451 Industrial Lane
Hibbett Sporting Goods, Inc.'s stores offer a high level of customer service and competitive prices for an extensive assortment of quality athletic equipment, footwear, and apparel for team and individual sports.
Hibbett Sporting Goods, Inc. is a leading operator of retail stores for a full line of sporting goods. Founded in 1945, the company targets small to mid-sized markets located mostly in the southeastern United States. In 1998 Hibbett had 159 stores located in 19 states. These stores consist of the company's flagship Hibbett Sports, Inc. stores; Sports & Co., Inc. superstores; and smaller-format Sports Additions, Inc. stores. The stores offer a broad assortment of quality athletic equipment, footwear, and apparel at competitive prices. They feature a core selection of brand-name merchandise for team and individual sports and localized apparel and accessories designed to appeal to customers within each market. About 90 percent of Hibbett's retail outlets are located in large enclosed malls, but the stores also operate profitably in strip-center locations. More than 80 percent of the company's stores are in county markets with a population of less than 250,000. Company subsidiary Hibbett Team Sales, Inc. specializes in customized athletic apparel, equipment, and footwear, selling directly to school, athletic, and youth associations in Alabama. Team Sales has its own warehouse and distribution center from which it manages its operations independently from those of the company's other divisions. When the company went public in 1996, Hibbett stock traded for $16 a share; in 1998, shares of Hibbett stock were in the $25 to $35 range.
Founding and Early Years
In 1945 Rufus Hibbett, a high-school coach and teacher in Florence, Alabama, founded Dixie Supply Company, a retailer of athletic, marine, and aviation equipment. When his two sons joined the business in 1952, Rufus changed the company's name to Hibbett & Sons and focused operating strategy on merchandise for team sports. In the mid-1960s, the company further refined its retail strategy and changed its name to Hibbett Sporting Goods, Inc.
In 1980 the Anderson family of Florence, Alabama, purchased Hibbett, invested in professional management and systems, and continued to expand the company's store base at a moderate pace. Hibbett's unique operating strategy was to target small to mid-sized markets ranging in population from 30,000 to 250,000. By focusing on markets of this size, the company achieved significant strategic advantages, including numerous expansion opportunities, comparatively low operating costs, and a more limited competitive environment than generally would have prevailed in larger markets. Hibbett was also able to establish greater customer and vendor recognition as the leading retailer of a full line of sporting goods in a local community. Furthermore, the company's regional focus enabled it to achieve significant cost benefits, including lower corporate expenses, reduced distribution costs, and increased economies of scale.
Rapid Expansion in the 1990s
By the early 1990s Hibbett's primary retail format was that of its flagship Hibbett Sports, Inc. stores: 5,000-square-foot stores located predominantly in enclosed malls. The company tailored this Hibbett Sports concept to the size, demographics, and competitive conditions of its small to mid-sized markets. Hibbett also established Sports Additions, Inc. stores, which were smaller units of 1,500 square feet. About 90 percent of the Sports Additions merchandise was footwear, with the remainder consisting of caps and limited apparel. These stores offered a broader assortment of athletic footwear, and emphasized a more fashionable footwear assortment than could be found in Hibbett Sports stores. All Sports Additions stores were located in the same malls as Hibbett Sports stores. By the end of fiscal 1993, Hibbett recorded combined sales of $32.03 million from 34 Hibbett Sports stores and four Sports Additions stores. By the end of fiscal 1994, company sales had grown to $40.12 million from the operation of 41 Hibbett Sports and eight Sports Additions stores. The company grew from 38 stores at the end of fiscal 1993 to 60 stores at the end of fiscal 1995.
According to the National Sporting Goods Association (NSGA), U.S. retail sales of sporting goods (including athletic footwear, apparel, and equipment) totaled approximately $36 billion in 1995. The market for sporting goods remained highly fragmented; large retailers of sporting goods competed for market share by using a variety of store sizes, including larger-format stores, called superstores. Although several retailers of sporting goods--namely, Foot Locker and Foot Action--were already present in most of Hibbett Sports' mall locations, the company believed that the Hibbett Sports store format could be adjusted effectively to a superstore format focused on a full line of quality sporting merchandise that included products for individual and team sports and a localized mix of apparel and accessories.
