Patrick Watson - Corporate Communications Jeffry Rosenthal - President and 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

Seth Sigman - Credit Suisse Camilo Lyon - Canaccord Genuity Peter Benedict - Robert W. Baird & Co., Inc. Michael Baker - Deutsche Bank Rafe Jadrosich - Bank of America Merrill Lynch Richard Nelson - Stephens Inc. Samuel Poser - Susquehanna Financial Group David Novak - Consumer Edge Research Peter McGoldrick - Stifel, Nicolaus & Co., Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Hibbett Sports Third Quarter 2019 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Tuesday, November 27, 2018. I would now like to turn the conference over to Mr. Pat Watson with Corporate Communications. Please go ahead, sir.

Thank you everyone for joining Hibbett Sports to review the Company's financial and operating results for the third quarter and first nine months of fiscal year 2019, which ended on November 3, 2018. 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, November 27, 2018. 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, Pat, and good morning, everyone. Welcome to the Hibbett Sports third quarter earnings call. I have with me this morning Scott Bowman, Senior VP and CFO; Jared Briskin, Senior VP, Chief Merchant; and Cathy Pryor, Senior VP of Store Operations. Comparable sales for the 13-week period ending November 3, 2018, increased 0.1%. E-commerce sales increased 62%, and represented 8.8% of total sales for the third quarter. Total net sales decreased $20.9 million, negative 8.8% to $216.9 million compared with $237.8 million for the 13-week period ended October 28, 2017. The year-over-year decrease in net sales included a decrease of approximately $17.3 million due to the week shift resulting from the 53-week last year, and a decrease of $2.4 million due to the sale of the Company’s Team Division in December of 2017. We continue to see good momentum in our branded apparel business, which helps offset softness in our licensed, equipment, and accessory business in the quarter. Footwear comparable sales were relatively flat, although we see upside in the fourth quarter as our depth of premium products continues to improve. Our e-commerce business continues to exceed expectations, and we expect continued traction as we benefit from the enhancements to our mobile app and our new Buy Online, Pick Up in Store, and Reserve in Store capabilities. Also in the third quarter, we closed on the City Gear acquisition. We believe that with their superior customer service, a compelling merchandise assortment, we will add shareholder value for years to come. Our vendor partners are also very excited with the opportunity for growth in the future. Strategically with the City Gear team, we will grow profitably together. For the quarter, Hibbett opened seven new stores, expanded or relocated one store and closed 24 underperforming stores, bringing the store base to 1,042 in 35 states as of November 3, 2018. We will continue to right size our store base in order to improve our profitability. During the quarter, digital sales were up 62% year-over-year. Our strategy and investments in digital commerce drove these gains. The investment included not only our core website, but also best-in-plate class capabilities like our apps, BOPIS and ROPIS, marketing programs as well as intense focus on our overall digital experience. Our e-commerce margins have significantly improved year-over-year. We have significantly shifted from being a clearance vehicle to selling a majority of full-price merchandise. As a result, gross margin dollars were improved year-over-year in the third quarter. Our omnichannel customer spends more than twice as much per year as our store-only customers. We expect to continue growth here as more customers use our website and apps, and also our new BOPIS and ROPIS programs. Although, we launched our loyalty program late Q2 of last year, we are continuing to see year-over-year benefits and growth. Members’ sales totaled 60% of sales versus 56% last year. Total number of sales were up 9% year-over-year. Most of this growth is coming from increased transactions and average value per members. When it comes to digital, CRM and omnichannel mindset is critical. We review these essential elements for growth. We do not have check-the-box mentality. We will continue to play to win. As we move into the fourth quarter, we are optimistic with our City Gear acquisition, our sought-after assortments, our brand partnerships, and our omnichannel capabilities that will connect with our customers that Hibbett and City Gear. I want to thank all of our associates for their hard work and dedication. 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. During the third quarter, we achieved positive comp store sales in apparel, footwear, and our cleated business, declines and accessories, equipment and licensed products impacted comps for the quarter by two percentage points. Our apparel business posted its fourth consecutive comp store gain up high single-digits. Men's apparel was up double-digits, women's apparel up high single-digits, and kids’ apparel declined slightly. Sportswear that is trend relevant and connects with our sneaker business continue to drive our trend, especially in fleece, tees and bottoms, increased investments and extended sizes in both men's and women's apparel also performed well in the quarter. The accessory category was still challenging down mid single-digits, strong gains and backpacks, crossbody bags and sneaker cleaner were offset by challenges in socks. The licensed business was also down high single-digits, while the college business and NFL businesses were much improved during the quarter down low single-digits. This was offset by a significant loss in major league baseball due to the Houston Astros World Series win in the year-ago period. Teamsports business was down mid single-digits. Cleated business was positive overall for the fourth consecutive quarter. Solid comp gains in baseball cleats, soccer cleats, tracks, bikes and volleyball shoes were offset by significant declines in football cleats. Equipment business remains soft down high single-digits. Positive business in baseball, softball and volleyball, did not offset declines in fitness, basketball, and football. Footwear was slightly positive posting the fifth consecutive quarterly comp store gain. Men's business was up high single-digits and there is a strong pipeline of product and we continue to improve our access points and allocations. Women's and kids were down for the quarter. Kids' footwear was significantly impacted by product availability compared to the prior year. From an inventory perspective, we remain much fresher than a year-ago and are confident that our assortments will resonate with our consumer. I'll now turn the call over to Scott Bowman to discuss our financial results.

