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, Store Operations

Dan Wewer - Raymond James Rafe Jadrosich - Bank of America Stephen Tanal - Goldman Sachs Camilo Lyon - Canaccord Genuity David Magee - SunTrust Peter Benedict - Robert W. Baird Rick Nelson - Stephens Sam Poser - Susquehanna International Group Anthony Lebiedzinski - Sidoti & Company Jim Duffy - Stifel Mitch Kummetz - B. Riley & Company Mark Smith - Feltl and Company Adam Sindler - Deutsche Bank Patrick McKeever - MKM Partners

Ladies and gentlemen, thank you very much for standing by and welcome to Hibbett Sports’ Fourth Quarter Fiscal 2017 Conference Call [Operator Instructions] As a reminder, this conference is being recorded on Friday, March 10, 2017. I would now like to turn the conference over to Pat Watson with Corporate Communications. Please proceed.

Thank you for joining Hibbett Sports to review the company’s financial and operating results for the fourth quarter of fiscal year 2017, which ended on January 28, 2017. 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, March 10, 2017. 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 would 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 fourth 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 weeks ended January 28, 2017 increased 0.5% to $246.9 million compared with $245.7 million for the 13-week period ended January 30, 2016. Comparable store sales decreased 2.2%. However, we did end the year with a positive comp of 0.2%. We were disappointed with sales challenges in the fourth quarter. Weaker traffic during the holiday season lower than expected sales in apparel and equipment led to a comparable store sales decline, but continued to experience strength in our footwear business. We are making significant progress in our store typing initiatives and in our in-stock position on key items in footwear, equipment and apparel. Moving forward, we are excited about the progress we are making on our major initiatives and expect to see meaningful revenue growth for them this year and beyond. Our store POS rollout of store-to-store will be fully rolled out in the next 3 weeks and will give as many levers in helping us run our business more efficiently. We are sowing very positive results so far. Our store to home capability is in pilot mode and scheduled to begin rollout in the first quarter of this year. This will enable us to use our entire chain to locate an item and send directly to our customers’ homes. We are also seeing very positive results while in pilot mode. We are also on track to launch our e-commerce site in the third quarter of this year, which will be fully integrated with our stores and will include an enriched customer loyalty program. Once implemented, we feel these initiatives will provide an outstanding customer experience and will position us to drive long-term growth and shareholder value. For the year, Hibbett opened 65 new stores, expanded 8 high-performing stores, closed 31 underperforming stores, bringing the store base to 1,078 in 35 states as of January 28, 2017. We have opened 3 stores in California. We are very pleased with the results so far. It gives us confidence that we could open many more, not just in the state of California, but as well as many other states throughout the U.S. Our goal to have over 1,500 stores in underserved markets has not changed. This is the year to see the results of our significant investments we made over the past several years. A new distribution center, a new home office, new POS system upgrades and then the omni-channel. All these investments were made to maximize our opportunities and ensure a strong and stable foundation for our success. I would like to thank all of our associates for their hard work. All of this would not be happening without them and their expertise, knowledge, teamwork, extended hours and dedication to Hibbett Sports to ensure positive results. 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. While fourth quarter was more challenging than we would like, we remain confident in our strategy and opportunities that lie ahead. The continued declines of some of our legacy businesses such as performance apparel and footwear, licensed products and equipment continue to reinforce our direction, focusing on sports-inspired fashion products for our stores. We are also excited about the levers such as store-to-home shipping and e-commerce that we believe will help us stabilize some of our poor performing legacy businesses. For the quarter, we saw the negative impacts hurt our sports specialty stores the most. These stores have the highest penetration of legacy categories and we were not able to offset the declines. Our athletic specialty stores fared better as the assortment in these stores is gaining relevancy, but was not able to offset the declines in the legacy categories. Our fashion specialty stores performed exceptionally well as improvements to our assortment resonated with our consumers. These stores have a low penetration of legacy categories. Apparel was down mid single-digits primarily due to impacts in our accessory business. Weakness in team sports-related products, socks and hydration led to declines. Branded apparel was much improved with a very low single-digit decline. Our focus on premium sports-inspired fashion styles performed better than the balance of our assortment. We continue to take a more meaningful position in this product in an effort to stabilize our branded apparel business. From a gender perspective, women’s was down low single-digits, kids down mid single-digits, but men’s was up low single-digits. The license business was down double-digits and remains our most challenged area. The core licensed business continues to be very difficult. This coupled with declines from events in the prior year quarter led to significant declines. Our license team did an excellent job of maximizing the Cubs World Series Championship, Clemson National Championship as well as Falcons Super Bowl run, but they were not large enough to offset the prior year. Our team sports business was down high single-digits. Cleated business was down low single-digits, but equipment was poor, down low double-digits. While fitness was our most challenging area, there was general weakness across all the footwear categories. Footwear performed well for the quarter and was up mid single-digits. All genders were positive led by our men’s business, which was up double-digits. Key styles for the quarter were Retro and True Flight from Jordan; Huarache, Kyrie 3 and Air Force from Nike; and NMD, AlphaBOUNCE Shadow and Superstars from adidas. From an inventory perspective, we were able to close the year below our plan and are expecting improvement in inventory productivity throughout fiscal 2018. We will continue to invest in our footwear business while rightsizing some of our legacy businesses. I will now turn the call over to Scott Bowman to discuss our financial results.