From a Private to a Public Company in 1996
In 1995 the Anderson family sold control of the company to Saunders Karp & Co., an investment firm. During the spring of the same year, Hibbett opened its first 25,000-square-foot superstore, dubbed Sports & Co., in Huntsville, Alabama. Athletic equipment and apparel represented a higher percentage of the overall merchandise mix at the Sports & Co. superstore than they did at Hibbett Sports stores. The superstore was designed to project the same atmosphere as that of Hibbett Sports stores, but on a larger scale. For example, the superstore included space for customer-participation areas, such as putting greens and basketball-hoop shoots. Periodically, the superstore featured special events with appearances by well-known athletes.
The need for expanded inventory and larger operating quarters led Hibbett to build a state-of-the-art office/warehouse in Birmingham's Oxmoor Industrial Park. In January 1996 the company relocated to this 130,000-square-foot center, which had significant expansion potential to support Hibbett's growth for the foreseeable future, and centralized the distribution process from its corporate headquarters located in the same building. The company saw strong distribution support for its stores as critical to its expansion strategy and central to maintaining a low-cost operating structure. Hibbett received substantially all of its merchandise at the Birmingham distribution center, where it maintained back stock of key products allocated and distributed to stores through an automatic replenishment program based on items sold during the prior week.
In October 1996 Hibbett completed an initial public offering (IPO) of its shares of common stock for $16 per share and traded on the NASDAQ under the symbol HIBB. The company accelerated its rate of new store openings to take advantage of the growth opportunities in its target markets. Hibbett's clustered expansion program, which called for opening new stores within a two-hour driving radius of another company location, made for greater efficiency in distribution, marketing, and regional management. In evaluating potential markets, the company considered population, economic conditions, local competitive dynamics, and availability of suitable real estate. Although the core merchandise assortment tended to be similar for each Hibbett Sports store, the company recognized important local or regional differences by regularly offering products that reflected particular sporting activities in a particular community, local college, or professional sports team. Thus, Hibbett Stores was able to react quickly to emerging trends or special events, such as college or professional championships.
During fiscal 1996, sales from Hibbett's 67 stores increased 28.3 percent to $67.1 million. This gain was attributable to the opening of four Hibbett Sports stores and three Sports & Co. superstores. Hibbett's leading product categories, ranked according to sales, were athletic footwear, apparel, and sporting equipment. Although aggressive about expansion, Hibbett continued to emphasize the sale of quality brand-name merchandise at competitive prices. The breadth and depth of the company's merchandise selection generally exceeded that of local independent competitors. Among the brand names that Hibbett offered, the top 25 (based on sales) included: Adidas, Asics, Champion, Converse, Columbia, Dodger, Easton, Everlast, Fila, Louisville Slugger, K-Swiss, Mizuno, New Era, New Balance, Nike, Pro Line, Rawlings, Reebok, Rollerblade, Russell, Spalding, Starter, The Game, Umbro, and Wilson.
Because many of these branded products were highly technical and required considerable customer assistance, Hibbett coordinated with its vendors to educate the store-level sales staff about new products and trends. The merchandise staff analyzed current sporting goods trends by monitoring sales at competing stores; communicating with customers, store managers, and personnel; maintaining close relationships with the company's multiple vendors; and reviewing industry trade publications. The staff also worked closely with store personnel to assure availability of sufficient quantities of products at individual stores.
During 1997, the company further accelerated its store-opening rate by taking advantage of the growth opportunities in its target markets: Hibbett opened 21 Hibbett Sports stores and one Sports & Co. superstore, thereby making the company the operator of 77 stores at the end of fiscal 1997; sales peaked at $86.4 million. Hibbett's increase in sales was attributable to the opening of 22 new stores and to increased footwear sales. The company's largest vendor, Nike, represented approximately 40 percent of its total purchases. Based on its performance in the full-line sporting goods category, Hibbett received the Nike Retailer Excellence Award for the Southeast region for the ninth consecutive year.