Thanks, Jared, and good morning. For the third quarter, overall comp sales increased 0.1%. By month, comp sales were 2.8% in August, negative 5% in September and 1.6% in October. Total sale decreased 8.8% at $216.9 million, which was mainly due to a negative impact of $17.3 million from the 53 week-shift and a decrease of $2.4 million related to the sale of our Team Division last year. E-commerce sales continue to show significant growth and represented 8.8% of total sales for the quarter. Gross profit rate increased 51 basis points in the quarter. Product margin increased 113 basis points, mainly due to cleaner inventory and more full-priced selling. Logistics and store occupancy expenses decreased 3.3% compared to last year, but increased 62 basis points as a percent of sales due to deleverage associated with lower sales. SG&A expenses increased 7.5% in the quarter and increased 436 basis points as a percent of sales. The increase as a percent of sales was mainly due to $1.5 million in non-recurring costs related to the acquisition of City Gear, additional investments made during the back-to-school season in marketing and deleverage associated with lower sales. The income tax rate for the quarter was 29.2%, which compared to last year's rate of 35.5%. The reduction was mainly due to the decrease in the federal rate as a result of tax reform. Earnings per share for the quarter was $0.08 per share on a GAAP basis and $0.14 per share on a non-GAAP basis after excluding costs related to the City Gear acquisition. Turning to the balance sheet. The Company ended the quarter with $121 million in cash versus $58 million last year, with $25 million in borrowings outstanding on our revolving credit facilities. As was previously announced, we recently completed the acquisition of City Gear and the purchase price as well as an additional $25 million in borrowings will be adjustments to the cash balance in the fourth quarter. Inventory for the quarter decreased 3% from last year and was up 1% on a per store basis. We spent $6 million in CapEx for the quarter, bringing the year-to-date total to $14 million. Also, the Company repurchased 395,000 shares for a total of $7.6 million in the quarter. Year-to-date, we have purchased 772,000 shares for a total of $16.5 million. At quarter-end, we had approximately $188 million remaining under the existing purchase authorization. Turning to our guidance. We are updating our full-year guidance with the following changes. We are updating earnings per share on a GAAP basis to a range of $1.35 to $1.48, which includes the negative impact of $0.17 to $0.20 per share for non-recurring costs related to the acquisition of City Gear. Excluding these costs, non-GAAP earnings per share are expected to be in the range of $1.55 to $1.65, which compared to previous guidance of $1.57 to $1.75. As a note, we do not expect any material contribution to earning from the City Gear business in the fourth quarter. This is mainly due to clean up of inventory and other activities to prepare the business for next year. Also, for consistency purposes, the following guidance for sales and SG&A expenses relate to the Hibbett business only, which does include some non-recurring acquisition costs. For comp sales, we are updating our guidance to a range of flat to positive 1%. This compared to previous guidance of negative 1% to positive 1%. Also, for total sales, we see a negative impact of $1.8 million in the fourth quarter due to the sale of our Team Division last year and an estimated negative impact of $900,000 due to the week-shift from last year's 53 week. For SG&A expense, we are updating our guidance to an increase of 8.8% to 11.2% on a GAAP basis, which includes acquisition costs related to City Gear. Excluding these costs, we expect an increase of 7% to 9% on a non-GAAP basis, which is consistent with prior guidance. For store growth, we now expect to open approximately 30 stores and closed 82 stores including two closures due to the hurricane impact and 25 anticipated closures for the fourth quarter. This compared to previous guidance of 30 to 35 openings and 55 to 60 closures. We will continue to evaluate our store performance and we will take advantage of our flexible lease structures to improve the productivity of our store base. For share buybacks, we anticipate a total of $18 million to $23 million for the year compared to prior guidance of $40 million to $50 million. With that update, operator, we are now ready for questions.

