Q2 2021 Hibbett Sports Inc Earnings Call
On your telephone if at any time during the conference you need to reach an operator. Please press Star Zero I was a reminder, does conference is being recorded on Friday August 28.
2020, I would now like to turn the conference or to Jason Freuchtel Director of Finance and Investor Relations. Please go ahead.
Good morning. Please note that we have prepared a slide deck that <unk>, we will refer to during our prepared remarks. The slide deck is available on hibbett Dot com via the Investor Relations link down at the bottom of the home page use materials may help you follow along with our discussion this morning.
Before we begin I'd like to remind everyone that someone management's comments. During this conference call are forward looking statements. These statements, which reflect the company's current views with respect to future events and financial performance are made in her life in the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995 and are subject to uncertainties and risks should be no.
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.
And the news release issued this morning, the company's annual report on form 10-K. The most recent quarterly report on form 10-Q, and in other filings Securities and Exchange Commission.
I refer you to do sources for more information also to these non-GAAP financial measures discussed on this call. You made you may find a regular operations that are most directly comparable GAAP measures on our website lastly, I'd like to point out management's remarks, and others are based on information and understand accurate as of today's date August 28 22.
20, because of the time sensitive nature of this information. It is a policy of hibbett sports to limit the archived replay of this conference call with caster period of 30 days.
Just back on this call or Mike long ago, President Chief Executive Officer, Bob <unk>, Chief Financial Officer, Jared Briskin, Senior Vice President and Chief merchant build plan Senior Vice President marketing marketing and digital and then Nitin senior Vice President of operation.
I'll now turn the call over to make long ago.
Thanks, Jason Good morning, and welcome to the Hibbett Sports Q2 earnings call.
We're following along use in the slide deck, Tom on the third slide and title introduction.
This quarter was a remarkable outcome from a financial perspective for the company from sales to gross margin to profits and cash flow. This was an unprecedented quarter as you saw the press release, we reported a nearly 80% sales comp.
With a brick and mortar accomplished 65% and ecommerce of 212%.
This resulted in operating income a bowl $70 million.
Non-GAAP earnings per share $2, a 95 cents.
These remarkable results were made possible by the hard work our 10000, Tim teammates in the stores the store support center and the distribution center. They put in the time they made the right decisions and then.
Very challenging time.
Those those of US on the call are proud to represent our teammates today and we're extremely proud of them and as I'm fond of saying retail is the ultimate team sport and I couldn't have picked a better team to compete work.
Speaking of our team I did want to highlight the press release that came out earlier. This week about recent changes to our store operations team.
These new regional Vice presidents of stores reporting directly to been night in our senior Vice President of ops.
Allow us to both improve our capabilities and better represents our consumer base. We're very excited about the team and their ability to further improve our consumer experience in the stores and in the Omni channel business next slide that we're gonna covers the Coburn response.
As a reminder, since mid March.
Hibbett adopted a stay at so we would remain open in the stores and online as long as it was in compliance with state and local restrictions.
At the same time, we extend to pay a benefit to our full timers in order to help them during that time when their individual stores were closed.
While running those stores, we made sure we followed federal state and local guidelines to ensure the safety of our consumers as well as our employees as a result of these actions when we reopened our stores we were fully staffed and we believe that our consumers felt safe to shop.
And since we continue to do business throughout this time, we reopened with the freshest newest inventory to sell.
So the next slide that we're gonna covers the sales drivers slot and then that we wanted the breakdown. The factors that we believe drove a the second quarter sales and continue to produce strong sales result into Q3.
As we discussed previously on our July Twentyth update.
We believe the increases in sales were driven by a number of factors, including temporary closures of competitors, which we believe gave us the advantage of accessing new consumers both in store and online.
Second one was accelerating consumer adoption of ecommerce that gave us yet another set of new consumers, who could test drive our best in class Omni channel experience.