Toward the 21st Century: 1998 and Beyond
Thirty years of profitable retailing in small to mid-sized markets validated Hibbett's adherence to the Hibbett Stores format for competing effectively against both the general and the specialty retailers in its industry. Compared to discounters and department stores that generally offered limited assortments of sporting goods, Hibbett carried a wide selection of branded products. Compared to national specialty retailers that typically focused on a single category, such as footwear, or on a specific activity, such as golf or tennis, Hibbett differentiated itself by its breadth of quality merchandise geared to local sporting and community interests. Although some competitors carried product lines and national brands similar to Hibbett's stores, Hibbett Sports stores were usually the primary retailers of a full line of sporting goods in their markets. In the company's 1998 annual report Hibbett President Michael J. Newsome commented that there were three options open to retailers in the sporting goods industry: "stand idly on the sidelines and let the world pass you by; 'slug it out' for incremental market share; or cater to a genuine need. We prefer the latter." The strength of Hibbett's niche, Newsome pointed out, was that the company "offers a full line of sporting goods with superior customer service. Concentration on smaller markets generally limits our competition to small, independent sporting goods operators and national footwear chains and allows us to better serve a broader customer base."
The company targeted special publicity opportunities in its markets to increase the effectiveness of its advertising budget. To further differentiate itself from national chain competitors, Hibbett preferred promotional spending in local media. Advertising in the sports pages of local newspapers served as the foundation of its promotional program; in 1997 the major portion of the company's publicity budget was spent in this way. Hibbett also used local radio, television, and outdoor billboards to reinforce name recognition and brand awareness in the community.
Hibbett's primary retail format and growth vehicle remained that of the Hibbett Sports 5,000-square-foot store located predominantly in enclosed malls. The company used relevant design, in-store atmosphere, and eye-catching signage to channel mall traffic into the stores. Hibbett's management information systems tracked different retail prices for the same item at different stores, thereby enabling more competitive pricing by location. Furthermore, the purchasing staff regularly reviewed and analyzed the company's point-of-sale computer system in order to make appropriate merchandise allocation and markdown decisions.
During 1998 Hibbett opened 31 Hibbett Sports stores and two Sports Additions stores; sales increased 31.4 percent to $113.6 million. The increase was due to the addition of 33 new stores, to larger sales for ladies' and children's footwear and apparel, and to higher equipment sales. Higher earnings also reflected lower store-operating and selling expenses as a percentage of sales due to improved leveraging of administrative costs. At the end of fiscal 1998, Hibbett operated 120 stores in 14 southeastern states. Hibbett expanded its geographic reach when it opened its first store in eastern Oklahoma and five stores in Arkansas, but the majority of the new stores were in states where Hibbett already operated. To keep pace with the company's rapid expansion, Hibbett continually evaluated and improved the capacity and effectiveness of its Birmingham distribution center. The addition of radio frequency technology reduced labor costs and increased accuracy. The installation of additional conveyors and of other equipment decreased processing time and improved inventory turns.
During the first six months of fiscal 1999, Hibbett surpassed all its previous records for increases in net income, net sales, and number of store openings. Net sales increased 25.3 percent to $65.86 million, compared with $52.56 million for the same period in fiscal 1998. Net income increased 33.2 percent to $3.2 million, compared with net income of $2.4 million for the first six months of fiscal 1998. During the first quarter, Hibbett opened a record 15 stores, making a total of 135 Hibbett stores operating in 16 southeastern states. During the second quarter, the company opened 20 additional stores, including 18 Hibbett Sports stores and two Sports Additions stores. Hibbett acquired two of the stores from W.C. Bradley Company and five of the stores from Olympia Sports. Five of the seven stores were converted to Hibbett Sports stores and two were converted to Sports Additions stores.
Commenting on these results, President Newsome said: "In light of the number of new store openings to date and a tremendous number of expansion opportunities, we have increased our goal for fiscal 1999 [from at least 42 to at least 48 new stores] and now expect to end the fiscal year with at least 168 stores. The acquisitions completed during the second quarter were opportunistic in nature and are an excellent fit to our existing store base." The new stores, including Hibbett's first stores in eastern Texas and southern Indiana, further expanded Hibbett's presence in several key markets in Alabama, Georgia, and Mississippi.
As the 21st century drew near, the company's strategy of targeting small to mid-size markets "For the Good Sport" (Hibbett's byline) prepared it for even more outstanding growth. The Hibbett Sports store format consistently produced a strong return on capital in the first year of operation and significant sales growth in the second and third years. New stores positioned within a two-hour driving distance of an existing store expanded Hibbett's store base while maintaining low costs for distribution of merchandise. Hibbett's plan for clustered expansion into over 500 potential markets identified for future Hibbett Sports stores, seemed an attainable goal.
Principal Subsidiaries: Hibbett Sports, Inc.; Hibbett Team Sales, Inc.; Sports Additions, Inc.; Sports & Co., Inc.
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