Thank you, Jared and good morning. For the fourth quarter, total sales increased $1.2 million to $246.9 million, an increase of 0.5% over the prior year. Comp sales were down 2.2%. By month, comp sales were negative 0.7% in November, negative 3.4% in December and negative 0.4% in January. Gross profit rate decreased 177 basis points in the quarter. Product margin decreased 118 basis points mainly due to mark-downs associated with liquidating seasonal and aged inventory. Logistics and store occupancy expenses increased 59 basis points as a percent of sales, which was due to de-leverage of these expenses associated with lower comp sales. SG&A expenses increased 7% in the quarter and increased 147 basis points as a percent of sales. This was mainly due to investments in our omni-channel initiative and de-leverage associated with lower comp sales. Depreciation and amortization increased 14% from last year and was up 25 basis points as a percent of sales. This was mainly due to the rollout of our new POS system, investments in our stores and other infrastructure improvements. The income tax rate for the quarter was 36.7%, which compares to last year’s rate of 36.8%. Operating income of $19.1 million decreased 31% from last year and was 7.8% of sales versus 11.2% last year. Diluted earnings per share came in at $0.54 per share versus $0.76 last year, a decrease of 28%. For the full year, I would also like to mention a few highlights. Total sales were up 3.2%, while comp store sales increased 0.2%. Gross profit rate was down 48 basis points while SG&A expenses increased 9.4% and were up 130 basis points as a percent of sales. Operating income decreased 193 basis points to 10% of sales and earnings per diluted share of $2.72 decreased 6.8%. From a balance sheet perspective, the company ended the quarter with $39 million in cash versus $32 million last year with no borrowings outstanding on our revolving credit facilities. Significant progress is made on our inventory position in the quarter with total inventory decreasing by 0.8% over last year and 4% lower on a per store basis. We spent $10.2 million in CapEx for the quarter as we made very good progress on our major initiatives and finished the year at $29.8 million. Also, the company repurchased 324,000 shares for a total of $11.4 million in the quarter and repurchased 1.2 million shares for $43.1 million for the entire year. At quarter end, we had approximately $258 million remaining under the existing purchase authorization. As we turn our focus to fiscal 2018, I would like to provide some highlights related to our guidance. I would like to start with some assumptions in our guidance related to our omni-channel initiative and we will then provide details on our consolidated financials. For our omni-channel initiatives, we expect to spend $7 million to $8 million in capital to complete the rollout of our new POS system, complete the build out of our fulfillment capability and complete the infrastructure workflow of website launch. From an earnings standpoint, we expect to incur an incremental impact of approximately $0.03 to $0.04 per share in fiscal 2018, which will include incremental SG&A and depreciation expense, partially offset by additional revenue. Starting next year, in fiscal 2019, we expect the incremental impact to be a net positive as we ramp up sales and leverage our operating cost. With that update, I would like to now provide details on our consolidated guidance for fiscal 2018. Keep in mind that fiscal 2018 will include 53 weeks versus 52 weeks in fiscal 2017. For the year, we expect comparable store sales to increase in the low single-digit range. We plan to open 50 to 60 new stores and close 25 to 35 stores. We expect earnings per diluted share to be in the range of $2.65 to $2.85, including $0.09 to $0.11 for the 53rd week. For gross margins, we expect our overall rate to be relatively flat. Product margin is expected to decline as a percent of sales due to freight cost associated with store to home and e-commerce sales, although we will see an offset from leverage gained on logistics and store occupancy expenses. With respect to SG&A, we expect to de-leverage by 30 basis points to 40 basis points. Our omni-channel initiative will negatively impact SG&A by 60 basis points to 70 basis points, but we will be partially offset by additional revenue and other expense savings. Depreciation is expected to increase 30 basis points to 35 basis points, mainly due to the capitalization of our new POS system and development costs related to our omni-channel initiative. We expect our tax rate to be approximately 37.5%, which exceeds last year’s rate of 36.7%. The increase is due to an accounting standards change which relates to tax effects of stock-based compensation. Any change in valuation of stock-based compensation between grant date and investing date can now be booked to the P&L rather than the equity section of the balance sheet. For fiscal 2018, the effect of this change will be mostly realized in the first quarter. Our earnings per share guidance reflects the continuation of our share buyback program and we expect to repurchase $45 million to $55 million in stock for the year. For capital expenditures, we expect to spend $25 million to $30 million as we continue investments in our omni-channel initiative, grow our store base and execute on our strategic initiatives to improve the business. With that preview of fiscal 2018, operator, we are now ready for questions.

