant sell-throughs on Kyrie's products, which were at a little lower retail price that already had the price value relationship intact. So we feel like it's moving in the right direction. I still think that the price value piece of it is one part. It still comes down to the product, but the product has got to be trend relevant. I think in particular, with second quarter, the low-cut version of the LeBron from a style perspective just looks significantly better than we've had in the past and was priced appropriately, so it's a combination. But we're not sharing the margin. The margin is a complete reset back to our normal margins.

Okay, great. And then any sort of indication on the outlook for that particular category from a cost perspective as you see over the next nine to 12 months?

Yes, I think, the product pipeline is pretty full. I mean, we feel great about the offering with regard to Retro without question. Certainly, the Steph Curry product has performed very, very well. And the Signature product, again, KD has started out pretty strong, and we do feel that the basketball category and Nike has done a nice job from a product perspective and distribution segmentation standpoint. So, we feel like there's some opportunities in the category. It's the same as other categories. The product's got to be right, and we do feel like there's some opportunity there for the back half, especially as how it compares to last year's back half offering.

Fantastic, thank you, for the color. Take care.

Thank you.

Thank you. We have no further questions at this time. I'll turn the call back over to you, Mr. Rosenthal, for any closing remarks.

Thank you very much for being on the call today. We look forward to having you to see our third quarter results in November. I just would like to say we continue to make investments and we continue to see some of the investments starting to pay off as we continue to move down throughout this year. So, thank you very much.

Thank you. Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect all lines. Thank you, and have a good day.