HIBBETT INC - Annual Report: 2014 (Form 10-K)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.   20549

FORM 10-K

(Mark One)

[  X  ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

or

[      ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(For the transition period from:  __________________________ to __________________________

Commission file number:                                                                      000-20969

HIBBETT SPORTS, INC.

(Exact name of registrant as specified in its charter)

(Address of principal executive offices, including zip code)

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to section 12(g) of the Act:

NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

 

 

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232-405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.      ______

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

 

The aggregate market value of the voting stock held by non-affiliates of the Registrant (assuming for purposes of this calculation that all executive officers and directors are "affiliates") was $1,578,943,516 on August 3, 2013, based on the closing sale price of $61.30 at August 2, 2013 for the common stock on such date on the NASDAQ Global Select Market.

The number of shares outstanding of the Registrant's common stock, as of March 15, 2014, was 25,817,480.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Annual Report to Stockholders for the year ended February 1, 2014 are incorporated by reference into Part II and portions of the Registrant's Proxy Statement for the 2014 Annual Meeting of Stockholders to be held on May 29, 2014 are incorporated by reference into Part III of this Annual Report on Form 10-K.  Registrant's definitive Proxy Statement will be filed with the Securities and Exchange Commission on or before April 24, 2014.

 

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HIBBETT SPORTS, INC.

INDEX

 

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A Warning About Forward-Looking Statements

This document contains "forward-looking statements" as that term is used in the Private Securities Litigation Reform Act of 1995.  Forward-looking statements address future events, developments and results.  They include statements preceded by, followed by or including words such as "believe," "anticipate," "expect," "intend," "plan," "target" or "estimate."  For example, our forward-looking statements include statements regarding:

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our anticipated net sales, including comparable store net sales changes, net sales growth and earnings;

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our growth, including our plans to add, expand or relocate stores and square footage growth, our markets' ability to support such growth and the suitability of our new wholesaling and logistics facility;

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our ability to renew or replace store leases satisfactorily;

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the cost of regulatory compliance, including the costs and possible outcomes of pending legal actions and other contingencies;

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our cash needs, including our ability to fund our future capital expenditures and working capital requirements;

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our analysis of our risk factors and their possible effect on financial results;

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our ability and plans to renew our revolving credit facilities;

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our expectations regarding our capital expenditures;

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our seasonal sales patterns and assumptions concerning customer buying behavior;

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our expectations regarding competition;

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our estimates and assumptions as they relate to preferable tax and financial accounting methods, accruals, inventory valuations, dividends, long-lived assets, store closures, carrying amount and liquidity of financial instruments and fair value of options and other stock-based compensation as well as our estimates of economic and useful lives of depreciable assets and leases;

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our expectations concerning future stock-based award types and our expectations concerning employee stock option exercise behavior;

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the possible effect of inflation, market decline and other economic changes on our costs and profitability, and ability to secure suitable locations for new stores;

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the possible effects of uncertainty within the capital markets, the commercial credit environment and the levels of consumer confidence;

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our analyses of trends as related to earnings performance;

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our target market presence and its expected impact on our net sales growth;

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our expectations concerning vendor level purchases and related discounts;

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our estimates and assumptions related to income tax liabilities, deferred taxes and uncertain tax positions;

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the future reliability of, and cost associated with, our sources of supply, particularly imported goods;

·

the loss of key vendor support; and

·

our ability to mitigate the risk of possible business interruptions.

Our forward-looking statements could be wrong in light of these risks, uncertainties and assumptions.  The future events, developments or results described in this report could turn out to be materially different.  We have no obligation to publicly update or revise our forward-looking statements after the date of this Annual Report and you should not expect us to do so.  Investors should also be aware that while we do, from time to time, communicate with securities analysts and others, we do not, by policy, selectively disclose to them any material non-public information with any statement or report issued by any analyst regardless of the content of the statement or report.  We do not, by policy, confirm forecasts or projections issued by others.  Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.

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Introductory Note

References to "we", "our", "us" and the "Company" used throughout this document refer to Hibbett Sports, Inc. and its subsidiaries as well as its predecessors.  Unless specifically indicated otherwise, any reference to the following years or fiscal years relates to:

PART 1

Item 1.  Business.

Our Company

Our Company began in 1945 under the name Dixie Supply Company in Florence, Alabama.  Although we initially specialized primarily in the marine and small aircraft business, by 1960 we were solely in the sporting goods business.  In 1965, we opened our second store, Dyess & Hibbett Sporting Goods, in Huntsville, Alabama, and hired Mickey Newsome, who is now our Chairman of the Board.  The following year, we opened another sporting goods store in Birmingham and by the end of 1980, we had 12 stores in central and northwest Alabama with a distribution center located in Birmingham and our central accounting office in Florence.  We became a public company in October 1996 when we had 79 stores and were incorporated under the laws of the State of Delaware as Hibbett Sporting Goods, Inc.  We incorporated under the laws of the State of Delaware as Hibbett Sports, Inc. in January 2007, and on February 10, 2007, Hibbett Sports, Inc. became the successor holding company for Hibbett Sporting Goods, Inc., which is now our operating subsidiary.

Today, we operate sporting goods stores in small and mid-sized markets predominantly in the South, Southwest, Mid-Atlantic and the Midwest.  As of February 1, 2014, we operated 927 stores consisting of 910 Hibbett Sports stores and 17 smaller-format Sports Additions athletic shoe stores in 31 states, opening our first stores in Delaware and Pennsylvania in Fiscal 2014.  Our primary retail format and growth vehicle is Hibbett Sports, an approximately 5,000 square foot store located primarily in strip centers, which are usually near a Wal-Mart store.  Approximately 80% of our Hibbett Sports store base is located in strip centers, which includes free-standing stores, while approximately 20% of our Hibbett Sports store base is located in enclosed malls.  We expect to continue our store base growth in strip centers versus enclosed malls.

We offer convenient locations and a broad assortment of brand name quality athletic equipment, footwear, and apparel with a high level of customer service.  Our merchandise assortment emphasizes team sports complemented by localized apparel, footwear and accessories designed to appeal to a wide range of customers within each individual market.

Available Information

We make available free of charge on or through our website under the heading "Investor Relations," certain reports that we file with or furnish to the Securities and Exchange Commission (SEC) in accordance with the Securities Exchange Act of 1934 (Exchange Act).  These include our Annual Reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K.  We make this information available on our website as soon as reasonably practicable after we electronically file the information with or furnish it to the SEC.  In addition to accessing copies of our reports online, you may request a copy of our Annual Report on Form 10-K for the fiscal year ended February 1, 2014, at no charge, by writing to: Investor Relations, Hibbett Sports, Inc., 2700 Milan Court, Birmingham, Alabama 35211.