Absolutely sir. Ladies and gentlemen we will now proceed to the question-and-answer session. [Operator Instructions] Our first question comes from the line of Dan Wewer from Raymond James. Please proceed with your question.

Thank you. Jeff, can you give some more depth on the store typing work that you are doing, maybe give us an indication of how many stores today fall into those three buckets and when you think about the 1,500 store potential nationally, how will they fall into those three categories?

Sure. We continue to refine that, but really, what it has given us between fashion and athletics, specialty and sports is really more of a focused inventory on our consumers, what they want, what they need. You know the fashion doors as Jared mentioned, have performed much better. And as we spoke in the past, we are getting access to more products in some of the other stores, which is a landing us to feel a little bit more confident on where – what stores we open and where we open. And it varies by states and it varies by demographics, but it really gets back to focusing on that consumers needs.

So are we thinking is roughly one-third of the stores are fashion stores today or do you think it’s less than that?

That’s about right.

And then on the other two, are they equally split as well or...?

There is more athletic specialty and then maybe about a third sport, yes.

And long-term, is there an opportunity to convert more of the stores to fashion or are you thinking ultimately, it’s about 500 stores of fashion, 500 athletic and 500 sports?

Dan, it’s Jared, I mean we continue to look at this certainly on a quarterly basis and we will move the stores based off of what the customers are telling us within each store. Our opportunity is to certainly improve the mix of lifestyle or fashion in our sports stores as well as our athletic stores. There is a significant opportunity that we feel like we have strong plans in place to take advantage of. Our initial roll out of store piping occurred within our footwear category. And we are seeing our best results there. So we do feel as we continue to roll the strategy to all categories, hopefully that will lead to better results.

Okay. And then Scott, one question for you, did you – did I understand correctly that the tax rate headwind is going to be most significant in the first quarter and are there any other issues that make the first quarter more challenging compared to the rest of the year?

No, that’s one of the biggest differences Dan. And that’s what I did and for – the tax rate change will be mostly realized in the first quarter and we expect the other quarters to be similar to last year’s rate.

Okay, thank you.

Thank you.

Thank you. And our next question comes from the line of Rafe Jadrosich from Bank of America. Please proceed with your question.

Hi, good morning. Thanks for taking my question.

Good morning.

Jared, I was hoping you could talk a little bit more about this shift to like more lifestyle products in apparel, talking about kind of when that started? And then how you feel you can adjust your assortment going forward to be kind of more on trend for that?

Yes. I think we started it the second half of last year was when we really started getting some stronger deliveries of that product and the goal was to certainly follow our typing strategy and follow the strength of our footwear business. It’s taken a little longer to execute. Frankly, the strength of what we see from the assortment perspective and the sports inspired fashion product is outstanding, but we are seeing deterioration in some of the legacy performance categories that’s happening a little faster than we projected. So we will continue to take a more aggressive stance in shifting that assortment. We feel like that will put us in better position to stabilize branded apparel.

And then the softness on some of the performance of the legacy kind of performance styles, what do you think is driving that? Is that just – is it just the trend shift or do you think there is just more competition in that category?

I think it’s a combination of a lot of things. I don’t think it’s one. Certainly, there is more competition in the category, but I think it more pertains to the consumer today and certainly the younger consumer. This kid is just so well connected from an information perspective and I think they are looking more and more for the latest and greatest and looking more and more to stand out. And they know what’s happening not just across the U.S., but around the world from a fashion perspective. So I think as our kid gets more engaged from a media perspective and they certainly are, I think we will continue to see their efforts personally to become faster and more trend relevant.

Thank you. It’s really helpful. And then just I wanted to follow-up with one more on just the omni-channel outlook. In terms of the 2019 commentary, you said it be incremental, would there be a net positive for fiscal ‘19, is that just on SG&A or is that all-in in terms of the EBITDA contribution?

That’s all in, Rafe. So, the way to think about it is the incremental impact will be a net positive. So, we will still have some increases in expenses and revenue, but we will see some year-over-year positive effects of that.

Okay, great. Thank you.

Thank you.

Thank you, sir. Our next question comes from the line of Stephen Tanal from Goldman Sachs. Please proceed with your question.

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

Good morning.

I just wanted to ask if you can give us any color on sort of tax refunds and what you may have seen there, anything you could help with, I wonder is that shared up in the business at all?

