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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Feb. 03, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The consolidated financial statements of our Company include its accounts and the accounts of all wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Occasionally, certain reclassifications are made to conform previously reported data to the current presentation. Such reclassifications have no impact on total assets, total liabilities, net income or stockholders' investment in any of the years presented.

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (U.S. GAAP) requires management to make estimates and assumptions that affect:

the reported amounts of certain assets, including inventories and property and equipment;

the reported amounts of certain liabilities, including legal, tax-related and other accruals; and

the reported amounts of certain revenues and expenses during the reporting period.

The assumptions used by management could change significantly in future estimates due to changes in circumstances and actual results could differ from those estimates.

Reportable Segments

Given the economic characteristics of the store formats, the similar nature of products offered for sale, the type of customers, the methods of distribution and how our Company is managed, our operations constitute only one reportable segment.

Vendor Arrangements

We enter into arrangements with some of our vendors that entitle us to a partial refund of the cost of merchandise purchased during the year or reimbursement of certain costs we incur to advertise or otherwise promote their product. Volume-based rebates, supported by vendor agreements, are estimated throughout the year and reduce the cost of inventories and cost of goods sold during the year. This estimate is regularly monitored and adjusted for current or anticipated changes in purchase levels and for sales activity.

We also receive consideration from vendors through a variety of other programs, including markdown reimbursements, vendor compliance charges and defective merchandise credits. If the payment is a reimbursement for costs incurred, it is recognized as an offset against those related costs; otherwise, it is treated as a reduction to the cost of merchandise. Markdown reimbursements related to merchandise that has been sold are negotiated by our merchandising teams and are credited directly to cost of goods sold in the period received. If vendor funds are received prior to merchandise being sold, they are recorded as a reduction of merchandise cost. Vendor compliance charges and defective merchandise credits reduce the cost of inventories.

Marketing

We expense marketing costs when incurred. We participate in various marketing cooperative programs with our vendors, who, under these programs, reimburse us for certain costs incurred. A receivable for cooperative marketing to be reimbursed is recorded as a decrease to expense as advertisements are run.

The following table presents the components of our marketing expense (in thousands):

	Fiscal Year Ended
	February 3, 2018			January 28, 2017			January 30, 2016
	(53 weeks)			(52 weeks)			(52 weeks)
Gross advertising costs	$	13,356		$	10,382		$	9,983
Advertising reimbursements		(3,010	)		(3,319	)		(2,949	)
Net advertising costs	$	10,346		$	7,063		$	7,034

Cost of Goods Sold

We include merchandise costs, store occupancy costs, occupancy and operating costs for our wholesale and logistics facility and ship-to-home freight in cost of goods sold. Costs associated with moving merchandise to and between stores are included in store operating, selling and administrative expenses.

Cash and Cash Equivalents

We consider all short-term, highly liquid investments with original maturities of 90 days or less, including commercial paper and money market funds, to be cash equivalents. We are exposed to credit risk in the event of default by our financial institutions where we maintain deposits to the extent the amount recorded on the consolidated balance sheet exceeds the FDIC insurance limits per institution. Amounts due from third-party credit card processors for the settlement of debit and credit card transactions are included as cash equivalents as they are generally collected within three business days. Cash equivalents related to credit and debit card transactions at February 3, 2018 and January 28, 2017 were $3.9 million and $3.7 million, respectively.

Investments

We hold certain trading securities as investments in trust for the Hibbett Sports, Inc. Supplemental 401(k) Plan (Supplemental Plan) and the Hibbett Sports, Inc. Executive Voluntary Deferral Plan (Deferral Plan). At February 3, 2018, we had $2.9 million of investments of which $0.5 million was included in prepaid expenses and other and $2.4 million was included in other assets, net. At January 28, 2017, we had $2.7 million of investments of which $0.1 million was included in prepaid expenses and other and $2.6 million was included in other assets, net. Net unrealized holding gains for Fiscal 2018 and Fiscal 2017 was $0.3 million and $0.1 million, respectively.

