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NANTUCKET, MA-Hibbett Sporting Goods Inc. plans toexpand from 500 stores to 1,000 stores over the nextseven years–a roughly 15% annual growth, saidpresident and CEO Michael Newsome during WachoviaSecurities 15th Annual Nantucket Conference.

“There are 400 additional markets that we haveidentified for growth,” Newsome said. The Birmingham,AL-based sporting goods retailer currently operates in21 states. Its competitive niche is small markets–specifically counties with 30,000 to 100,000 people. “We understand small markets and how to make money in them,” Newsome said. “In a small market, there is a real need for what we do.”

Newsome contended that Hibbett has very littlecompetition. “Strategically, we don’t compete with bigbox retailers; we don’t go where they go,” heexplained. “Our number one competitor is a mom and popstore.”

Newsome claimed that Hibbett has many advantages oversmall operators. In particular, he pointed to Hibbett’ssuperior locations, sophisticated replenishment and alarge selection of brands and full-price equipment.”We’ve found that in small towns, brands are verymeaningful,” he noted, adding that roughly 1% ofHibbett’s merchandize is private label.

Hibbett isn’t even cowed by discount giant Wal-Mart.”We consider Wal-Mart an ally, not an enemy,” Newsomesaid. In fact, the retailer prefers to be in stripcenters that are anchored by a Wal-Mart Supercenter ornear one. “They have no apparel or footwear brands,and there is very little overlap in pricing,” heexplained. For example, Wal-Mart may have 30 baseballgloves, while Hibbett has more than 80, he said.

Hibbett’s success is not driven solely by customerdemand. “We are important not only to the consumer,but also the vender,” Newsome said. Indeed, vendorslike Nike and Oakley find that Hibbett is the onlygame in town when they want to reachsmall-town consumers. Moreover, landlords wantHibbett. “In a lot of small towns, we’re a landlord’sonly hope for a sporting goods store,” he said.

Hibbett has stayed true to its original strategy ofoperating in small markets, and that constancy hasallowed the retailer to achieve the highest operatingmargins in the sporting goods category. This year, theretailer expects to record an operating margin between11.5% and 12%, according to vice president and CFOGary Smith.

The retailer’s sales and same-store comps are equally impressive; Smith said newly opened Hibbett stores experience sales of $125 per sf. Moreover, the retailer has posted 8% same-store comps for several quarters.

This year, Hibbett plans to open more than 80 storesand close five to 10 stores. Strip centers are theretailer’s growth vehicle, Smith said, adding that theretailer has very specific lease terms related toco-tenancy and exclusivity. “We’re not afraid to closean underperforming store,” he noted.

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