Yes, this is Jared. I mean, certainly, there has not been a secret. The late start of the refund season was certainly impactful. What we have seen as the dollars have flowed into the marketplace, we are very confident in the product that we have and see the customer responding to our assortments. But certainly, we have never seen a shift of that magnitude from a tax refund perspective. We have seen shifts, but nothing to that magnitude. So there is still some time to really fully understand that shift along with some of the other shifts that we see in first quarter, such as Easter shifting from March to April.

Got it. And I think as we think through some of those puts and takes is there anything in the thought process that would say that same-store sales in the first quarter should be materially different than the year?

Yes. I think I will comment on that. I think if you look at the year, the main contributors to our low single comp this year should be our store-to-home capability and our digital business that we will take online in the back of the year. And so, the good way to think about it is that comps should continue to improve a bit quarter-over-quarter throughout the year because of that, so that’s kind of built into the guidance to get to our low single for the entire year.

Got it. And then I just wonder if you would be able to give us a little color. I mean, obviously, the store typing initiative sounds pretty exciting. But could you or would you be willing to share sort of what fashion specialty comped in the quarter versus maybe some of the other store types?

Yes. Jared mentioned a little bit that they did perform better, but we are really not going to give that out.

Okay, alright. Thanks a lot.

Thank you.

Thank you, sir. Our next question comes from Camilo Lyon from Canaccord Genuity. Please proceed with your question.

Thanks. Good morning, gentlemen.

Good morning.

Maybe asking the last question a little differently, could you share what the spread is between your fashion stores and your athletic stores, sports specialty stores?

No. Again, I think, in our initial commentary, I think what we are willing to share is certainly, our best performing store type is our fashion stores followed by our athletic specialty stores and then the weakness is certainly coming more from the sports specialty stores.

Okay. And just thinking more about the discussion around what’s built into the comp guidance. Scott, I think you mentioned there is an expectation for e-comm to be contributing and that’s built into the comp expectation. What changed – I guess, initially, what changed from the flat to low single-digit guidance on comps to now up low singles relative to the last time that we heard from you?

The main thing that’s changed is as we get closer and closer, the more confident we feel about both of those initiatives. We actually have shipped our first store-to-home order and it worked. So, that’s encouraging. Still a little bit ways to go to get rolled out, but we are very encouraged with that capability. And then on the digital initiatives, it’s a testament to the team. I mean the capability of our team and the focus they have on that initiative is outstanding. Both initiatives really – and so it’s really a testament to their hard work to get us to where we are today and to give us confidence that we will be able to launch according to schedule.

Yes. And we also – we started with just store to store and we have seen how well it’s worked for us. So we know once we get store to home going later in the quarter that that will also help.

Got it. And then I guess as we think about the rollout for the e-comm used in the third quarter, how are you guys thinking about if there is any actual store comp leakage as it may shift to online? Is that contemplated in this outlook or you are just thinking about the incrementals that it may add?

No, that is contemplated in the guidance. So, we were conservative on the comp. We expect to add a brick-and-mortar outside of the store-to-home bump that we should see. But we also think that there is going to be benefit both ways. So, there will be a little bit of a blurry line there. When we do go online, we will have that full integration with the stores to see some inventory availability, the ability to return products in stores, to drive further traffic into the stores a little bit better enriched loyalty program. So we are doing some things around that digital launch to really make sure that there is that integration with the stores that should help that leakage now that you mentioned.

Great. And then just finally for me on categories, if you could just talk about – maybe Jared, you could talk about on the footwear side. Generally speaking, it seems like footwear has slowed a little bit from the high single that you are producing previously. Just maybe address that? And then as it relates to basketball versus lifestyle versus running, if you could just address where the acceleration is mostly coming from? And is there a deceleration in one category as the other categories benefit from an acceleration in demand on those trends you are talking about?

Yes. I think from an acceleration perspective, I think from a commentary perspective, what we are really seeing is more fashion forward footwear is really what’s taking share from the performance categories. When you look across the categories within footwear, we have got cool shoes across every category and are very, very pleased with the performance the way the categories are performing. The real trend that we are seeing within footwear, again, is the deterioration around performance product and the consumer moving more towards these fashion-inspired styles.

Is that – so when you say performance, you are talking just running or basketball and running?

No, I am talking performance across the entire portfolio.

Got it, okay. And then just why did it decelerate? Why do you think it decelerated from Q3 high single-digits to mid-singles in footwear?

Well, I think first and foremost when we initially rolled out our store typing strategy, we had some significant gains in the back half of last year. So we are starting to lap some of those, but I also think we have some general view of traffic declines in our stores throughout the period which certainly had an impact, but we weren’t able to offset in some of our stores.

Got it, okay, that’s helpful. Thanks so much. Good luck guys.

Thank you.

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

Yes. Hi guys. Good morning.

Good morning.

I wanted to ask about the fashion stores, geographically, where would they be concentrated, would those be stores that would be closer to major market areas?

