IMPORTANT NOTICE REGARDING 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:

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

· 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 distribution facilities;

· the possible effect of pending legal actions and other contingencies;

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

· our ability and plans to renew our revolving credit facilities;

· our seasonal sales patterns and assumptions concerning customer buying behavior;

· our expectations regarding competition;

· our ability to renew or replace store leases satisfactorily;

· our estimates and assumptions as they relate to preferable tax and financial accounting methods, accruals, inventory valuations, dividends, 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;

· our expectations concerning future stock-based award types;

· our expectations concerning employee stock option exercise behavior;

· the possible effect of inflation, market decline and other economic changes on our costs and profitability, including the impact of changes in fuel costs and a downturn in the retail industry or changes in levels of store traffic;

· the possible effects of continued volatility and further deterioration of the capital markets, the commercial and consumer credit environment and the continuation of lowered levels of consumer spending resulting from the global economic downturn, lowered levels of consumer confidence and higher levels of unemployment;

· our analyses of trends as related to earnings performance;

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

· our expectations concerning vendor level purchases and related discounts;

· our estimates and assumptions related to income tax liabilities and uncertain tax positions;

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

· the possible effect of recent accounting pronouncements.

For a discussion of the risks, uncertainties and assumptions that could affect our future events, developments or results, you should carefully consider the risk factors described from time to time in our other documents and reports, including the factors described under "Risk Factors," "Business" and "Properties" in our Form 10-K for the fiscal year ended January 31, 2009.

Our forward-looking statements could be wrong in light of these and other 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 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.

You should assume that the information appearing in this report is accurate only as of the date it was issued. Our business, financial condition, results of operations and prospects may have changed since that date.

INVESTOR ACCESS TO COMPANY FILINGS

We make available free of charge on our website, www.hibbett.com under the heading "Investor Information," copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 ("Securities Exchange Act") as well as all Forms 4 and 5 filed by our executive officers and directors, as soon as the filings are made publicly available by the Securities and Exchange Commission on its EDGAR database at www.sec.gov. 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 January 31, 2009, at no charge, by writing to: Investor Relations, Hibbett Sports, Inc., 451 Industrial Lane, Birmingham, Alabama 35211.

General Overview

Hibbett Sports, Inc. operates sporting goods stores in small and mid-sized markets, predominantly in the Southeast, Southwest, Mid-Atlantic and the lower Midwest. Our stores offer a broad assortment of quality athletic equipment, footwear and apparel with a high level of customer service. As of August 1, 2009, we operated a total of 759 retail stores composed of 738 Hibbett Sports stores, 17 Sports Additions athletic shoe stores and 4 Sports & Co. superstores in 24 states.

Our primary retail format and growth vehicle is Hibbett Sports, a 5,000-square-foot store located primarily in strip centers which are usually influenced by a Wal-Mart store and in enclosed malls. Over the last several years, we have concentrated and expect to continue our store base growth in strip centers versus enclosed malls. We believe Hibbett Sports stores are typically the primary sporting goods retailers in their markets due to the extensive selection of quality branded merchandise and a high level of customer service. We do not expect that the average size of our stores opening in Fiscal 2010 will vary significantly from the average size of stores opened in Fiscal 2009.

We operate on a 52- or 53-week fiscal year ending on the Saturday nearest to January 31 of each year. The consolidated statements of operations for fiscal years ended January 30, 2010 and January 31, 2009 will include 52 weeks of operations. We have operated as a public company and have been incorporated under the laws of the State of Delaware since October 6, 1996.

Comparable store net sales data for the period reflects sales for our traditional format Hibbett Sports and Sports Additions stores open throughout the period and the corresponding period of the prior fiscal year. If a store remodel or relocation results in the store being closed for a significant period of time, its sales are removed from the comparable store base until it has been open a full 12 months. Our four Sports & Co. stores are not and have never been included in the comparable store net sales comparison because we have not opened a superstore since September 1996 nor do we have plans to open additional superstores in the future.

Executive Summary

Unfavorable global economic conditions experienced in Fiscal 2009 have continued into and adversely affected us in the first half of Fiscal 2010. During the second quarter of Fiscal 2010, we saw lower retail store traffic and a significant decline in footwear sales. However, most other categories of merchandise performed within the expected range during the second quarter.