 

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Reports filed with or furnished to the SEC are also available free of charge upon request by contacting our corporate office at (205) 942-4292.

Our Business Strategy

We target markets with county populations that range from 25,000 to 75,000.  This strong regional focus enables us to achieve significant cost benefits including lower corporate expenses, reduced distribution costs and increased economies of scale from marketing activities.  We use sophisticated information systems to maintain tight controls over inventory and operating costs and continually search for ways to improve efficiencies and the customer experience through information system upgrades.  In addition, we establish greater customer, vendor and landlord recognition as a leading sporting goods retailer in these communities.  We believe our ability to more effectively merchandise to local community sporting interests differentiates us from our national competitors.

We strive to hire enthusiastic sales people with an interest in sports.  Our extensive training program focuses on product knowledge and selling skills and is conducted through the use of in-store clinics, DVDs, self-study courses, interactive group discussions and Hibbett University designed specifically for store management.

Our Store Concepts

Hibbett Sports

Our primary retail format is Hibbett Sports, an approximately 5,000 square foot store located primarily in strip centers, which are usually near a Wal-Mart store.  In considering locations for our Hibbett Sports stores, we take into account the size, demographics, quality of real estate and competitive conditions of each market.  Of these stores, 730 Hibbett Sports stores are located in strip centers, which include free-standing stores, with the remaining 180 stores located in enclosed malls, the majority of which are the only enclosed malls in their county.

Hibbett Sports stores offer a core selection of quality, brand name merchandise with an emphasis on team sports.  This merchandise mix is complemented by a selection of localized apparel, footwear, equipment and accessories designed to appeal to a wide range of customers within each market.  We strive to respond quickly to major sporting events of local interest such as the dominance of the Southeastern Conference and consecutive appearances in the Bowl Championship Series (BCS) National Championship games and similar sporting events in major league baseball, football and basketball.

Sports Additions

 

Team

Hibbett Team Sales, Inc. (Team), a wholly-owned subsidiary of the Company, is a supplier of customized athletic apparel, equipment and footwear primarily to school athletic programs in Alabama and parts of Georgia, Florida and Mississippi.  Team sells its merchandise directly to educational institutions and youth associations.  The operations of Team are independent of the operations of our retail stores.

None of our store concepts meets the quantitative or qualitative requirements of the Accounting Standards Codification (ASC) Topic 280, Segment Reporting.

 

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Our Growth Strategy

We currently have identified markets for our Hibbett Sports stores within the states in which we operate to grow to over 1300 stores.  Our clustered expansion program, which calls for opening new stores primarily within two-hour driving distance of an existing Hibbett location, allows us to take advantage of efficiencies in distribution, marketing and regional management.  It also allows us to build on our understanding of merchandise selection for the local market.  In evaluating potential markets, we consider population, economic conditions, local competitive dynamics, availability of suitable real estate and proximity to existing Hibbett stores.

Omni-channel development.  Store growth will continue to be the cornerstone of our growth strategy.  However, we recognize that our customer is evolving and looking to engage with us in multiple ways.  In Fiscal 2014, we began to develop an omni-channel roadmap that will be used going forward as we focus on engaging our customer specifically in the digital commerce channel.

Our Distribution

We believe strong distribution support for our stores is a critical element of our expansion strategy and is central to our ability to maintain a low cost operating structure.  We also use third-party logistics providers to gain efficiencies of distribution costs to approximately 19% of our outlying stores.  Our new wholesaling and logistics facility will be placed in service in early Fiscal 2015 and has been designed with significant automation and operation efficiencies.  We expect the facility will support our growth over the next several years.

We receive substantially all of our merchandise at our distribution center.  For key products, we maintain backstock at the distribution center that is allocated and distributed to stores through an automatic replenishment system based on inventory levels and sales.  Merchandise is typically delivered to stores weekly via Company-operated vehicles or third-party logistics providers.

 

Our Merchandise

Our merchandising strategy is to provide a broad assortment of quality brand name footwear, apparel, accessories and athletic equipment at competitive prices in a full service environment.

The following table indicates the approximate percentage of net sales represented by each of our major product categories:

We believe that the breadth and the depth of brand name merchandise that we offer consistently exceed the merchandise selection carried by most of our competitors.  Many of these brand name products are highly technical and require considerable sales assistance.  We coordinate with our vendors to educate the sales staff at the store level on new products and trends.

 

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Although the core merchandise assortment tends to be similar for each Hibbett Sports store, important local or regional differences exist.  Accordingly, our stores offer products that reflect preferences for particular sporting activities in each community and local interests in college and professional sports teams.  Our knowledge of these interests, combined with access to leading vendors, enables our merchandising staff to react quickly to emerging trends or special events, such as college or professional championships.

Our merchandising staff, operations staff and management analyze current sporting goods trends primarily through the gathering and analyzing of daily sales activity available through point-of-sale terminals located in the stores.  Other strategic measures we utilize to recognize trends or changes in our industry include:

·    maintaining close relationships with vendors and other retailers;

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studying other retailers for best practices in merchandising;

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attending various trade shows, both in our industry and outside as well as reviewing industry trade publications;

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actively participating in industry associations such as the National Sporting Goods Association (NSGA);

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visiting competitor store locations;

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monitoring product selection at competing stores and online; and

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communicating with our regional vice presidents, district managers and store managers.

Our Vendor Relationships

Our Information Systems

We use technology as an enabler of our business strategies.  We have implemented systems targeted at improving financial control, cost management, inventory control, merchandise planning, logistics, replenishment and product allocation.  In recent years, we have focused on information systems that are designed to be used in all stores, yet are flexible enough to meet the unique needs of each specific store location.

A communications network sends and receives critical business data to and from our stores, providing timely and extensive information on business activity in every location.  Our information is processed in a secure environment to protect both the actual data and the physical assets.  We attempt to mitigate the risk of possible business interruptions by maintaining a disaster recovery plan, which includes storing critical business information off-site.

We strive to maintain highly qualified and motivated individuals to support our information systems, which includes help desk staff, computer operators, programmers, system analysts, business analysts, project managers and a security officer.  Our systems are monitored 24 hours a day.  Our management believes that our current systems and practice of implementing regular updates position us well to support current needs and future growth.  We use a strategic information systems planning process that involves senior management and is integrated into our overall business planning and enterprise risk management.  Information systems projects are prioritized based upon strategic, financial, regulatory and other business criteria.