And the pent up demand from March and the boost from fiscal stimulus gave consumers, both new and existing consumers, even more reasons to shop with us.
Data shows us a handful of important facts that I wanted to highlight first this situation drove traffic to our stores into our website and yielded what we believed to be increased market share and resulting higher sales.
Approximately 27% of store traffic and approximately 49% of our online business came from these new consumers.
Second now that these new consumers have experience our trademark service and best in class Omni channel experience. It's our belief that we have the opportunity to retain many of them and drive higher sales volumes in the future in fact, our data shows that we've done a good job retaining these new consumers so far.
On top of all this we believe that we have tailwinds going into the third quarter and beyond.
We're just now beginning to see the benefits of the permanent closure of a number of competitors and similar businesses, who also sell apparel and footwear. These can pet these competitors, specifically JC Penney and stage stores have announced the closure of approximately 250 stores within two miles of an existing sitting here.
We are hibbett sports location.
That presents a meaningful upside opportunity.
For us in both fashion athletic categories. These are just see announced closures of stores and publicly traded companies in a very narrowly defined channel. The total number of closures will ultimately be higher than that when we include other smaller chains.
In order to capitalize on these opportunities merchandising team led by Jared.
Specific buys for these stores to handle the additional business that we anticipate.
Additionally, we still we believe is continued consumer adoption of omni channel. This plays to our script was our best in class Omnichannel consumer experience.
Finally, we believe that many of the new consumers, we attracted last quarter and continue to attract we'll continue to shop with us in the future.
In total we believe these changes in the competitive landscape and changes to consumer behavior or resulted in an approximate $20 million to $40 million annual incremental sales opportunity for heaven.
For this in a number of other reasons, we're very confident in our future, while we won't likely reported another quarter like this one we do expect continued sales momentum into the third quarter, but before we go any further in the future when I ask Bob bulky to provide some detail on the financial results Bob.
Thanks, Mike and good morning, if you will please refer to the second quarter results slide.
As a reminder, we treat city gear as an extension of the Hibbett business and these results are reported on a combined basis for the second quarter total net sales increased 74.9% to 441.6 million and consolidated comp sales increase 79.2%. This compares to second quarter fiscal 2020 sales of 200.
52.4 million and a comp sales increase a 0.3%.
Brick and mortar comp sales were very strong and came in at 65.2% while the momentum in ecommerce business. We saw at the end of the first quarter carried into the second quarter resulted in a 212.2% comp for the quarter ecommerce sales accounted for 15.7% of net sales compared to 8.6% in the second quarter of last year.
Our GAAP gross margin expanded significantly to 37% of net sales compared to 30.3% in the prior year second quarter. This approximate 670 basis point improvement was due to higher initial sell through a reduction of inventory reserves and leverage of store occupancy costs that are included in our gross margin calculation.
There was a slight offset due to the higher volume of ecommerce sales, which carry a slightly lower margin to the incremental shipping cost cuts sodium associated with the sale.
Excluding the reduction of inventory reserves in the current period adjusted gross margin was 36.7% this year compared to adjusted gross margin of 30.3% last year.
Store operating selling and administrative expenses were 22.6% of net sales in the second quarter compared to 31.8% in the second quarter fiscal 2020. This decrease of approximately 920 basis points was primarily due to the leverage from the strong sales performance, excluding certain expenses related to the cobot 19 pandemic.
And Citi Your acquisition and integration expenses, adjusted SG and I was 19.3% of net sales compared to adjusted EPS DNA of 28.5% in the prior year second quarter.
The primary non-GAAP adjustment in the current quarter was an approximate $14.5 million increase in the liability for the year to earn out related to the Citi. Your acquisition. This was driven by the strong twoq results and the optimistic outlook for the remainder of the fiscal year. Let me remind you that we took an $11 million reduction in this liability in the first quarter based on.
The uncertain business outlook at that time.