Not necessarily. I think it’s very interesting. Our real estate strategy has always been about trying to hone in to these underserved, smaller isolated markets. And we are seeing the same thing through our store typing. And we have fashion stores that are close to major markets, but we also have fashion stores that are in a really, really clean markets. So I think it’s all based off of the demographics as local to the store as we possibly can get. So it’s really across the whole chain from where these stores lie, whether they are sports, athletic or fashion.

Thanks Jared. And then secondly, with regard to the loyalty program and e-commerce, I am curious what sort of tweaks you might make there and what percent of your current business is done by MVP participants at this point?

The current percentage is right around 50% of our sales are done through MVP loyalty members, so it’s a great asset for us that we just haven’t fully utilized up until this point. Some more details will come out closer to the launch. But just from a broad perspective, it will just be more competitive as you look at our peer group in terms of how quickly you earn points and what those points are worth and the ability for us to reach out to those customers in a more differentiated way. We will also have a couple of different tiers to incentivize those customers to get to that next tier. And so that’s kind of the broad view of it and we will have more details come out later in the year.

And David, we just have these capabilities, just got it with the rollout of the new POS, so as we roll that out, we get to e-commerce, so it will be much more enriched than it ever has been. And it gives us a lot of benefit that we just couldn’t pull off of with our old POS.

Great. Thank you, Jeff. Good luck.

Thank you.

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

Thank you. Just a clarification guys, so just on the comp ramp, Scott it didn’t sound like you are necessarily expecting all of the quarters to be positive, but clearly acceleration throughout the year, is that the right way to think about it?

It is, yes.

Okay, perfect. And when we think about the revenue from getting these omni-channel capabilities in the store to home up and running, I mean is 50 basis points to 60 basis points for the year, is that – are we in the neighborhood there in terms of what you think the lift might be and obviously it could be more as it’s in for the full year in 2018, but are we on the right track there?

Yes. I think so. It actually could be a little higher. Those two initiatives, we feel will provide most of our low single-digit increase in comp sales.

Okay, good. And on SG&A Scott, the leverage point beyond this year, can you help us – how do we think about 2018, I think you mentioned in your prepared remarks that you would expect some leverage of your expenses in ‘18, I am just trying to understand you think what kind of comp do you need to leverage SG&A in 2018?

I think in 2018 or fiscal ‘19, it will go down a little bit closer to probably about a 4% rate. And as we continue to ramp up our digital business and store to home, we will continue to see leverage as we gain volume.

Okay, that’s helpful. And then last question just on e-commerce site, I don’t know how much – and I apologize if this was already been asked, but any color on the loyalty program, what’s going to be new. And then when you say store integration, is there going to be a functionality like buy online, pickup in the store, that type of thing? Thanks.

Sure. A couple of important things Peter, on the loyalty program is that you will earn awards more quickly and it will be more kind of in line with our peer group. And then we will have a couple of peers to further incentivize those customers to get to those next year. From a visibility and integration standpoint, there will be very good integration of the program with our digital website and so it will be very visible as you shop and put items in your basket. It will kind of show you your points value and how close you are to the next award. And it also, from a store perspective and online, it will be much easier to sign up customers to get them into the program. So I think everyone will be pleased, there has been a lot of work and research that’s going into it and so I think it will be a nice improvement versus what we have in the past.

Okay. Thank you.

Thank you.

Thank you, sir. Continuing on, our next question comes from the line of Rick Nelson from Stephens. Please proceed with your question.

Thanks. Can you talk to traffic and ticket, what you saw there in the fourth quarter?

Sure, Rick. Traffic or transactions, we measure by transactions, we are down high single-digits and then the average ticket was up mid single-digits.

And Scott or Jeff, what can you do – I guess, what kind of tools do you have in your toolbox to alter that direction in traffic?

There is really a couple of things that we are doing. First off, the store to home capability should certainly improve conversion, so convert more customers that are coming in our stores today and converting those into transactions. I think the other thing with – on the product side, as Jared continues to do great work on, our store typing initiatives, getting the right product in the right stores certainly helped the loyalty program that I have mentioned. It should also help get those folks into the store on a more frequent basis as they redeem awards and accumulate points. And then certainly, when we launch our digital website, that will give us some nice advertising, marketing awareness for our stores, especially when those customers come in to return products, so that should help from a traffic standpoint when we get to that stage.

And just to add to that Rick, as Scott mentioned, the digital piece really gives us the avenue to connect the customer 24/7, which will both drive online traffic and to the store. So there is a lot of things we can do about going to pick up things or just rent things to store. So we really think that’s been our missing link, is being able to get connected 24/7 and make sure that we tell the proper content so people know what we carry. And I think that would be the perfect time to really pull all that together.

Yes. Just one other example too, as we continue to go down the path of launching our digital website, there will be some improvements on search results. We are really doing some good work on search engine optimization. And so in the future, if you go to a search engine and you are searching for sporting goods near me, for example, Hibbett stores will come up much more often than they have in the past.