 

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Our Advertising and Promotion

We target advertising opportunities in our markets to increase the effectiveness of our advertising budget.  Our advertising and promotional spending is centrally directed.  Print advertising, including direct mail catalogs and postcards to customers, has historically served as the foundation of our promotional program and accounted for the majority of our total advertising costs in Fiscal 2014.  Other advertising, such as our MVP customer loyalty program, the Hibbett website, social media, Hibbett trucks and outdoor billboards are used to reinforce Hibbett's name recognition and brand awareness.  By allowing us to reach and interact with our customers on a consistent basis through e-mail, the MVP program marketing effort has become the most efficient, timely and targeted segment of our marketing program.  Digital marketing, including mobile, social networks, website and MVP program marketing, will become a more significant portion of our advertising budget over the next several years.

Our Competition

The business in which we are engaged is highly competitive.  We have competition from national sporting goods chains in some of our large and mid-size markets.  The marketplace for sporting goods is highly fragmented as many different retailers compete for market share by utilizing a variety of store formats and merchandising strategies.  However, we believe the competitive environment for sporting goods is different in smaller markets where retail demand may not support larger format stores.

Our Trademarks

Our Company, by and through subsidiaries, is the owner or licensee of trademarks that are very important to our business.  For the most part, trademarks are valid as long as they are in use and/or their registrations are properly maintained.  Registrations of trademarks can generally be renewed indefinitely as long as the trademarks are in use.

Following is a list of active trademarks registered and owned by the Company:

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Hibbett Sports, Registration No. 2717584

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Sports Additions, Registration No. 1767761

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Hibbett, Registration No. 3275037

Our Executive Officers

Our current executive officers and their prior business experience are as follows:

Jeffry O. Rosenthal, age 56, has been our Chief Executive Officer and President since March 2010.  Formerly, he served as President and Chief Operating Officer from February 2009 through March 2010 and as Vice President of Merchandising from August 1998 through February 2009.  Prior to joining us, Mr. Rosenthal was Vice President and Divisional Merchandise Manager for Apparel with Champs Sports, a division of Foot Locker, Inc. from 1981 to 1998.

Scott J. Bowman, age 47, was hired as our Senior Vice President and Chief Financial Officer in July 2012.  Prior to joining us, Mr. Bowman was Division Chief Financial Officer – Northern Division (Division CFO) of The Home Depot, a large home improvement retailer.  Previously, Mr. Bowman served The Home Depot as their Senior Director, Finance – IT for approximately three years.  In prior retail experience, he has worked in various controller and accounting management positions.

 

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Rebecca A. Jones, age 54, was hired as our Vice President of Merchandising in August 2009 and is currently a Senior Vice President of the Company.  Prior to joining our Company, she served as Vice President/General Merchandise Manager-Crafts at Jo-Ann Fabric and Craft Stores from 2003 to 2009 and as Vice President/Divisional Merchandise Manager at Wal-Mart Stores from 1999 to 2003.  In her prior retail experience, Ms. Jones served in various operations, planning, buying and merchandising positions.

Cathy E. Pryor, age 50, is currently our Senior Vice President of Operations and has been with us since 1988.  She has been our Vice President of Operations since 1995.  Prior to 1995, Ms. Pryor held positions as a district manager and Director of Store Operations.

Effective February 2, 2014, Michael J. Newsome transitioned from Executive Chairman to Chairman of the Board of Directors.

Our Employees

As of February 1, 2014, we employed approximately 2,900 full-time and approximately 5,200 part-time employees, none of whom are represented by a labor union.  The number of part-time employees fluctuates depending on seasonal needs.  We consider our relationship with our employees to be good and have not experienced significant interruptions of operations due to labor disagreements.  We have implemented programs in our stores and corporate offices to ensure that we hire and promote the most qualified employees in a non-discriminatory way.

Employee Development.  We develop our training programs in a continuing effort to service the needs of our customers and employees.  These programs include DVD training in all stores for the latest in technical detail of new products and new operational and customer service techniques.  Because we primarily promote or relocate current employees to serve as managers for new stores, training and assessment of our employees is essential to our sustained growth.

One of the most significant training programs we have is Hibbett University or "Hibbett U", which is an intensive, four-day session designed specifically for store management.

 

Seasonality

We experience seasonal fluctuations in our net sales and results of operations.  Customer buying patterns around the spring sales period and the holiday season historically result in higher first and fourth quarter net sales.  Our third quarter experiences higher net sales, during the back-to-school shopping period combined with tax-free holidays in many of our markets.  In addition, our quarterly results of operations may fluctuate significantly as a result of a variety of factors, including the timing of new store openings, the amount and timing of net sales contributed by new stores, merchandise mix and demand for apparel and accessories driven by local interest in sporting events and significant weather events.

 

Item 1A.  Risk Factors.

You should carefully consider the following risks, as well as the other information contained in this report, before investing in shares of our common stock.  If any of the following risks actually occur, our business could be harmed.  In that case, the trading price of our common stock could decline, and you might lose all or part of your investment.

 

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Risks Related to Our Business and Industry.

A downturn in the economy could adversely affect consumer purchases of discretionary items, which could reduce our net sales.

In general, our sales represent discretionary spending by our customers.  A slowdown in the U.S. economy or other economic conditions affecting disposable consumer income, such as volatile fuel and energy costs, depressed real estate values, employment levels, inflation, deflation, business conditions, consumer debt levels, lack of available credit, interest rates and tax rates may adversely affect our business.  A reduction in customer traffic to our stores or a shift in customer spending to products other than those sold by us or to products sold by us that are less profitable could result in lower net sales, decreases in inventory turnover or a reduction in profitability due to lower margins.

A slower pace of new store openings may negatively impact our net sales growth and operating income and we may be unable to achieve our expansion plans for future growth.

The opening of new retail stores has contributed significantly to our growth in net sales.  In light of the challenging economic environment that has faced real estate developers over the past several years, our new store openings have slowed compared to our historical rate.  We expect that the pressure on the commercial real estate market will ease somewhat throughout Fiscal 2015, and we will be able to increase our overall square footage in Fiscal 2015.

We have grown rapidly, primarily through opening new stores, from 67 stores at the beginning of Fiscal 1997 to 927 stores at February 1, 2014.  Our continued growth depends largely upon our ability to open new stores in a timely manner, to operate them profitably and to manage them effectively.  Additionally, successful expansion is subject to various contingencies, many of which are beyond our control.  In order to open and operate new stores successfully, we must secure leases on suitable sites with acceptable terms, build-out and equip the stores with furnishings and appropriate merchandise, hire and train personnel and integrate the stores into our operations.

We cannot give any assurances that we will be able to continue our expansion plans successfully; that we will be able to achieve results similar to those achieved with prior locations; or that we will be able to continue to manage our growth effectively.  Our failure to achieve our expansion plans could materially and adversely affect our business, financial condition and results of operations.  Furthermore, our operating margins may be impacted in periods in which incremental expenses are incurred as a result of new store openings.