Receivables

Receivables consist primarily of tenant allowances due from landlords and cooperative marketing and other amounts due from vendors. We analyze receivables for collectability based on aging of individual components, underlying contractual terms and economic conditions. Recorded amounts are deemed to be collectible.

Inventories

Inventories are valued using the lower of weighted average cost or net realizable value method. Items are removed from inventory using the weighted average cost method.

Lower of Cost and Net Realizable Value: We regularly review inventories to determine if the carrying value exceeds net realizable value, and we record an accrual to reduce the carrying value to net realizable value as necessary. We account for obsolescence as part of our lower of cost and net realizable value accrual based on historical trends and specific identification. As of February 3, 2018 and January 28, 2017, the accrual was $5.2 million and $5.5 million, respectively. The accrual as of February 3, 2018, includes $0.9 million related to liquidation of our Team operations. A determination of net realizable value requires significant judgment.

Shrink Reserves: We accrue for inventory shrinkage based on the actual historical results of our physical inventory counts. These estimates are compared to actual results as physical inventory counts are performed and reconciled to the general ledger. Physical inventory counts are performed on a cyclical basis. As of February 3, 2018 and January 28, 2017, the accrual was $1.4 million and $1.3 million, respectively.

Inventory Purchase Concentration: Our business is dependent to a significant degree upon close relationships with our vendors. Our largest vendor, Nike, represented 57.9%, 57.0% and 57.5% of our purchases for Fiscal 2018, Fiscal 2017 and Fiscal 2016, respectively. Our second largest vendor, Adidas, represented 11.0% 5.5% and 4.2% of our purchases for Fiscal 2018, Fiscal 2017 and Fiscal 2016, respectively. Our third largest vendor, Under Armour, represented 10.8%, 16.4% and 15.9% of our purchases for Fiscal 2018, Fiscal 2017 and Fiscal 2016, respectively.

Property and Equipment

Property and equipment are recorded at cost and include assets acquired through capital leases. Depreciation on assets is principally provided using the straight-line method over the following estimated service lives:

Buildings	39 years
Leasehold improvements	3 – 10 years
Furniture and fixtures	7 years
Equipment	3 – 7 years

Deferred Rent

Deferred rent primarily consists of step rent and allowances from landlords related to our leased properties. Step rent represents the difference between actual operating lease payments due and straight-line rent expense, which we record over the term of the lease, including the build-out period. This amount is recorded as deferred rent in the early years of the lease, when cash payments are generally lower than straight-line rent expense, and reduced in the later years of the lease when payments begin to exceed the straight-line rent expense. Landlord allowances are generally comprised of amounts received and/or promised to us by landlords and may be received in the form of cash or free rent. We record a receivable from the landlord in accordance with the terms of the lease and a deferred rent liability. This deferred rent is amortized into net income (through lower rent expense) over the term (including the pre-opening build-out period) of the applicable lease, and the receivable is reduced as amounts are realized from the landlord.

In our consolidated statements of cash flows, the current and long-term portions of landlord allowances are included as changes in cash flows from operations. The liability for the current portion of unamortized landlord allowances was $5.1 million and $4.6 million at February 3, 2018 and January 28, 2017, respectively. The liability for the long-term portion of unamortized landlord allowances was $15.1 million and $16.4 million at February 3, 2018 and January 28, 2017, respectively. We estimate the non-cash portion of landlord allowances was $1.2 million and $1.4 million at February 3, 2018 and January 28, 2017, respectively.

Revenue Recognition

We recognize revenue in accordance with the Accounting Standards Codification (ASC) Topic 605, Revenue Recognition. Sales are recorded net of returns and discounts and exclude sales taxes. We recognize retail store revenue at the point of sale when the customer takes possession of the merchandise. We recognize ship-to-home revenue when the order ships. Shipping and handling costs billed to customers are included in net sales.

Layaways: Customers have the option of paying a down payment and placing merchandise on layaway. The customer may make further payments in installments, but the entire purchase price must be received by us within 30 days. The down payment and any installments are recorded as short-term deferred revenue until the customer pays the entire purchase price for the merchandise.