Depreciation depreciation and amortization declined approximately $200000 due to store closures in fiscal 2020 as part of the company's strategic alignment plan, partially offset by the new capital expenditures over the last several months.
On a GAAP basis, we generated $56.3 million of operating profit, which compares to last year's operating loss of 11.6 million, excluding all non-GAAP adjustments for the quarter adjusted operating income was $69.7 million or 15.8% of sales compared to an operating loss of 3.2 million in the.
Second quarter of fiscal 2020.
GAAP earnings per share were $2.38 for this year second quarter and non-GAAP earnings per share were $2 a 95 cents.
We generated 175 million of operating cash flow during the quarter and spent approximately $8.4 million in capital most of which was related to new relocated and remodeled stores in the prior year second quarter operating cash flow was 2.1 million and capital expenditures were 3.4 million.
Have you move forward to the year to date results page.
On a year to date basis sales have increased 19.4% to 711.4 million from 595.7 million over the first six months the prior year comp sales on a year to date bases R, 22.2% with brick and mortar posting 8.9% and E commerce coming in at 150.9%.
On a year to date basis ecommerce sales are 18.2% of our total net sales compared to 8.4% for the first half half of last year.
Our GAAP gross margin was 33.4% of net sales compared to 32.7 in the first six months of 2020 of the strong second quarter margin performance lifted the overall year to date results excluding year to date inventory reserve adjustments in the current year and Citi. Your acquisition costs in the prior year adjusted gross margin was 33.9 per se.
This year compared to 32.9% for the first half of last year.
First half GAAP F G and expenses were 26.6% of net sales compared to 25.9% in the first six months of last year. This increase of approximately 70 basis points was primarily due to first quarter adjustments for noncash intangible impairments attributable to the cobot 19 pandemic adjusted EPS Geneight was 21.
Percent for the first six months the current year compared to 24.2% for the same period last year.
On a GAAP basis, we produced 34.2 million of year to date operating profit compared to last year's operating profit of 25.7 million, excluding all non-GAAP adjustments in both years. Adjusted operating income was 77.5 million this year compared to operating profit of 36.8 million for the first half of last year.
Year to date earnings per share were $1.50 for the current year compared to a dollar five in the prior fiscal year and non-GAAP earnings per share were threethirty this year compared to $1.50 for the comparable period of fiscal 2020.
We generated 178.9 million of operating cash flow year to date basis, and have spent $12.5 million and capital once again with a focus on new relocated and remodeled stores over the first six months. The prior year operating cash flow was 74.1 million and capital expenditures were 5.9 million.
Turning to the balance sheet, we ended the quarter with $217.8 million cash versus 97.8 million a year ago, we paid off all amounts outstanding under our secured credit line during the quarter and currently have no debt, we have 75 million a borrowing capacity available to us, but do not anticipate the need to borrow under secured secured credit line on curve.
Based on current cash projections.
Inventory at the ended the quarter is 182 million a 32.7% declined from last year's second fiscal quarter. The strong sales in both the brick and mortar and online channels drove the decrease.
We did not purchased any shares during the second quarter under our authorized share repurchase plan. We have just over 143 million remaining authorization through January 29, 2022 for future share repurchases at management's discretion.
Ill now turn the call over to Jarrett for review of merchandising. Thanks, Bob If you will refer to the merchandising slide.
Our incredible comp performance was driven by apparel and footwear with significant gains in sales and share of our mix team sports was impacted by the that was down in the mid teens had a reduced share of our mix.
Apparel business was up in the mid eighties. This increase was driven primarily by significant gains and branded apparel licensed products and accessories. All genders were significantly positive within our apparel business sneaker connectivity nurse augment remain critical and helped us achieve growth of units in the transaction as well as transaction dollar growth.
From the athletic brands, we saw acceleration in our performance business as well as the lifestyle business. This was driven as fitness wellness and casual lifestyle trends all accelerator.