Failure to adequately plan and manage the transition to our new wholesaling and logistics facility may interrupt our operations and lower our operating income.

The lease on our distribution facility expires in December 2014.  In July 2012, we purchased land in Alabaster, Alabama and have almost completed construction on a new wholesaling and logistics facility to replace our current distribution facility.

The planned move of our distribution function entails risks that could cause disruptions in the operation of our business, delays and cost overruns.  Such risks include potential interruption in data flow, shortages of materials; shortages of skilled labor or work stoppages; unforeseen construction, scheduling, engineering, environmental or geological problems; weather interferences or other casualty losses; and unanticipated cost increases.  There is also the risk that we will not adequately adjust our business processes or appropriately manage our work force during the transition.  Failure to adequately plan and manage the relocation efforts or delays and cost overruns in or outside our control, could cause a disruption in our operations and lower our operating income.

We rely heavily on information systems to conduct our business.  Problems with our information systems could disrupt our operations and negatively impact our financial results and materially adversely affect our business operations.

The operation of our business is dependent on the successful integration and operation of our information systems.  We rely on our information systems to effectively manage our sales, distribution, merchandise planning and replenishment, to process financial information and sales transactions and to optimize our overall inventory levels.  We attempt to mitigate the risk of possible business interruptions through change control protocols and a disaster recovery plan, which includes storing critical business information off-site.

 

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Most of our information system infrastructure is centrally located at our headquarters, but we rely on third-party service providers for certain system applications that are hosted remotely or in cloud-based applications.  There is a risk that we may not have adequately addressed risks associated with using third-party providers or cloud-based applications including security issues such as adequate encryption and intrusion detection;  user access control; data separation; the impact of technical problems such as server outages; their disaster recovery capabilities; and exit strategies.   A service provider disruption or failure in any of these areas could have an adverse effect on our business.

We may not have the technology infrastructure to support our current and future information needs.  Insufficient investment in technology, inadequate prevention maintenance, investment in the wrong technology, delayed replacement of obsolete equipment, shifts in technology and inadequate policies to identify our technology needs could have an adverse effect on our business.

Our estimates concerning long-lived assets and store closures may accelerate.

Our long-term success depends, in part, on our ability to operate stores in a manner that achieves appropriate returns on capital invested.  We will only continue to operate existing stores if they meet required sales and profit levels.  In the current macroeconomic environment, the results of our existing stores are impacted not only by a volatile sales environment, but by a number of things that are outside our control, such as the loss of traffic resulting from store closures by other nearby retailers.

The uncertainty of the economy, coupled with the volatility in the capital markets, affects our business and, ultimately, our revenue and profitability.  To the extent our estimates for net sales, gross profit and store expenses are not realized, future assessments of recoverability could result in impairment charges.  In addition, if we were to close stores, we could be subject to costs and charges that may adversely affect our financial results.

Our stores are concentrated within the South, Southwest, Mid-Atlantic and Midwest regions of the United States, which could subject us to regional risks.

Our stores are heavily concentrated in certain regions of the United States.  We are subject to regional risks, such as the regional economy, weather conditions and natural disasters, increasing costs of electricity, oil and natural gas, as well as government regulations specific in the states and localities within which we operate.  We sell a significant amount of team sports merchandise that can be adversely affected by significant weather events that postpone the start of or shorten sports seasons or that limit participation of fans and sports enthusiasts.

The occurrence of severe weather events, catastrophic health events or natural disasters could significantly damage or destroy our retail locations, could prohibit consumers from traveling to our retail locations or could prevent us from resupplying our stores or distribution center, especially during peak shopping seasons.

Unforeseen events, including public health issues and natural disasters such as earthquakes, hurricanes, tornados, snow or ice storms, floods and heavy rains, could disrupt our operations or the operations of our suppliers, as well as the behavior of our consumer.  We believe that we take reasonable precautions to prepare for such events; however, our precautions may not be adequate to deal with such events in the future.  If such events occur in areas in which we have our distribution center or a concentration of retail stores, or if they occur during peak shopping seasons, it could have a material adverse effect on our business, financial condition and results of operations.

Poor performance of college and professional sports teams within our core regions of operation, as well as professional team lockouts, could adversely affect our financial results.

We sell a significant amount of licensed team sports merchandise, the sale of which may be subject to fluctuations based on the success or failure of such teams.  The poor performance by the college and professional sports teams within our core regions of operations, as well as professional team lockouts, could cause our financial results to fluctuate year over year.

 

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Our inability to identify, and anticipate changes in consumer demands and preferences and our inability to respond to such consumer demands in a timely manner could reduce our net sales.

Our products appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to rapid change.  Our success depends on our ability to identify product trends as well as to anticipate and respond to changing merchandise trends and consumer demand in a timely manner.  We cannot assure you that we will be able to continue to offer assortments of products that appeal to our customers or that we will satisfy changing consumer demands in the future.  Accordingly, our business, financial condition and results of operations could be materially and adversely affected if:

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we are unable to identify and respond to emerging trends, including shifts in the popularity of certain products;

·

we miscalculate either the market for the merchandise in our stores or our customers' purchasing habits; or

·

consumer demand unexpectedly shifts away from athletic footwear or our more profitable apparel lines.

In addition, we may be faced with significant excess inventory of some products and missed opportunities for other products, which could decrease our profitability.

If we lose any of our key vendors or any of our key vendors fail to supply us with merchandise, we may not be able to meet the demand of our customers and our net sales could decline.

We are a reseller of manufacturers' branded items and are thereby dependent on the availability of key products and brands.  Our business is dependent to a significant degree upon close relationships with vendors and our ability to purchase brand name merchandise at competitive prices.  As a reseller, we cannot control the supply, design, function or cost of many of the products we offer for sale.  In addition, many of our vendors provide us with return privileges, volume purchasing allowances and cooperative advertising.

We believe that we have long-standing and strong relationships with our vendors and that we have adequate sources of brand name merchandise on competitive terms.  However, the loss or decline of key vendor support could have a material adverse effect on our business, financial condition and results of operations.  We cannot guarantee that we will be able to acquire such merchandise at competitive prices or on competitive terms in the future.  In this regard, certain merchandise that is in high demand may be allocated by vendors based upon the vendors' internal criteria, which is beyond our control.

We also rely on services and products from non-merchandise vendors.  A disruption in these services or products due to the financial condition or inefficient operations of these vendors could adversely affect our business operations.

Our success depends substantially on the value and perception of the brand name merchandise we sell.