Thanks for that color. The pilot that you have going with store to home, can you speak to what you are seeing in terms of conversion there or comps or any financial metrics?

It’s much too early. Right now, we are just focused on the functionality and if that’s working and so far so good. And so we are really focused on that right now. And it’s really too early to tell or to measure the financial numbers behind it.

Okay, fair enough. Thanks a lot and good luck.

Thank you, sir. Our next question comes from the line of Sam Poser from Susquehanna International Group, please proceed sir.

Thank you. Good morning guys.

Good morning.

Can you talk about in more detail about this, about sort of the more traditional sports brands Jared and sort of how you are looking at that, what that – definition sort of what brands or items and sort of what that is. And then can you also talk about maybe SKU count reduction across categories?

Yes, sure Sam. I think when you look at it, I mean some of these categories, we call them legacy categories, they are fairly broad. I mean, certainly the business impacts that we are seeing right now are in our licensed product business, particularly with regard to the fan part of the license business that we are seeing a lot of deterioration. Similar results out of our equipment area as well, where I think it starts to get a little bit more item driven is in our apparel business and in our footwear business. And again, anything that I would consider to be performance versus sports-inspired fashion, those are really the differentiators where from a product perspective and apparel as an example compression, very, very performance team sports driven, that’s an area where we have seen some significant decline. So really, the difference is that sports-inspired fashion versus core sports performance those are the differentiators within each category.

And then in footwear, Jared, if I can follow-up, I mean, there has been lots of gray areas there. I mean, back in the shocks days, they wanted to call that performance. I don’t know, it was expensive, but it wasn’t performance. So I guess, the question is what do you – could you give us a couple of examples of what you define as a performance shoe and what you define as a fashion shoe?

Yes, I can without getting into – yes, without getting into too many details, I think that you are right, there is a lot of gray area. I think there is absolutely a lot of subjectivity. And frankly, it’s an item-by-item basis to make that determination. Some styles, as an example, there are performance colors and materials, but then there are other colors and materials of a particular style that actually make it more of a fashion-relevant shoe. So getting real specific on which shoe is which is a little bit difficult, because some of the iterations across each platform or each style, the footwear can really change the shoe to who the end user is. So, we have to look at every item appropriately and try and ensure that we feel that it really has that sports-inspired fashion look to each product. It’s less about the category, it’s less about the style it’s really more about the item. And to that point, in doing that, we have seen the items that we are bringing in dramatically reduce and we still see significant opportunities to reduce our assortment that much further and stay focused on those items that are more fashion inspired that will really drive the business.

Could I just – one last thing, I mean, an example would be like the Nike Pegasus, which is a performance shoe, but they did a lot of fashion and that would take both sides? Is that a fair example of that?

Yes, that’s a fair example, yes.

Because I don’t think that’s an example that you have in your mix. And just the SKU count, I mean, could you give us a percentage across the board of how you are thinking about the SKU count reduction?

Yes. We have been operating in the high-teens and we still see further reduction in that as we go forward. Some of the opportunities to help reduce the SKUs will also be some of the new capabilities around the store to home, where it will start to get leverage across using the inventory across all three types of stores, which will be very helpful as well.

Thanks very much. Good luck.

Thank you.

Thank you, sir. Our next question comes from the line of Anthony Lebiedzinski from Sidoti & Company. Please proceed.

Yes, good morning and thank you for taking the questions. So, just wanted to clarify as far as the timing of the e-commerce rollout, I think you mentioned third quarter, but will that be before the back-to-school season or are you thinking more like September, October?

We are still working on that, Anthony, so stay tuned. As we get further down the road, we will be able to tighten up that a little bit. But for right now, we are saying some time in the third quarter and we are going as fast as we can.

Got it, okay. Thanks for that. And then also as far as the loyalty program, will that be geared – as far as the improvements there, will that be geared towards trying to drive more traffic into the stores or will you be kind of more channel agnostic, how are you approaching that?

Yes. And eventually, we’ll be fairly channel agnostic. We want our customers to shop online and in our stores. And so hopefully, it will drive both.

Got it, okay. And then Scott, you also mentioned in your remarks that there will be some SG&A expenses savings, which areas of the business were you referring to as far as where you can potentially get some savings from?

That’s fairly broad-based, Anthony. I mean, we are always looking for ways to save money here and there without impacting the business. So there is not one particular area. It’s a lot of different areas that add up to some savings that we will continue to look for.

Got it. Alright, thank you very much.

Thanks, Anthony.

Thank you, sir. Our next question comes from the line of Jim Duffy from Stifel. Please proceed with your question.