Our fashion brand performance was exceptional as we're able to capitalize on strong performances in denim twill entities.
Our licensed product business that significant growth in the quarter as we advanced our strategy of sneaker activity caps jerseys NTS all performed well.
Accessory business also achieved significant growth as Sox hydration and sunglasses, all were significant Gators, new category investment and masks and underwear added incremental sales and our quickly becoming meaningful categories.
Footwear business was up in the mid Ninetys. This increase was driven by significant gains across performance lifestyle basketball and our sandal category, which includes slides all genders were significantly positive with women's growth outpacing men's and kids in the performance business the health and wellness.
Trend acceleration lined up with our investment strategy and business was very strong lifestyle and basketball results were explosive during the quarter as the launch calendar was favorable and key franchises sold through very quickly.
Slides and sandals also saw significant acceleration as consumers are spending more time at home being impacted by coated.
Specific to footwear and apparel, our women's business was exceptional growing triple digits for the quarter. This was followed closely by men's which grew in the mid Eightys and kids, which grew in the mid seventies.
Inventory at the ended the quarter was significantly down this as a result of increased sales as well as a fantastic job of inventory management by our team.
Inventory declines will moderate in the back half, we've made appropriate investments to balance our trend with potential uncertainty.
Aged inventory is slightly elevated mostly due to the effective cobot on team sports. Our team is manage this incredibly well and we do not see this as or risks moving forward I'll now turn the call back over to Mike.
Well, we'll please turn to the final slide called future.
We're confident in our ability to deliver improvements to the business second half of fiscal year 21.
And anticipate that several of the factors that we noted earlier that drove sales will continue into the second half most notably permanent competitive closures are best in class Omnichannel platform and new consumer retention.
Additionally, a number of initiatives runway that will significantly improve our connectivity to the consumer and drive further competitive advantages.
Again on the omni channel experience Weve same day delivery that we're working through what we're doing it today, we continue to expand that we've got improvements to our rappel system and a number of other initiatives with regards.
To our App and mobile.
Second the in store consumer experience, we're going to talk about this further in the next earnings call, but we're doing store refreshes, we've got the new store design that we're working through under new prototype.
Then as pioneering sales training as well as a change of the culture at the store level and that is going incredibly well and then on the part of the business that we don't talk a lot about but is incredibly important to what we do as retailers everyday on the supply chain a lot of work being done.
Both in the distribution centers wells in the transport and those goods and some of the things that we can do to increase frequency of delivery speed to market and then Theres a hub store initiative that will speak to more in the future all of those things combined help us to continue to improve our business model and continue to improve our.
Manages.
The more important than all of that our team of dedicated people, who day in and day out deliver our commitment to our consumer we're so proud of what they do and so thank you to our employees.
Bob can you outline our future guidance. Please.
Certainly.
We continued to experience a great deal of economic uncertainty as longer term consumer behavior is difficult to predict in light of the ongoing cobot 19 pandemic high unemployment rates and grid lock regarding additional stimulus measures. However, we're very confident in our business model and the trends we've seen over the last couple of months as a result, we will provide some limited.
Guidance for the back half of fiscal 2021.
First we anticipate comp sales will be in the mid single digits gross margin is expected to improved by approximately 50 to 70 basis points in comparison to the back half of fiscal 2000, 20-F, G and H as a percent of sales is projected to be approximately 70 to 90 basis points below the comparable six month period of fiscal two.
2020.
Diluted EPS is forecast to be in the range of 85 cents to one dollar with an assumption that the effective tax rate will be approximately 26% and the diluted share count will be approximately 16.9 million. We do not anticipate the difference between our GAAP measures and our non-GAAP measures will be material in the second half of the year.
That concludes our prepared remarks, we provided a quite a bit of information for you to digest and we know you will be.
Needing additional questions answered so operator, please open up the call for questions.
Thank you.
If you would like to registry question. Please press star one fall by the four on your telephone you will hear at retail and problem to acknowledge your request.