Our success is largely dependent on our consumers' perception and connection to the brand names we carry, such as Nike, Under Armour, Reebok, adidas, Easton, The North Face, etc.  Brand value is based in part on our consumer's perception on a variety of subjective qualities so that even an isolated incident could erode brand value and consumer trust, particularly if there is considerable publicity or litigation.  Consumer demand for our products or brands could diminish significantly in the event of erosion of consumer confidence or trust, resulting in lower sales which could have a material adverse effect on our business, financial condition and results of operations.

 

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A disruption in the flow of imported merchandise or an increase in the cost of those goods could significantly decrease our net sales and operating income.

We believe many of our largest vendors source a substantial majority of their products from foreign countries.  Imported goods are generally less expensive than domestic goods and contribute significantly to our favorable profit margins.  We may experience a disruption or increase in the cost of imported vendor products at any time for reasons beyond our control.  If imported merchandise becomes more expensive or unavailable, the transition to alternative sources by our vendors may not occur in time to meet our demands or the demands of our customers.  Products from alternative sources may also be more expensive than those our vendors currently import.  Risks associated with reliance on imported goods include:

·

disruptions in the flow of imported goods because of factors such as:

·

raw material shortages, work stoppages, labor availability and political unrest;

·

problems with oceanic shipping, including blockages or labor union strikes at U.S. or foreign ports; and

·

economic crises and international disputes.

·

increases in the cost of purchasing or shipping foreign merchandise resulting from:

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foreign government regulations;

·

rising commodity prices;

·

changes in currency exchange rates or policies and local economic conditions; and

·

trade restrictions, including import duties, import quotas or loss of "most favored nation" status with the United States.

In addition, to the extent that any foreign manufacturer from whom our vendors are associated may directly or indirectly utilize labor practices that are not commonly accepted in the United States, we could be affected by any resulting negative publicity.

Security threats, including physical and cyber security threats, and unauthorized disclosure of sensitive or confidential information could harm our business and reputation with our consumers.

The protection of Company, customer and employee data is critical to us.  We rely on third-party systems, software and monitoring tools to provide security for processing, transmission and storage of confidential customer and employee information such as payment card and personal information.  Although we have security measures designed to protect against the misappropriation or corruption of our information systems, our systems may still be vulnerable to computer viruses, thefts, cyber attacks, acts of vandalism, programming and/or human errors, disruptions caused by unauthorized tampering or outages caused by natural disasters or other similar events.

Cyber security threats are persistent and evolving.  They include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data.  Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential information, intentional or unintentional, whether by us or our providers, could damage our reputation, expose us to risk of litigation and liability and harm our business.

Pressure from our competitors may force us to reduce our prices or increase our spending, which would lower our net sales, gross profit and operating income.

The business in which we are engaged is highly competitive.  The marketplace for sporting goods is highly fragmented as many different retailers compete for market share by utilizing a variety of store formats and merchandising strategies.  We compete with local sporting goods stores, department and discount stores, traditional shoe stores and mass merchandisers and, on a limited basis, national sporting goods stores.  Many of our competitors have greater financial resources than we do.  In addition, many of our competitors employ price discounting policies that, if intensified, may make it difficult for us to reach our sales goals without reducing our prices.  As a result of this competition, we may also need to spend more on advertising and promotion than we anticipate.  We cannot guarantee that we will continue to be able to compete successfully against existing or future competitors.  Expansion into markets served by our competitors, entry of new competitors or expansion of existing competitors into our markets could be detrimental to our business, financial condition and results of operations.

 

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Our operating results are subject to seasonal and quarterly fluctuations.  Furthermore, our quarterly operating results, including comparable store net sales, will fluctuate and may not be a meaningful indicator of future performance.

We have historically experienced and expect to continue to experience seasonal fluctuations in our net sales, operating income and net income.  Our net sales, operating income and net income are typically higher in the spring, back-to-school and holiday shopping seasons.  An economic downturn during these periods could adversely affect us to a greater extent than if a downturn occurred at other times of the year.

Customer buying patterns around the spring sales period and the holiday season historically result in higher first and fourth quarter net sales.  In the past few years, we have also experienced higher than historical third quarter net sales resulting from the back-to-school period complimented by sales tax holidays in many of our markets.  In addition, our quarterly results of operations may fluctuate significantly as a result of a variety of factors, many outside our control, including the timing of new store openings, the amount and timing of net sales contributed by new stores, merchandise mix, demand for apparel and accessories driven by local interest in sporting events, the disgrace of sports superstars key to certain product promotions or strikes or lockouts involving professional sports teams.  Any of these events, particularly in the fourth quarter, could have a material adverse effect on our business, financial condition and operating results for the entire fiscal year.

Comparable store net sales vary from quarter to quarter, and an unanticipated decline in comparable store net sales may cause the price of our common stock to fluctuate significantly.  Factors which could affect our comparable store net sales results include:

·

shifts in consumer tastes and fashion trends;

·

calendar shifts of holiday or seasonal periods;

·

the timing of income tax refunds to customers;

·

increases in personal income taxes paid by our customers;

·

calendar shifts or cancellations of sales tax-free holidays in certain states;

·

the success or failure of college and professional sports teams within our core regions;

·

changes in the other tenants in the shopping centers in which we are located;

·

pricing, promotions or other actions taken by us or our existing or possible new competitors; and

·

unseasonable weather conditions or natural disasters.

We cannot assure you that comparable store net sales will trend at the rates achieved in prior periods or that rates will not decline.

We would be materially and adversely affected if our single distribution center were shut down.

We currently operate a single distribution center in Birmingham, Alabama.  While we plan to transition to our new wholesaling and logistics facility in early Fiscal 2015, we will continue to receive and ship substantially all of our merchandise at a single facility after the completion of the transition.  Any natural disaster or other serious disruption to this facility would damage a portion of our inventory and could impair our ability to adequately stock our stores and process returns of products to vendors and could adversely affect our net sales and profitability.  In addition, we could incur significantly higher costs and longer lead times associated with distributing our products to our stores during the time it takes for us to reopen or replace the center.

We depend on key personnel, the loss of which may adversely affect our ability to run our business effectively and our results of operations.

We benefit from the leadership and performance of our senior management team and other key employees.  If we lose the services of any of our principal executive officers or other skilled and experienced personnel, we may not be able to fully implement our business strategy or run our business effectively and operating results could suffer.

 

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The Compensation Committee of our Board of Directors reviews a succession plan prepared by senior management in consideration of the loss of key personnel positions on a regular basis.  The goal of the succession plan is to have a contingency plan that minimizes disruptions in the workplace until a suitable replacement can be found, but no assurance can be given that we will be able to retain existing or attract additional qualified personnel when needed.

Provisions in our charter documents and Delaware law might deter acquisition bids for us.