Thank you and good morning. Couple of questions for me. The first around merchandising direction towards lifestyle and fashion, can you build on your explanation of the operational implications of that? Does that change your buying patterns, buying philosophy at all? And what are any other operational implications in terms of flow of merchandise and so forth?

The implications are for us to get more focused based on the store assortment that we feel are relevant for each store type. It hasn’t necessarily changed the operation of how we go to buy. We do spend and have resourced appropriately some significant improvement to the way we assort. And based on those three types and the typing strategy has also helped us with regard to allocation as well. As the store-to-store capability and store-to-home capabilities continue to improve, we also see opportunities to leverage allocation into those markets as we will know a lot more about those stores and what they are capable of selling.

Okay. Is there a lot of continuity between regions in terms of how they respond to different lifestyle fashion trends or can that vary by region and does it require specific regional merchandising accordingly?

Yes. I think we have always had regional merchandising and there is always trends that are adopted in different parts of the country sooner than others. So, it really comes down to how fast based on where the consumer is, how fast they are willing to adopt the trend.

Fair enough. Last question, Scott, the share repurchases, 45 million to 55 million, is that irrespective of price? Do you have a price sensitivity? What’s kind of the strategy around that?

Yes, the overall strategy is that we would like to be in the market on a regular basis, but we will definitely take advantage of the stock at lower levels.

Fair enough. Thank you.

Thank you.

Thank you.

Thank you, sir. [Operator Instructions] Our next question comes from the line of Mitch Kummetz from B. Riley & Company. Please proceed with your question.

Yes, thanks for taking my questions. First question I have is just on the stores, I think you mentioned – and actually, I just looked it up online. You have got 3 stores in California. The stores that you are opening this year, how many are those going to be in California? And does your strategy in California differ at all from what your overall strategy is just given the void that’s now been left by the bankruptcies of TSA and Sports Chalet?

Sure. We still want to go where the markets are underserved, so we – but we see lots of open space with lots of population where there isn’t very much competition, but we will continue to look and see if there are some spots left void by some of those guys. But right now, it’s really just go to markets where we are underserved.

And can you say how many of the stores that you are opening this year are California stores?

We are still working on it, but it would be a pretty small subset, but we will continue to look at that a little bit more aggressively as the year goes on and probably more for next year than this year.

Got it. And then on the legacy performance apparel, any thoughts on what the product pipeline looks like there? I know that Under Armour has said publicly that they didn’t think their product this holiday season was that great in terms of newness or freshness, but they are kind of doubling down in those areas. I mean, when you look at the pipeline, maybe more into the back half of the year, is there improvement there on the performance side or is it not – is that not really kind of what you are looking to do, you are just looking to build out in other areas where the trend maybe a little bit stronger?

I mean, we are really looking just to build our assortment where the customer is going. From a product pipeline perspective, we feel very good about the rest of the year. From a pipeline perspective, we are a little bit less concerned about the underperformance categories. If the customer tells us that they have interest again in performance categories, then we will certainly move back in that direction. But currently, we are more focused on the lifestyle fashion piece of the business.

Got it. And then lastly, it sounds like the license piece of equipment continues to be through the weaker parts of the business, what can be done there to help improve that performance?

Yes. I think we continue to look at those categories and they are legacy categories and they are still very important to our business and certainly very important to our sports specialty stores primarily. The biggest lever that we will have for those businesses is that both of those businesses will be impacted by our store to store, store to home. And certainly e-commerce will allow it as we get to the latter part of the year. So we feel like those are opportunities that could hopefully help us stabilize some of those businesses.

Got it, alright. Thank you.

Thank you, sir. Our next question comes from the line of Mark Smith from Feltl and Company. Please proceed with your question.

Hi guys. Sorry if you have talked about this, but now that we are through another NFL and college football season, can you just talk about the trends in football and kind of any impact on your business?

We did see some trends with regard to tackle football that we certainly felt like there were some participation gaps. But at the same time, we saw some pretty significant increases in businesses that are more flat football related. So we still believe there is a lot of football being played. And certainly and categorically, it’s changing the way we would look at things. But for us, one of the drivers is certainly with regard to footwear for football, where you need it for tackle or for flagging, we saw better results there than we did on the equipment side, which we believe is due to the flag football influence.

Okay. And then last for me, can you just give us any more insight into how your customer is doing, as we look on where unemployment is, good consumer confidence, how do you feel your customer is doing in the market today?

I feel our customer is doing okay. I think there are some bright spots with the employment picture and wage growth. So I think those are positives. I think there are still some headwinds out there with regard to tuition costs and rent costs and healthcare and so forth. So I think they still see some of those headwinds. But overall, I think the customer is doing okay and hopefully we will improve a bit in next year or so.

Great. Thank you.

Thank you.

Thank you, sir. Our next question comes from the line of Adam Sindler from Deutsche Bank. Please proceed with your question.