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One moment please for the first question.
Our first question comes from Alex Parry with Bank of America. Please proceed.
Hi, Thanks for taking my question congrats on an exceptional quarter.
Just first you mentioned in the press release your strong vendor relationships should allow you to meet customer demand can you talk through more we can mean, there are you getting better product allocations from your vendor partners on a year over year basis, and then since the brands, presumably a cut orders.
There are manufacturing partners is inventory shortage with the high heat product not a concern in the back half. Thanks.
Yes, so I won't get specific with regard to allocations, but our partners have been incredible and helping us manage the flow of inventory.
Obviously with the results at the ended the quarter.
We're selling it as fast as we get it.
We've been able to work closely with our partners are closed on the incredible job of making incremental buys for the back half of the year.
Based on our expectations on our flow as I said, our declines in inventory going to moderate some will still be down.
But we expect to be at a better inventory position throughout the back half than we saw towards the latter ended the second quarter.
Perfect Thats really helpful. And then just a follow up on the ecommerce business.
The growth is in pretty exceptional here.
I guess, what what do you think were the main drivers to the 49% new customer op.
The option since you guys that competitors websites were also opened like what what do you think sort of driving people to your ecommerce business versus others.
Well, yes, we had an exceptional Q1 as well as Q2.
We've done a lot of things from a marketing standpoint to drive new customers to the web site.
Seen increases across every channel.
Part of that has been omnichannel activity as well as E. Commerce. So we've got a lot more people the shopping online and in our stores.
That is also attributed to again in overall traffic as well.
But we're also seeing really really good gains in mobile traffic.
And part of that is the strength of our App.
You look at our launch calendar over Q2 was very very favorable. So we had a lot of people come to the web site at that point and shop as well as the apps on that also drove online traffic.
Perfect. Thank you best of luck going forward.
Thank you thanks.
Our next question comes from Sam Poser with Susquehanna. Please proceed.
Good morning, everybody. Thank you for taking my questions that I have quite a few despite the good information that you provided.
In your release in the presentation. Good morning, I guess first of all.
About the inventory.
Good.
Understanding that the inventories in the not going to be as low year over year going forward does the results from the second quarter given your with your inventory levels give you an opportunity to Rebase your inventory and increase your churn versus what it was historically.
Going forward, if we think about fiscal 2021, and even this year, but I mean.
Do you do you now bring your inventories back to a lower lower base level than they used to.
Yes, Jared do you want to Sam good morning, So I mean, obviously the second quarter levels are not sustainable, but we're absolutely utilizing this opportunity to reset our base.
It's early we believe we can have significant improvements in Cape size from a pre covance levels based off the reset.
I do want to be clear that the second quarter levels, we don't believe to be sustainable, but we do believe we can have significant improvement going forward.
With regard to inventory caveats.
Thanks, Thank you drink and then.
The going forward on store openings and given that you probably had a significant benefit being off mall begun keep your less stores sort of course to closed versus many competitors.
What is your store opening plans, both in the near term and and sort of more theoretically I guess them along sharp.
Given where things are right now.
Perhaps.
Sure Ben Yes sounds spin.
We're really focused obviously on both manners are both brands out there city year, and hibbett and kind of looking forward, we anticipate double digit unit growth in both of those Citi Your inhibit brands going forward.
Is that for being this year are talking beginning next year.
Yeah, it's both.
Well, we're going to thank you.
In Q3, Sam This is Mike again Q3 Q4.
And we were going to talk about this because we're pretty sure was going to come up we're going to begin to work on some multiyear guidance for you, which will include number of openings per year and leverage that we expect to get.
And that will dovetail nicely.
We'll have the Q3 results and we'll be able to do a little bit better job for you talking about the future.
Can you give us some idea of your store opening plans by quarter. This year for the ramp downs.
For the balance of the year of this this year.