Thank you. [Operator Instructions] And our first question comes from the line of Seth Sigman with Credit Suisse. Please proceed with your question.

Thanks a lot. Good morning, guys. My first question relates to FY2020 actually, so obviously in this past year, a number of moving pieces here. I'm just curious, are you guys at a point where you could start talking about next year, how to think about the margin outlook? And also specifically as it relates to City Gear, I know you've talked about that being accretive, just any more details on how accretive it could potentially be? How should we be modeling that for next year? Thank you.

We’re not going to get into a whole lot of details right now on next year. We’ll provide the details on our next call. But we definitely anticipate that City Gear will be accretive next year and we'll share much more details on the next call.

Okay. I guess specifically on the margin trends and the margin outlook as it relates to online, this quarter your operating margins were down 340 basis points. Just curious how much of that relates to the channel mix shift that you're seeing with store comps down, but online up. And then, I guess, as you think about the medium- to longer-term, assuming that composition remains, stores down, online up, just sort of bridge us to how margins could stabilize given that composition? Thank you.

Sure. Yes, so we did see some impact on the margin due to the e-commerce business, but it wasn't the largest effect. I mean we did see a fairly sizable effect with the week shift, with over $17 million of revenue coming out of the quarter because of the week shifts, so that did impact that number quite a bit. As we look forward on the e-commerce business, what we're seeing is that even though it has a higher penetration and that will likely continue to grow, the margin rate is actually improving on that business. So that is offsetting the impact to the overall margin.

So it's up year-over-year, but are you able to speak to, I guess, the difference between an online margin and the stores? I assume it still would be dilutive to the base overall?

Yes, it is still dilutive. Not as dilutive as it had been in the past, so that gap has been closing. I think the way to think about it is, the main impacts to that e-commerce margin are naturally the freight cost, but also the fact that it is kind of our go-to clearance outlet. So we will always sell a higher percentage of clearance online than in our stores just by nature of the shopping habits and so that will continue. And so even though we closed the gap with the freight cost, which we think we will do a little bit next year, we'll still see a little bit lower on e-comm just because we'll continue to sell more clearance to that channel.

Gotcha. Okay. Thanks very much.

Sure. Thanks.

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

Thank you. Good morning, everyone. Just had a couple of questions here. First, with your commentary about the fourth quarter and the potential for upside there, I think that was a footwear-related comment. If you could just articulate what you're seeing in that? Is it more just volume increasing? Is it a better Jordan outlook? Or are there new innovations? And if you can speak to the innovation that you see on the footwear side into next year and how that differs from this year? That'd be helpful. And then, I have a follow-up.

Yes. This is Jared. I think, we do see some upside in the fourth quarter for footwear. We believe we stabilized on some inventory position on some real key trend-relevant models. We do see somewhat less of a headwind with regard to the Jordan business as well as we get into the fourth quarter and into next year. But our access points continue to significantly improve, and our allocations are significantly improved. Our vendors have been great partners. So our expectations for fourth quarter and moving forward, we do see a pretty full pipeline of product and are excited to take advantage of it.

Are there any callouts you'd care to mention from either specific launches or brands that are particularly driving the rest of this upside?

Yes. I think, without getting too detailed, we’ve certainly seen significant improvement in our Nike business primarily around the Air Max platform across numerous models, whether it be VaporMax 270, 97s, 95s, very strong results. The Air Force Platinum platform remains very, very strong. And then we’re seeing real significant gains with some of our smaller vendors, including Timberland, PUMA, New Balance, Vans, Reeboks and Brooks. So real excited about the opportunities really across the board. And then certainly from an Adi perspective, still seeing some nice results across platforms like NMD and Yeezy. So we feel like we have a very full portfolio of products that could help drive this quarter and going forward.