Hi, yes. Good morning everyone. Thanks for taking my questions real quickly. Two for sort of on the e-commerce side, first as it relates to the guidance for the year, now sort of more low single-digits relative to flat to low single-digits, I just want to confirm or sort of clarify, it’s not because of what you are seeing sort of quarter-to-date, but more just because of confidence that trends accelerate back into the back part of the year, driven in part by e-commerce, is that – would that be a fair statement?

That is and that’s exactly what’s driving that thought. I mentioned we did have our first store to home shipment and it worked, so that gives us more confidence. And as we get further down the road on both initiatives, we continue to feel more confident.

Okay. And then I guess just secondly, on e-commerce, are you are getting much closer to DTC now, what is baked into your internal plan as it relates to attrition at the store level, just so again sort of thinking about as you ramp on DTC, sort of what you expect to incur in brick-and-mortar?

Yes. I mean I won’t give out an exact number, but what I can tell you is that, we have taken that into account and our assumption on kind of base level brick-and-mortar comps is quite conservative, so we do feel we have that incorporated in the guidance.

Perfect, okay. Thank you so much. I appreciate it.

Thank you.

Thank you, sir. Our next question comes from Patrick McKeever from MKM Partners. Please proceed with your question.

Thank you. Good morning guys. A question on all of the store closures that are either in process or on the horizon in the near-term, thinking mostly the department stores, but not just the department stores and I am just wondering, if you have – if there is anything there that is reflected in guidance, I mean would you expect a negative impact from some of the liquidation sales followed by perhaps, a little bit of an opportunity later in the back half of the year or is it something that’s just not really – maybe outside of your business, something you are not going to see an impact from one way or the other?

Yes. I believe sometimes, obviously, when Sports Authority went out, I think there was a lot more product available in the marketplace, I think now it’s kind of settling in the way it’s going to be. Some of our centers may get affected, but for the most part, we are pretty isolated from a lot of it. And so we don’t think it’s going to have a major impact with the way we look at the business.

Okay. And then on the launch of e-commerce in the back half of the year, what do you think will be sort of a key or what are the key competitive advantages, do you think that you will bring to the marketplace?

Yes. For us being late to the game, we need to make sure that we look like we belonged and we have been doing business for a long time. We really have spent a lot of time. Our digital team and management and a lot of people in this building have spent a lot of time in making sure that we benchmark against all of our competitors and other people out there. So the good thing about being late, if there is something good to it, is that there are so many more functionalities that we will be able to have from the get-go than some people have. So we really have benchmarked the industry and we feel that our product will be at or better than what they have out there. And so we feel pretty confident on what we are doing with it.

Okay. Thanks. And then my last question is on the fourth quarter and the negative 2.2% comp, I mean how much impact do you think there was from e-commerce competition in the quarter, do you think it was greater than the fourth quarter of 2015, do you feel like or you think your core customer is accelerating their spending online or do you think there were other factors that played the more into the performance including just I guess the weakness in traffic across all of bricks-and-mortar retail?

We definitely think that e-commerce played a much bigger role. One of the things that we have really looked at in the last, really, 3 years is really that Cyber Week, it was a dramatic drop in our business during Cyber Week and that’s a pretty large volume week for us. So we have been seeing it gradually go, but this year was so much more dramatic. And it really affected our December tremendously for Cyber Week. And so we know a lot of it’s going there. Obviously, there were other things out in the marketplace that affected our business too, but we think that was the most significant piece within that Cyber Week, Black Friday, those type of things, we are definitely seeing store traffic and revenue go down on those key e-commerce weeks.

Okay, super helpful. Thank you.

Thank you, sir. And we now have a follow-up question from the line of Stephen Tanal from Goldman Sachs. Please proceed with your question.

Sorry guys to keep this going. But two very quick ones, just on the P&L, how much of the 118 basis points of merch margin decline was sort of one-time ish in nature are liquidations versus the mix shift, did you just think about that?

The mix shift was a small component. The majority of it is kind of a one-time adjustment that we have to make to get our inventory in line.

Got it. And then just last one is, the SG&A was pretty tight in the quarter with all that you have going on, I was wondering if like there is anything specific you call out to get our models better calibrate, was there an incentive comp like a swing or anything like that?

There weren’t really any big swings like that. I think overall, we are just a little bit more focused on making sure that we can cut where we can without affecting the business. So it’s a generally tight controls in light of the extra money we are spending on our initiatives.

Alright. Thanks so much.

Thank you.

Thank you, sir. Mr. Rosenthal, there are no further questions at this time. I will now turn the call back to you. Please continue your presentation or your closing remarks.

I would like to thank everyone for being on the call today and look forward to our next call when we report the first quarter. Thank you very much.

Thank you, sir. Ladies and gentlemen, that does conclude the conference call for today. We thank you all for your participation and ask that you please disconnect your lines. Thank you once again. Have a great day.