I think we'll hit the total number we don't typically talked about quarter to quarter.
Let me say this though to help answer your question, we are having no problems with disruption of store openings were having no disruptions in terms of running the stores that we have.
Okay, great. Thank you and then I'll just.
What margins can you give us what the merchandise.
You don't like emerged margin was up or down in the quarter and your fixed cost leverage.
Yes, Alex Jarred merch margins were up.
I see our the health of our inventory in the fast turns that we saw.
Certainly help that we believe our inventory as position incredibly well right now although lean.
We're very clean where it matters.
In this environment and obviously, you're very confident in the flow going forward.
Top of that from a marketplace perspective.
We were very concerned about the health of levels of inventory in the marketplace and the marketplace feels fairly clean.
So we do think that Theres an opportunity for continued expansion.
So I really just wanted the history, what what the merged large wells in the quarter.
Sure.
In Q1 Q2.
It was caught it was.
Well, we reported in the earnings right. So it's in the press release total tote not merchandise.
Total margin continental margin in.
Yes.
What it is yeah. So we don't go beyond that level of detail sand in the second so thats flush with the occupancy or the fixed cost.
So we do capture store occupancy costs within our gross margin calculation. So as you can imagine ramped in property taxes and things that go along with the building a relatively fixed or is some variability as we open and close stores, obviously, but for the most part as our sales lift was so substantial we obviously have significant leverage on that occupancy.
Well historically, you've given the given both you've given the fixed cost and the merge so I'm going to change in the way you are now going to report.
No that's not a change and were consistent with our past practices.
Okay.
Then.
Okay, all other things.
Nike Nike is now decided to pull.
Product out of up quite a few stores in your neighborhood.
Dillards and.
And develop the primary how do you view that as potential help when we go into next year.
I'll start that office, Mike in general follow up.
Stated, what we're comfortable stating because that's how in the call Hain.
The commentary about stage stores in JC Penney publicly traded companies we've made public.
Now expense and those are facts.
We're not comfortable talking about other people's businesses, Jared, Yes, I think sample will obviously watch other competitor closures and any changes from a distribution perspective.
And as we get more information will run a similar play to what we run already for JC Penney and stage.
Okay, and then two more.
One.
With your ecommerce business can you give us an idea of what percent of that business was up low bids or and curbside pickup.
What curbside looking like going forward and then.
And I just want to.
Got you on the allocations, one more time, especially in the fourth quarter. When it comes to some of the big lot shoes. I mean are are you are you are your allocations going to be inline with last year on on the key items in the fourth quarter.
Let's start with journey.
I'll start I mean, I'm not going to get to specific levels with details and allocation and I'll just reiterate.
What I said earlier, we're very confident than our flow of inventory.
So we feel again based on our guidance, we feel good about our back half.
Back Omnichannel I don't know if I had mentioned a couple of times, but we have a best in class Omnichannel consumer experience.
And so part of that as the BOPUS road as the curbside.
And I do like to brag on the team that the data we decided to go to curb side. It took up six hours to get it up and running so.
That's the kind of team that can execute.
And represented here by benign and build plan. So bill you want to give additional flavor to that yes, yes, Sam I can't talk about specific percentages for curbside, what I can say is we're happy with the performance we surveyed the customers who have done it as well as our stores and everyone likes the programs that were very very happy with it.
We also added a new Omnichannel program buy online ship to store that was done over the summer early summer. So we're continuing to invest an omnichannel. The other thing I would say is theres certainly these programs, but also just the general behavior of customers shopping invest channels has increased pretty significantly.
So we've got a lot of customers, who are shopping in store and online.
Okay. Thank you very much and and continued success.
Thank you.
As a reminder to registry question. Please press star one fall by the four on your telephone.
Our next question comes from my Peter Benedict with Baird. Please proceed.
Hi, guys. Thanks for thanks for taking the question.
So.