That's great. Thank you for that Jared. And if you could maybe give some detail around the apparel piece, you talked about that continued to be a nice contributor to the overall comp on the branded apparel side, any color there would be helpful too?

Yes. So as we continue to ensure that our assortments are as relevant and there is trend as possible, and that really put a full court press within our assortments to follow a lot of our sneaker business and ensure that we have strong connectivity from an outfit perspective. So as we've improved that assortment primarily with Nike and Adi, we've seen some nice gains there along with some additions of some new brands like Champion and Fila, so really excited about the results there. And then as I mentioned in my commentary, we felt like there was a significant whitespace opportunity around extended sizes of women's and big and tall in men's, and we made some pretty substantial investments in both genders and extended sizes and are seeing some nice results from it.

Is there anything on the performance side from a trend perspective that is starting to turn up? Or is this continued – does this continue to be a lifestyle sportswear driven apparel trends that you're seeing?

Yes. I would say it's still a lifestyle trend without question. We have seen some stabilization on the performance side in particular in some of the core products, like compression, and we’re seeing somewhat of resurgence there, but we're still seeing the marketplace more as a sportswear driven category, at least for the foreseeable future.

Great. And then Jeff or Scott, I wanted to get your thoughts on the traffic driving initiatives. It looks like store comps continue to be negative kind of mid-to-high single-digit range in the quarter, what traction are you seeing, if any on a Buy Online Pick up in Store and Reserve Online Pick up in Store, any of those sort of traffic initiative, driving initiatives that you're engaging and those taking hold or does this trend of negative store comps, positive e-comm growth continue to unfold for the foreseeable future? Thank you.

Yes. We launched BOPIS and ROPIS late September, so just really one full month through it. We're seeing over a 10% of our business right now with BOPIS and ROPIS. We're seeing some significant extra attachment rates when people actually come to our stores and pick up. So there was a lot of positives there and we will do some incentives around driving traffic, especially as we get closer to Christmas time, which we think can help drive traffic to our stores still early, but so far very encouraged with the results and it's really as much about educating our customers that we have it. And as I do that, we think that they will continue to drive extra traffic to our stores.

And just to add on that. I'm a little bit, BOPIS and ROPIS and rolled out on our website. All stores were rolled out in October, but we have done some work since than and we recently rolled out the ability to use BOPIS/ROPIS on our mobile app as well. So we think that will be an additional benefit. So far the customers like the program. They're giving at a very high rating 4 out of 5 is kind of the average rating. So we're getting some good feedback. Also getting really good execution from our stores, so the stores have gotten some pretty good practice fulfilling orders, in most cases not having any problem, delivering the product in that 90 minute window. About 20% of the customers are picking up another item when they're in the store and about 75% of the orders or BOPIS and 25% Reserve Online. So some pretty good stats so far, it's still early days, but we're encouraged on kind of the early read on it and will continue to drive in and create more awareness going forward.

So you guys have a good luck in holiday season.

Thank you.

Thank you.

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

Hi, guys. Thanks. First question is just, Scott maybe what's your view on where the consolidated inventory settles out at the end of the year? Now that you're going to have City Gear in there, just how should we think about that and the expected draw on the credit facility, just an update there?

Yes. So overall inventory for Hibbett should be about flat, but then City Gear will be additive to that. And their turns are similar to ours, maybe a tick higher, so that will be additive. And then on the credit facilities, like I said, we do $25 million at the very end of the quarter and then another $25 million at the beginning of the fourth quarter. So for the acquisition of City Gear, we have about $50 million outstanding on the credit facilities and we'll begin to pay that down in the fourth quarter.

Got it. Okay. Thank you on that. And then just on the – can you talk about the type of integration work that you plan on doing with City next year? What parts of the business will be kind of brought into the Hibbett umbrella and then what maybe systems and function are going to remain separate?

Most of the major systems, Peter will continue to be separate as we continue to learn the business and kind of map out a longer-term roadmap from an IT system standpoint. Really the near-term priorities are more from an accounting standpoint to be able to consolidate their financials into Hibbett to get that visibility and to get that mechanism working, doing a lot of work on internal controls, to make sure that they're brought up to standard. And then just from an IT security standpoint, would that be PCI compliance or performance testing on their website and making sure that their website is to cure disaster recovery and so forth. So a lot of it is kind of the backend stuff that we want to make sure that is very solid before we look at more of the business kind of applications, like merchandising and warehouse management. Those will come later as we continue to learn the business and map out a longer term plan.