Certain provisions of our certificate of incorporation and bylaws may be deemed to have anti-takeover effects and may discourage, delay or prevent a takeover attempt that a stockholder might consider in its best interest.  These provisions, among other things:

·

classify our Board of Directors into three classes, each of which serves for different three-year periods;

·

provide that a director may be removed by stockholders only for cause by a vote of the holders of not less than two-thirds of our shares entitled to vote;

·

provide that all vacancies on our Board of Directors, including any vacancies resulting from an increase in the number of directors, may be filled by a majority of the remaining directors, even if the number is less than a quorum;

·

provide that special meetings of the common stockholders may only be called by the Board of Directors, the Chairman of the Board of Directors or upon the demand of the holders of a majority of the total voting power of all outstanding securities of the Company entitled to vote at any such special meeting; and

·

call for a vote of the holders of not less than two-thirds of the shares entitled to vote in order to amend the foregoing provisions and certain other provisions of our certificate of incorporation and bylaws.

In addition, our Board of Directors, without further action of the stockholders, is permitted to issue and fix the terms of preferred stock, which may have rights senior to those of common stock.  We are also subject to the Delaware business combination statute, which may render a change in control of us more difficult.  Section 203 of the Delaware General Corporation Laws would be expected to have an anti-takeover effect with respect to transactions not approved in advance by the Board of Directors, including discouraging takeover attempts that might result in a premium over the market price for the shares of common stock held by stockholders.

Increases in transportation costs due to rising fuel costs, climate change regulation and other factors may negatively impact our results of operations.

We rely upon various means of transportation, including ship and truck, to deliver products from vendors to our distribution center and from our distribution center to our stores.  Consequently, our results can vary depending upon the price of fuel.  The price of oil has fluctuated drastically over the last few years.  In addition, efforts to combat climate change through reduction of greenhouse gases may result in higher fuel costs through taxation or other means.  Any such future increases in fuel costs would increase our transportation costs for delivery of product to our distribution center and distribution to our stores, as well as our vendors' transportation costs.

In addition, labor shortages in the transportation industry could negatively affect transportation costs and our ability to supply our stores in a timely manner.  We also rely on efficient and effective operations within our distribution center to ensure accurate product delivery to our stores.  Failure to maintain such operations could adversely affect net sales.

We manage cash and cash equivalents beyond federally insured limits per financial institution and purchase investments not fully guaranteed by the Federal Deposit Insurance Corporation (FDIC), subjecting us to investment and credit availability risks.

We manage cash and cash equivalents in various institutions at levels beyond federally insured limits per institution, and we purchase investments not guaranteed by the FDIC.  Accordingly, there is a risk that we will not recover the full principal of our investments or that their liquidity may be diminished.  In an attempt to mitigate this risk, our investment policy emphasizes preservation of principal and liquidity.  We cannot be assured that we will not experience losses on our deposits.

 

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We face risk that financial institutions may fail to fulfill commitments under our committed credit facilities.

We have financial institutions that are committed to providing loans under our revolving credit facilities.  There is a risk that these institutions cannot deliver against these obligations in a timely matter, or at all.  If the financial institutions that provide these credit facilities were to default on their obligation to fund the commitments, these facilities would not be available to us, which could adversely affect our liquidity and financial condition.  For discussion of our credit facilities, see "Liquidity and Capital Resources" in Item 7 and Note 5 to our consolidated financial statements.

Risks Related to Ownership of Our Common Stock.

The market price of our common stock, like the stock market in general, is likely to be highly volatile.  Factors that could cause fluctuation in our common stock price may include, among other things:

·

actual or anticipated variations in quarterly operating results;

·

changes in financial estimates by investment analysts and our inability to meet or exceed those estimates;

·

additions or departures of key personnel;

·

market rumors or announcements by us or by our competitors of significant acquisitions, divestitures or joint ventures, strategic partnerships, large capital commitments or other strategic initiatives; and

·

sales of our common stock by key personnel or large institutional holders.

Many of these factors are beyond our control and may cause the market price of our common stock to decline, regardless of our operating performance.

Risks Related to Regulatory, Legislative and Legal Matters.

We operate in a number of jurisdictions.  It can be cumbersome to fill needed positions and comply with labor laws and regulations, many of which vary from jurisdiction to jurisdiction.

We are heavily dependent upon our labor force.  Our compensation packages are designed to provide benefits commensurate with our level of expected service.  However, within our retail and our distribution operations, we face the challenge of filling many positions at wage scales that are appropriate to the industry and competitive factors.  We operate in a number of jurisdictions which can make it cumbersome to comply with labor laws and regulations, many of which vary from jurisdiction to jurisdiction.  As a result of these and other factors, we face many external risks and internal factors in meeting our labor needs, including competition for qualified personnel, overall unemployment levels, prevailing wage rates, as well as rising employee benefit costs.  Changes in any of these factors, including a shortage of available workforce in areas in which we operate, could interfere with our ability to adequately service our customers or to open suitable locations and could result in increasing labor costs.

We cannot be assured that we will not experience pressure from labor unions or become the target of labor union campaigns.

While we believe we maintain good relations with our employees, we cannot be assured that we will not experience pressure from labor unions or become the target of labor union campaigns.  The potential for unionization could increase in the United States if Congress passes federal legislation that would facilitate labor organization.  Significant union representation would require us to negotiate wages, salaries, benefits and other terms with many of our employees collectively and could adversely affect our results of operations by increasing our labor costs or otherwise restricting our ability to maximize the efficiency of our operations.

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Changes in federal, state or local laws, or our failure to comply with such laws, could increase our expenses and expose us to legal risks.

Our Company is subject to numerous laws and regulatory matters relating to the conduct of our business.  In addition, certain jurisdictions have taken a particularly aggressive stance with respect to certain matters and have stepped up enforcement, including fines and other sanctions.   Such laws and regulatory matters include:

·     The Americans with Disabilities Act and similar state laws that give civil rights protections to individuals with disabilities in the context of employment, public accommodations and other areas; 

·     The Patient Protection and Affordable Care Act provisions;

·     Labor and employment laws that govern employment matters such as minimum wages, overtime, family leave mandates and workplace safety regulations;

·     Securities and exchange laws and regulations;

·     New or changing laws relating to state and local taxation and licensing, including sales and use tax laws, withholding taxes and property taxes;

·     New or changing laws relating to information security, privacy, cashless payments and consumer credit, protection and fraud;

·     New or changing environmental regulations, including measures related to climate change and greenhouse gas emissions;

·     New or changing laws and regulations concerning product safety or truth in advertising; and

·     New or changing federal and state immigration laws and regulations.