In the mid single digit comp plan for the second half just curious is there any threeq versus fourq two dynamics that we should be aware.
Maybe anything on how how August is influencing that.
That spread that's my first question.
As you know August as a significant portion of the Q3 sales we feel very confident about what's going on.
There's been a lot of commentary in the public about back to school and while the timing is disrupted we don't believe the amplitude of it has has changed we believe that back to school spending.
I have a positive versus previous year and our experience in Q3 is in line with that and the results that were seeing are in line with the guidance that we've given.
So we're pretty confident about Q3 as well.
Okay. So at this point no no material differences I guess between how you're thinking about threeq and Fourq understanding obviously there's.
A lot of just general uncertainty.
Sure but.
We.
That uncertainty is mostly around timing, what specifically Q3.
The other uncertainties that we've mentioned both in print and during our commentary here about the macro situation and all the other things going on in the world, Yes, those uncertainties exist, but the rest of it we feel pretty confident them.
Great that's helpful.
Hi, how should we think about.
The flow through on that incremental revenue that you guys are expecting from the closures.
JC Penney Sage two states stores 20 40 million.
I guess, you know as we kind of come through the noise of alive.
This year.
How how are you thinking about.
Flow through margins and that type.
You're talking about operating income what weve typically seen in just all the retail I've ever been.
This one included approximately one third of incremental revenue falls to the bottom line inside a relevant range.
We were talking about doubling revenue that range doesn't hold.
But in this case, it's in the relevant range, so generally, but 30% of incremental revenue falls to the to the operating income line and most retailers.
Okay perfect Thats helpful. And then I guess the last question.
Would be just the plans for allocating excess cash obviously, you're going to rebuild the the inventory levels to some degree but beyond that.
What are the what are the priorities here do you have any buyback thats baked into the second half the look like it but just curious when you might turn that back on.
Just any thoughts on Capex I apologize if I missed anything on Capex. Thank you.
We didnt give much guidance on that so let me.
Thanks, Eric.
As as you pointed out we've got approximately $13 per share in cash on the balance sheet substantial we will use some of that although not a tremendous amount to replenish the inventory.
As it comes in through Q.
Inventory builds which will then also take care of that metric on aged inventory percentage.
As it inventory builds it will be somewhat of the use of cash.
Then we're going to come back in Q3, Q4 and talk about our Egypt.
Alternatives on uses of cash, but we're not comfortable talking about it further than that.
Bob.
Yeah I mean.
The Big thing, obviously is share repurchase plan, which we've done historically, we did not do any of that in Q2 due to.
The great amount of uncertainty.
We are certainly considering and talking about our options as far as doing some share repurchase I think at the end of the day, obviously want to try to find the best use of our cash regardless of what that.
Uses for but we're going to keep looking for ways to beef up business and bring more profitably to the bottom line.
Okay, Great and just one follow up I apologize for asking so many just.
Yes.
When do you think about the back half of the year I mean, the plan has as mid single digit.
Comps it seems like it implies roughly flattish operating margins is that.
Hi, how we should be thinking about the business you know.
Longer term I know, you're going to give us more information but.
Given that the.
The.
Penetration of digital et cetera, how the sales are coming through the door that kind of a mid single digit comp is something where you would be able to maintain.
Operating margins.
We think that the operating margins go up from here. So we're going to walk back through the guidance one more time make sure that were answering your question appropriately. So gross margin leverage as 50 to 70 basis points SGN, a leverage 70 to 90 basis points.
And then on top of that we've got the mid single digit comp which should drive.
No margin on top of that on the operating income and so as a result earnings per share and in here.
Share count.
So slight increase so thats, where we got to the 85 to above so if you think about Peter last year I think we did on a GAAP basis 47 cents in the second half of the year in here, we're talking about a range of 85 to one dollar and it's not all related to share repurchases in prior periods. It is truly kind of a mix between that share count as well as some additional.
Profitability.