Okay. That's helpful. And my last question, Scott, just around kind of the occupancy expense outlook now. As you look forward, you bring City Gear into the numbers. I mean, does that business operate at a lower occupancy ratio? I mean, is it kind of thing where you could see occupancy leverage next year even if comps are flattish, let's say, just trying to understand how that dynamic might play out?

Yes. I don't think it's different enough Peter to really make a difference on the overall number. So I wouldn't really model in much difference in our occupancy expense related to City Gear.

Okay, great. Thanks so much.

Thanks Peter.

Our next question comes from the line of Mike Baker with Deutsche Bank. Please proceed with your question.

Hi, thanks. Just a couple of clarifications. Did you say that City for the fourth quarter would be immaterial or not material? And how does that – I think in your press release you had said slightly accretive back when you made the acquisition for the fourth quarter. So is that a change or is that just sort of same idea, just slightly different language?

Yes, just slightly different language. My thought is that we'll get their inventory cleaned up a bit and do some work from a transition standpoint in the fourth quarter, and so the costs from that will offset any favorability from the business itself. And so that's what kind of got me to a flat outlook for fourth quarter for that business.

So does that imply that you saw some inventory that was a little different than you had thought when you made the acquisition that needed to be cleaned up?

No, not materially different. I mean, as we got – until we want to make sure that we end the year as clean as possible on inventory and so as we kind of fine-tune their estimates around what that would take that kind of got me to a flat number.

Okay, thanks. And then one more follow-up just to be clear, the 7% to 9% SG&A increase for the year that I understand that excludes acquisition costs, but does that include any of the City Gear’s operating costs or not?

No, that does not. So that's just for the Hibbett business for consistency purposes. I tried to make it apples-to-apples with the Hibbett business. So as you look at your model, just separately model the City Gear business, knowing that I guided that the overall impact or earnings would be about flat and so model that separately. So that will change the percentages a little bit, but from an earning standpoint it will be about flat.

Yes. Okay, understood. And then finally, one more. You have increased the number of store closures, is that due to the City Gear acquisition? So with all those stores, you maybe need fewer Hibbett stores?

No, we continue to look at unproductive stores and trying to right size everything. It really has nothing to do with the City Gear transaction.

Okay. Thanks. Appreciate the color.

Thank you.

And our next question comes from the line of Rafe Jadrosich with Bank of America Merrill Lynch. Please proceed.

Hi, good morning. Thanks for taking the questions. The first question, can you talk about the promotional environment maybe compared to last year so far through holiday and what you're expecting for the rest of the fourth quarter?

No, I think it's as promotional as it was last year. In some cases, it’s a little bit more aggressive, but still pretty promotional going through the fourth quarter and I expect that to stay that way.

That's helpful. And then Jared, can you just follow-up a little bit on your comments on footwear, especially in terms of decelerated in 3Q from 2Q, kind of what drove the deceleration? And then maybe it will be helpful if you can give a little bit more color on what product availability you’re referencing for women's and kids and why you expect – what gives you confidence that will improve in the fourth quarter?

Yes. So with regard to the deceleration, second quarter last year did not have our e-comm business. Third quarter did, so that's where the deceleration is from a comp standpoint. Regarding the kids inventory, last year for the back-to-school period, we were able to make a very advantageous in-season buy that we took a significant inventory stance. And unfortunately for this year, we’re not able to comp that stand in inventories for the latter part of back-to-school.

So it wasn’t anything – it was last year was unusual. It wasn't anything specific to this year?

No, it was last year unusual. With regard to September as a whole, not specific to footwear. Certainly we saw an impact in the football business as well, but specifically to footwear, the largest impact was in our kids' business due to that advantageous buy in the year-ago period.

Okay. And then my last question will just be on the higher store closures you're planning now than compared to a quarter ago. How should we think about your store closures going forward into next year and after that? Can you talk about how many of your stores are either losing money or are currently below your – the performance metrics you would want to keep them open?