Customer Orders: Customers may order merchandise available in other Hibbett store locations for pickup in the selling store at a later date. Customers make a deposit payment with the remaining balance due at pickup. The deposits are recorded as short-term deferred revenue until the remaining balance is paid and the customer takes possession of the merchandise.

Customer Loyalty Program: We offer a customer loyalty program, the Hibbett Rewards program, whereby customers, upon registration, can earn points that convert to reward certificates at defined thresholds. Reward certificates can be redeemed in our stores or online. An estimate of the obligation related to the program, based on historical certificate redemption rates, is recorded as a current liability and a reduction of net retail sales in the period earned by the customer. At February 3, 2018 and January 28, 2017, the amount recorded in other accrued expenses on our consolidated balance sheet for reward certificates issued was not material.

Gift Cards: Proceeds received from the issuance of our non-expiring gift cards are initially recorded as deferred revenue. Revenue is subsequently recognized at the time the customer redeems the gift cards and takes possession of the merchandise. Unredeemed gift cards are recorded in accounts payable on our consolidated balance sheet.

The net deferred revenue liability for gift cards, customer orders and layaways at February 3, 2018 and January 28, 2017 was $6.2 million and $5.8 million, respectively, recognized in accounts payable on our consolidated balance sheet. Income from unredeemed gift cards is recognized on our consolidated statements of operations as a reduction to store operating, selling and administrative expenses when the likelihood of redemption becomes remote. We have determined the likelihood of redemption is remote when redemptions are equal to or less than five percent of the remaining balances of gift cards aged by activation year. Gift card breakage was not material in Fiscal 2018, Fiscal 2017 or Fiscal 2016.

Store Opening and Closing Costs

New store opening costs, including pre-opening costs, are charged to expense as incurred. Store opening costs primarily include payroll expenses, training costs and straight-line rent expenses. All pre-opening costs are included in store operating, selling and administrative expenses as a part of operating expenses.

We consider individual store closings to be a normal part of operations and regularly review store performance against expectations. Costs associated with store closings are recognized at the time of closing or when a liability has been incurred. These costs were not significant in Fiscal 2018, Fiscal 2017 or Fiscal 2016.

Impairment of Long-Lived Assets

We continually evaluate whether events and circumstances have occurred that indicate the remaining balance of long-lived assets may be impaired and not recoverable. Our policy is to recognize any impairment loss on long-lived assets as a charge to current income when certain events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Impairment is assessed considering the estimated undiscounted cash flows over the asset's remaining life. If estimated cash flows are insufficient to recover the investment, an impairment loss is recognized based on a comparison of the cost of the asset to fair value less any costs of disposition. Evaluation of asset impairment requires significant judgment.

Insurance Accrual

We are self-insured for a significant portion of our health insurance. Liabilities associated with the risks that are retained by us are estimated, in part, by considering our historical claims experience. The estimated accruals for these liabilities could be affected if future occurrences and claims differ from our assumptions. To minimize our potential exposure, we carry stop-loss insurance that reimburses us for losses over $0.2 million per covered person per year. As of February 3, 2018 and January 28, 2017, the accrual for these liabilities was $0.4 million and $0.6 million, respectively, and was included in other accrued expenses in the consolidated balance sheets.

We are also self-insured for our workers' compensation, property and general liability insurance up to an established deductible with a cumulative stop-loss on workers' compensation. As of February 3, 2018 and January 28, 2017, the accrual for these liabilities (which is not discounted) was $0.7 million and was included in other accrued expenses in the consolidated balance sheets.

Sales Returns

Net sales returns were $43.8 million for Fiscal 2018, $37.8 million for Fiscal 2017 and $34.8 million for Fiscal 2016. The accrual for the effect of estimated returns was $0.5 million and $0.4 million as of February 3, 2018 and January 28, 2017, respectively, and was included in other accrued expenses in the consolidated balance sheets.