Increasing regulations could expose us to a challenging enforcement environment or to third-party liability (such as monetary recoveries and recoveries of attorney's fees) and could have a material adverse effect on our business and results of operations.

Our corporate legal department monitors regulatory activity and is active in notifying and updating applicable departments and personnel on pertinent matters and legislation.  Our Human Resources (HR) Department leads HR compliance training programs to ensure our field managers are kept abreast of HR-related regulatory activity that affects their areas of responsibility.  We believe that we are in substantial compliance with applicable environment and other laws and regulations, and although no assurance can be given, we do not foresee the need for any significant expenditure in this area in the near future.

Changes in rules related to accounting for income taxes, changes in tax laws in any of the jurisdictions in which we operate or adverse outcomes from audits by taxing authorities could result in an unfavorable change in our effective tax rate.

We operate our business in numerous tax jurisdictions.  As a result, our effective tax rate is derived from a combination of the federal rate and applicable tax rates in the various states in which we operate.  Our effective tax rate may be lower or higher than our tax rates have been in the past due to numerous factors, including the sources of our income and the tax filing positions we take.  We base our estimate of an effective tax rate at any given point in time upon a calculated mix of the tax rates applicable to our Company and on estimates of the amount of business likely to be done in any given jurisdiction.  Changes in rules related to accounting for income taxes, changes in tax laws in any of the jurisdictions in which we operate, expiration of tax credits formerly available, or adverse outcomes from tax audits that we may be subject to in any of the jurisdictions in which we operate could result in an unfavorable change in our effective tax rate.

Litigation may adversely affect our business, financial condition and results of operations.

Our business is subject to the risk of litigation by employees, consumers, suppliers, competitors, stockholders, government agencies or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation.  The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify.  We may incur losses relating to these claims, and in addition, these proceedings could cause us to incur costs and may require us to devote resources to defend against these claims that could adversely affect our results of operations.  For a description of current legal proceedings, see "Part I, Item 3, Legal Proceedings."

 

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Item 1B.  Unresolved Staff Comments.

None.

Item 2.  Properties.

As current leases expire, we believe we will either be able to obtain lease renewals for present store locations or to obtain leases for equivalent or better locations in the same general area.  Historically, we have not experienced any significant difficulty in either renewing leases for existing locations or securing leases for suitable locations for new stores.  However, in recent years, we have experienced some difficulty securing leases for new stores related to new construction due to the economic issues facing the commercial real estate market and landlords, thus reducing our ability to open stores at our historical rates.  This trend has continued, but has improved to some extent each year and into Fiscal 2014.  Based primarily on our belief that we maintain good relations with our landlords, that most of our leases are at approximate market rents and that generally we have been able to secure leases for suitable locations, we believe our lease strategy will not be detrimental to our business, financial condition or results of operations.

 

Store Locations

As of February 1, 2014, we operated 927 stores in 31 contiguous states.  Of these stores, 195 are located in enclosed malls and 732 are located in strip-shopping centers, which are frequently near a Wal-Mart store.  Strip-shopping centers include free-standing stores.  The following shows the number of locations by state as of February 1, 2014:

 

As of March 15, 2014, we operated 931 stores in 31 states.

 

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Item 3.  Legal Proceedings.

We are a party to various legal proceedings incidental to our business.  Where we are able to reasonably estimate an amount of probable loss in these matters based on known facts, we have accrued that amount as a current liability on our balance sheet.  We are not able to reasonably estimate the possible loss or range of loss in excess of the amount accrued for these proceedings based on the information currently available to us, including, among others, (i) uncertainties as to the outcome of pending proceedings (including motions and appeals) and (ii) uncertainties as to the likelihood of settlement and the outcome of any negotiations with respect thereto.  We do not believe that any of these matters will, individually or in the aggregate, have a material effect on our business or financial condition.  We cannot give assurance, however, that one or more of these proceedings will not have a material effect on our results of operations for the period in which they are resolved.  At February 1, 2014 and February 2, 2013, we estimated that the liability related to these matters was approximately $0.2 million and $0.3 million, respectively, and accordingly, we accrued $0.2 million and $0.3 million, respectively, as a current liability in our consolidated balance sheets.

The estimates of our liability for pending and unasserted potential claims do not include litigation costs.  It is our policy to accrue legal fees when it is probable that we will have to defend against known claims or allegations and we can reasonably estimate the amount of the anticipated expense.

From time to time, we enter into certain types of agreements that require us to indemnify parties against third-party claims under certain circumstances.  Generally, these agreements relate to: (a) agreements with vendors and suppliers under which we may provide customary indemnification to our vendors and suppliers in respect to actions they take at our request or otherwise on our behalf; (b) agreements to indemnify vendors against trademark and copyright infringement claims concerning merchandise manufactured specifically for or on behalf of the Company; (c) real estate leases, under which we may agree to indemnify the lessors from claims arising from our use of the property; and (d) agreements with our directors, officers and employees, under which we may agree to indemnify such persons for liabilities arising out of their relationship with us.  We have director and officer liability insurance, which, subject to the policy's conditions, provides coverage for indemnification amounts payable by us with respect to our directors and officers up to specified limits and subject to certain deductibles.

If we believe that a loss is both probable and estimable for a particular matter, the loss is accrued in accordance with the requirements of ASC Topic 450, Contingencies.  With respect to any matter, we could change our belief as to whether a loss is probable or estimable, or its estimate of loss, at any time.

Item 4.  Mine Safety Disclosures.

Not applicable.

 

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PART II

Item 5.  Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock is traded on the NASDAQ Global Select Market (NASDAQ/GS) under the symbol HIBB.  The following table sets forth, for the periods indicated, the high and low sales prices of shares of our Common Stock as reported by NASDAQ.

On March 15, 2014, the last reported sale price for our common stock as quoted by NASDAQ was $55.70 per share.  As of March 15, 2014, we had 35 stockholders of record.

The Stock Price Performance Graph below compares the percentage change in our cumulative total stockholder return on our common stock against a cumulative total return of the NASDAQ Composite Index and the NASDAQ Retail Trade Index.  The graph below outlines returns for the period beginning on January 31, 2009 to January 31, 2014.  We have not paid any dividends.  Total stockholder return for prior periods is not necessarily an indication of future performance.

 

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	01/31/09	01/31/10	01/31/11	01/31/12	01/31/13	01/31/14
Hibbett Sports, Inc.	100.00	155.91	235.27	352.17	386.92	440.93
NASDAQ Composite	100.00	145.73	185.35	196.13	222.33	296.73
NASDAQ Retail Trade	100.00	176.03	231.96	262.10	333.70	401.19

Dividend Policy.  We have never declared or paid any dividends on our common stock.  We currently intend to retain our future earnings to finance the growth and development of our business and for our stock repurchase program, and therefore do not anticipate declaring or paying cash dividends on our common stock for the foreseeable future.  Any future decision to declare or pay dividends will be at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as our Board of Directors deems relevant.