Yes. We'll continue to look at closures. We closed a few more that we said at the beginning of the year. So we continue to look at the return on invested capital in these stores and what the four-wall cash flow is and we’ll continue to look at that. For the foreseeable future, we'll lay out guidance for next year as we get into the fourth quarter, but we continue to look at that pretty closely.

Yes. And the number fluctuates in terms of how many are not profitable or marginal, but I mean we continue to look at that bucket of stores that are at least close to being flat and just go through a process to review those stores and see what we can do to bring them around. In some cases, we can make some changes and show some improvement. But for those stores that we don't see improvement even after those efforts will look to close those doors going forward to keep the store base healthy.

We signed very short leases, so as they come up, we have that flexibility which is one of our strengths.

Okay. Gotcha. That's helpful. Thank you.

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

Hi, good morning. I wanted to follow-up on the store closings and if you could quantify the sales and both the losses of go-away? And is there any commonality among the new store or the mall, base stores or strips and among your three concepts of fashion, athletic and team are they heavily skewed to one of those buckets?

Yes. So I'll start off and I'll let Jeff finish. From a financial standpoint, as you look at our closed stores, I think a good rule of thumb is, that those stores will do, quite a bit less than our average store, maybe about half or so in terms of volume. So the volume impact isn't kind of a one for one, just because those stores are a lower volume to start with. Then as we close those stores, the impact from a closing standpoint, I'm usually isn't too great because we can shift the inventory around and we typically don't have, a big write-offs for those stores because they're not very capital intensive in the first place.

Commonality, Jeff I guess you’re going to hit on that?

Yes, a commonality, some of the markets are maybe a little bit smaller that used to work and now some of those communities just aren't as work as some of the businesses has shifted to more e-comm and some other things, so some of the markets were just a little bit smaller. There are some law closures, sometimes malls go-away and there are some strip centers that maybe there's another strip center on the other side of town. So I would say those are the common themes is really maybe some of the markets are just a little bit too small in today's environment.

And among the three concepts, are they more heavily oriented toward one of three?

It varies, we have a little bit in all, but it's across the Board.

Okay. And Scott buybacks, you renewed your guidance, they're curious what is behind that? Is that City Gear acquisition or some other thing?

Yes, it really related to the acquisition Rick just with the debt that we're taking on that's going to be a priority to paydown that debt. And so that's the main reason of reducing the buyback.

Gotcha, right. Great, thanks. Good luck.

Thanks Rick.

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

Good morning. Jared, what percent of your digital business right now it's happening on the mobile app versus desktop I guess?

I think right now Sam, I think it's close to 20% is on the mobile app.

And is that – are you seeing that pickup through the – is it picking up sort of weekly kind of thing or is it stable?

Yes, over time it has definitely picked up as that awareness has grown and as we continue to make improvements, you know, most recently with the BOPIS/ROPIS capability.

Okay. And then your expectations within your Q4 – implied Q4 guidance for store traffic? Can you give us some idea of what you're thinking about there as far as an improvement or the store comps versus Q3?

Yes. So we measured more in transactions, but we anticipate down mid single-digits are so consistent with recent trends.

Okay. And then Jared, what percent of the launches that you're selling or planning to sell that the improved product mix, you mentioned a few of them, are you selling online versus in the stores right now?

Yes, Sam, we're not going to give that information out, but certainly we believe that, on the launch product that certainly drives, not only traffic to the stores to drive significant traffic to the website and certainly through our app. So that balance – we look at that balance on a weekly basis. There are some other drivers of that that don't make that percentage as consistent, but we look at that on a launch by launch basis and we feel like we make the best decision we can based on the product.

Okay. And then you mentioned that there were some traffic driving initiative to the stores that you were going to use in the fourth quarter. What type of initiatives are those that you mentioned?

Yes. I mean, I can start. I think as BOPIS and ROPIS gains more awareness, I think that will continue to help, especially now that it's on the app. And we continue to do a better job on our email and mobile text, segmenting customer types that we do have some more tools in that area that gives us the ability to be a little bit more specific on our emails and who we send them to and what customer types. So we're still learning in that area, but we have better tools now and we will continue to improve in that area to communicate to our customers with promotions or just what's new in our stores to make sure that that awareness as good as it can be.

Thanks. And then lastly, tax rate full-year, where do you think the whole things going to end up?

For the total year, it should be between 24% and 25%.

So expecting Q4 to be down from Q3 levels?