Yes, I guess I was thinking about it on an adjusted basis I understand the GAAP guidance I was thinking more just we can walk through some of this offline. Thanks. So much guys. Appreciate it thank you better.
Our next question comes from a gym shortly with Monness Crespi, an art.
Please proceed.
Good morning my questions.
Just wanted to touch on the store opening plans.
Think of last year, you closed 7% of your stores and short to understand the rationale for now starting to return to double digit growth and within that where do you see the opportunity for new stores, maybe from geography, or and or is it more within existing geographies.
We certainly did historically closed some stores they were poor performers and they were close when the lease came up.
For renewal so that the company didnt have any extraordinary cost enclosure and the.
The capital was reallocated.
That historically was happening given the health of the current fleet of stores plus the underlying changes to the competitive.
Landscape plus the changes to our business model, which had been relatively substantial we really are very optimistic about the fleet in stores that we have today.
And that comes from a number of things not the least with.
Bruce much the merchandise in the stores.
Improved.
Morale in the stores as well as the sales training thats going on and morale comes from winning.
And it's as simple as that.
In a win win win for.
Deals in the store level.
Yes hit my bonus target.
Overall, I feel like that so winning the gets winning and the sales training thats going on in the stores.
His.
Helping thats why we will turn even faster and I don't know if I had mentioned omnichannel, yet, but that is a substantial portion of our business and we really like what's going on there right.
Pure play.
Ecommerce businesses have a problem pure play brick and mortar businesses have a probable good retail is omni channel, where you have both and you do them, both very well and I will.
And then nights teams are executing very high level with regard to the omni channel business.
So as a result, we believe that there is a tremendous opportunity to turned back on the store net store growth. We will always have a handful of stores that are underperforming because when you have a portfolio stores, you're going to open some that aren't as good as others.
So, we'll we'll close a handful every year when the leases come up and Thats the appropriate way to do it.
At the same time, we have a lot of white space opportunities, while we're not comfortable commenting on specifically where those stores go.
We will be able to give further guidance in the future we don't like to talk about.
Exactly where simply from a competitive stance.
Understood and then just on the on the store refreshes.
What percentage of your existing store base do you think needs a refresh how many refreshes do you think you'll do per year.
What's the cost of that and what kind of sales lift have you seen from do refresh in the past, we're going to come back with some facts and figures and where we're at in Q3, but we have an initiative underway to improve the look and feel of every store and the Jay.
We believe it is incredibly important as retail one on one one store model one look one field one way of doing business and that should we should be substantially done in Q3.
Thanks, and best of luck.
Thank you we appreciate the goal and the and the question.
We have a follow up question from Sam Poser with Susquehanna. Please proceed.
Just to hi, just for clarification the double digit.
But when I asked the question regarding.
Double digit store growth.
You mentioned double digit store growth does that mean more than 10 or does that mean as a percent.
Everybody in the room shaking their head because they knew.
The unit growth similar to store growth is not percentage growth. Thank you. Thanks for the clarification.
Okay and then.
Just a.
I was just wondering if you can call out.
Jerry maybe some of the brands that are.
For me or not.
Right now or improvements you're seeing bar.
Brad slowing down any color you want to give us there.
Yes, I'm not going to get too detailed here, Sam but I mean overall with the results that we've had.
Business was really strong overall.
I would say certain categories performed better than others and that led to brand performance.
Both positive and negative.
Just a few that I will comment on.
Yes, certainly.
Certainly business with Nike was exceptionally strong business with Georgia was exceptionally strong.
Our business with Adidas was very strong.
But overall it was a really really good result.
Great. Thanks again.
There are no further questions at this time, please continue with your presentation or closing remarks.
Well. Thank you everyone. We really appreciate your time and attention during the call. We know that those a lot of information.
We appreciate the questions. We appreciate the feedback and we look forward to doing this again very very soon thank you.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect. Your line have a great Dave you want.
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Correct.
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