Equity Compensation Plans.  For information on securities authorized for issuance under our equity compensation plans, see "Part III, Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters."

 

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Issuer Repurchases of Equity Securities

The following table presents our shares repurchase activity for the thirteen weeks ended February 1, 2014 (1):

(1)  In November 2012, the Board of Directors authorized a Stock Repurchase Program of $250.0 million to repurchase our common stock through January 29, 2016.   See Note 1, "Stock Repurchase Program."

Item 6.  Selected Consolidated Financial Data.

Note:  No dividends have been declared or paid.

 

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(1)	Represents the increase in comparable store sales for the period ended February 2, 2013 to February 1, 2014.

(2)	As originally reported for the period ended February 2, 2013.

 

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Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations.

	FISCAL 2013
	First Quarter	Second Quarter	Third Quarter	Fourth Quarter	Full Year
Comparable store sales increase (originally reported)	11.1%	4.8%	6.4%	4.9%	6.9%
Comparable store sales increase (adjusted for week shift)	8.6%	12.5%	-0.7%	4.4%	6.0%
Impact of week shift	-2.5%	7.7%	-7.1%	-0.5%	-0.9%

		Fiscal 2014 (52 weeks)				Fiscal 2013 (53 weeks)				Fiscal 2012 (52 weeks)
Net sales (in millions)		$	852.0			$	818.7			$	732.6
Operating income, percentage to net sales			13.4	%			14.2	%			12.8	%
Comparable store sales increase			1.8	%			6.9	%			6.8	%
Net income (in millions)		$	70.9			$	72.6			$	59.1
Net income, percentage (decrease) increase			(2.4	)%			22.9	%			27.3	%
Diluted earnings per share		$	2.70			$	2.72			$	2.15

		Fiscal Year Ended
		February 1, 2014				February 2, 2013				January 28, 2012
Net sales			100.0	%			100.0	%			100.0	%
Costs of goods sold, including distribution and store occupancy costs			63.7				63.5				64.2
Gross profit			36.3				36.5				35.8
Store operating, selling and administrative expenses			21.3				20.8				21.2
Depreciation and amortization			1.6				1.6				1.8
Operating income			13.4				14.2				12.8
Interest (expense) income, net			-				-				-
Income before provision for income taxes			13.4				14.2				12.7
Provision for income taxes			5.0				5.3				4.7
Net income			8.3	%			8.9	%			8.1	%

		Fiscal Year Ended
		February 1, 2014				February 2, 2013				January 28, 2012
Net cash provided by operating activities		$	53,301			$	87,124			$	54,921
Net cash used in investing activities			(50,990	)			(22,318	)			(13,375	)
Net cash used in financing activities			(12,995	)			(43,033	)			(61,925	)
Net (decrease) increase in cash and cash equivalents		$	(10,684	)		$	21,773			$	(20,379	)

		Payment due by period
Contractual Obligations		Less than 1 year				1 - 3 years				3 - 5 years				More than 5 years				Total
Long-term debt obligations		$	-			$	-			$	-			$	-			$	-
Capital lease obligations (1)			331				741				854				1,285				3,211
Interest on capital lease obligations (1)			288				514				405				406				1,613
Operating lease obligations (1)			50,162				71,540				40,428				29,941				192,071
Purchase obligations (2)			4,497				933				21				-				5,451
Other liabilities (3)			515				-				-				2,437				2,952
Total		$	55,793			$	73,728			$	41,708			$	34,069			$	205,298

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

Investment and Credit Availability Risk

We manage cash and cash equivalents in various institutions at levels beyond federally insured limits per institution, and we may purchase investments not guaranteed by the FDIC.  Accordingly, there is a risk that we will not recover the full principal of our investments or that their liquidity may be diminished.  In an attempt to mitigate this risk, our investment policy emphasizes preservation of principal and liquidity.

Interest Rate Risk

Our net exposure to interest rate risk results primarily from interest rate fluctuations on our credit facilities, which bears interest at a rate which varies with LIBOR, prime or federal funds rates.  At the end of Fiscal 2014 and Fiscal 2013, we had no borrowings outstanding under any credit facility, nor did we have any borrowings against either of the facilities during Fiscal 2014 and Fiscal 2013.

 

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Quarterly and Seasonal Fluctuations

We experience seasonal fluctuations in our net sales and results of operations.  Customer buying patterns around the spring sales period and the holiday season historically result in higher first and fourth quarter net sales.  Over the past few years, our third quarter has experienced higher than historical net sales, resulting from back-to-school shopping combined with tax-free holidays in many of our markets.  In addition, our quarterly results of operations may fluctuate significantly as a result of a variety of factors, including the timing of new store openings, the amount and timing of net sales contributed by new stores, merchandise mix and demand for apparel and accessories driven by local interest in sporting events.

Although our operations are influenced by general economic conditions, we do not believe that, historically, inflation has had a material impact on our results of operations as we are generally able to pass along inflationary increases in costs to our customers.

Tax Matters

We do not believe that there are any tax matters that could materially affect our financial condition, results of operations or cash flows.

 

Item 8.  Consolidated Financial Statements and Supplementary Data.

The following consolidated financial statements and supplementary data of our Company are included in response to this item:

 

All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

 

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Hibbett Sports, Inc.:

We have audited the accompanying consolidated balance sheets of Hibbett Sports, Inc. and subsidiaries as of February 1, 2014 and February 2, 2013, and the related consolidated statements of operations, stockholders' investment, and cash flows for each of the years in the three-year period ended February 1, 2014. We also have audited Hibbett Sports, Inc.'s internal control over financial reporting as of February 1, 2014, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Hibbett Sports, Inc.'s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on Hibbett Sports, Inc.'s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hibbett Sports, Inc. and subsidiaries as of February 1, 2014 and February 2, 2013, and the results of their operations and their cash flows for each of the years in the three-year period ended February 1, 2014, in conformity with U.S. generally accepted accounting principles. Also in our opinion, Hibbett Sports, Inc. maintained, in all material respects, effective internal control over financial reporting as of February 1, 2014, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Birmingham, Alabama

March 31, 2014

 

 

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HIBBETT SPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share information)

See accompanying notes to consolidated financial statements.

 

 

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HIBBETT SPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information)

See accompanying notes to consolidated financial statements.

 

 

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HIBBETT SPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except share information)

See accompanying notes to consolidated financial statements.

 

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HIBBETT SPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT

(in thousands, except share information)