Yes, it should be down a bit from Q3.

Thank you very much and good luck. Happy holidays.

Thank you.

Our next question is from the line of David Schick with Consumer Edge Research. Please proceed with your question.

Good morning. This is Dave Novak on for Dave Schick. Thanks for taking our question. We wanted to ask about your level of investment going forward and where you stand with some of the buckets that you've invested in this year. You've talked about BOPIS, Reserve Online, merchandise investment, where are you on all those? And how should we think about marketing expenses, wages? Just trying to figure out some of the major buckets of investment that you think you're going to encounter maybe next year or where that you still need to drive the business? Thanks.

Sure. What I see without getting too specific, I think next year we'll have a good chance of doing some good work around optimizing a lot of the functionality that we put in place, this year and even last year. So still a lot of value on some of the tools that we put in place in some of the functionality. And so we'll continue to optimize those new things that we put in place recently. So I think that will be a big theme for next year and then also just some small enhancements. There's always small enhancements to be done on the website, in the mobile app, freshening up our stores, things like that. And so that will be a focus as well. But overall the investment level should be able to come down a little bit because we do have a lot of major functionality already rolled out. From a marketing standpoint, a lot of marketing that we've done this year has really helped the business, but we've also done quite a few tests in different areas to really measure and evaluate different forms of marketing and the payback on that. And so we'll take those learnings and shift some dollars around to get the best return on those dollars. But we do anticipate that marketing dollars will still be fairly high. I don't think we'll see a huge increase next year, but there will be more of shifting those dollars to those areas that have the best return. And then your final question on wages, next year, I'm sure there will still be some wage inflation next year as there normally is, but we don't anticipate any huge changes there.

Great. Thanks for all the color.

Sure.

[Operator Instructions] And our next question comes from the line of Jim Duffy with Stifel. Please proceed with your question.

Hi. This is Peter McGoldrick on for Jim. Thanks for taking my questions. On e-commerce, what have you done to move the business from closed out dominant sales channel to a majority full price channel? Is it solely a function of the makeup of inventory on hand? And is there sales growth impact related to more disciplined selling here? How do you see that full price mix progressing in the future?

Yes. So we'll continue to sell a lot of [inventory] on the web, but as we cleaned up our inventory, it's not as impactful. Last year, as we came into second and third quarter, we had a lot of aged inventory and our inventory is in much better shape, and then continued to focus on premium products, launch products and new innovations. We continue to see more full price selling online. So it's really just a big mix change and not having as much aged as we had a year-ago.

Yes, and we continue to expand our assortment as well. So our assortment continues to improve and get a little bit wider, a lot of good work also being done from an SEO standpoint as the website continues to mature that search engine optimization does get better. And so we see more organic search in terms of traffic. We're also staying pretty aggressive on our loyalty program. We're adding on average about 25,000 loyalty members per week and so that that base of loyalty members will continue to grow and that gives us great opportunity to turnaround and do marketing to those folks whether that be promotions or just news on new products, things like that. So a lot of different things that we're working on there, but those are some of the main reasons why we'll see continued growth next year for that business.

Okay. I was curious on the football cleat business. Do you see pressure here as a continuing trend in the future? Is that a lost team sports customer? Or are you offsetting the pressure elsewhere within team sports?

We're seeing some movement to other sports. Again, I think when we talk football, the tackle football business has certainly been impacted, but we are seeing some improvement in some of the product initiatives we've had around flag football that are offsetting to a degree as well as fall soccer and fall baseball. So some of it is moving, but again, but we do see some of it is also moving away from the team sports aspect as a whole.

Okay. And then just on the store base City Gear, are you adding the full 135 store fleet in fourth quarter? Or are there some closures there? And then on top of that, as you right size the store base, does the acquisition change the thresholds for incremental closures?

It's really two separate things. The first question, yes, those 135 stores will come into the fleet in the fourth quarter and still as we end the year our store count will include those stores. And as far as evaluating new stores, we'll keep the same discipline on return on invested capital for looking at new stores and they need to meet that threshold to have a nice return going forward, whether it would be a City Gear store or Hibbett store.

Thank you.

Sure. End of Q&A

Mr. Rosenthal, there are no further questions at this time. I'll turn the call back to you.

Thank you for being on our call today. We look forward to having you on our fourth quarter call in March. Thank you very much.

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