Net sales for the thirteen-week period ended August 1, 2009, decreased 5.5% to $123.1 million compared with $130.3 million for the thirteen-week period ended August 2, 2008. Comparable store sales decreased 10.5%. Operating income was 1.6% of net sales for the thirteen-week period ended August 1, 2009 compared to 6.0% for the thirteen-week period ended August 2, 2008. Net income decreased to $1.1 million compared with $4.8 million for the thirteen-week period ended August 2, 2008. Diluted earnings per share decreased to $0.04 compared with $0.17 for the thirteen-week period ended August 2, 2008.

Net sales for the twenty-six-week period ended August 1, 2009, increased 1.7% to $280.8 million compared with $276.1 million for the twenty-six-week period ended August 2, 2008. Comparable store sales decreased 3.6%. Operating income was 6.9% of net sales for the twenty-six-week period ended August 1, 2009 compared to 8.4% for the twenty-six-week period ended August 2, 2008. Net income decreased to $12.0 million compared with $14.2 million for the twenty-six-week period ended August 2, 2008. Diluted earnings per share decreased to $0.41 compared with $0.49 for the twenty-six-week period ended August 2, 2008.

During the second quarter, Hibbett opened nine new stores and closed three stores, bringing the store base to 759 in 24 states as of August 1, 2009. Inventory on a per store basis at August 1, 2009 decreased 1.3% compared to August 2, 2008. Hibbett ended the second quarter with $15.6 million of available cash and cash equivalents on the unaudited condensed consolidated balance sheet and full availability under its $80.0 million unsecured credit facilities.

Significant Accounting Estimates

The unaudited condensed consolidated financial statements are prepared in conformity with U.S. GAAP. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions. Our significant accounting policies and estimates are described more fully in the Annual Report on Form 10-K filed on March 31, 2009. There have been no changes in our accounting policies in the current period that had a material impact on our unaudited condensed consolidated financial statements.

Recent Accounting Pronouncements

See Note 2 of this Form 10-Q for the period ended August 1, 2009, for information regarding recent accounting pronouncements.

Results of Operations

Thirteen Weeks Ended August 1, 2009 Compared to Thirteen Weeks Ended August 2, 2008

Net sales. Net sales decreased $7.2 million, or 5.5%, to $123.1 million for the thirteen weeks ended August 1, 2009 from $130.3 million for the comparable period in the prior year. Furthermore:

· We opened nine Hibbett Sports stores and closed three stores in the thirteen weeks ended August 1, 2009. New stores and stores not in the comparable store net sales calculation increased $5.9 million during the thirteen-week period.

· We experienced a 10.5% decrease in comparable store net sales for the thirteen weeks ended August 1, 2009.

During the thirteen weeks ended August 1, 2009, 670 stores were included in the comparable store sales comparison. The decrease in comparable store sales was primarily attributable to a significant decline in footwear that we believe was the result of the lack of economic stimulus checks that were in the market one year ago and the shift of tax-free holidays from the second quarter last year to the third quarter this year. The most significant trend we experienced in the second quarter this year was a decline in footwear, while most other categories performed within the range we expected. The difficult macroeconomic environment and declining consumer confidence resulted in lower customer traffic in our stores. Strip center locations continue to outperform enclosed mall stores and non-urban stores continue to outperform urban locations. Strip center locations now comprise approximately 75% of our total store base.

Gross profit. Cost of goods sold includes the cost of inventory, occupancy costs for stores and occupancy and operating costs for the distribution center. Gross profit was $36.8 million, or 29.9% of net sales, in the thirteen weeks ended August 1, 2009, compared with $42.3 million, or 32.4% of net sales, in the same period of the prior fiscal year. Our decrease in gross profit percent was due primarily to the clearance of older inventory. Distribution expense as a rate to net sales decreased 17 basis points primarily due to savings from lower fuel costs over a year ago. Occupancy expense increased 133 basis points and saw its largest increase in rent expense as a percent to net sales resulting primarily from the de-leveraging of expenses.

Store operating, selling and administrative expenses. Store operating, selling and administrative expenses were $31.3 million, or 25.4% of net sales, for the thirteen weeks ended August 1, 2009, compared to $30.9 million, or 23.7% of net sales, for the comparable period a year ago. We attribute this increase to the following factors:

· Salary and benefit expenses increased 110 basis points at the retail level primarily as the result of the increase in minimum wages. We also saw a slight increase in salary and benefit expenses at the administrative level.

· An increase in credit card expenses accounted for an increase of 12 basis points due to increases in interchange rates and chargebacks. Net advertising and supply expenses both increased by 11 basis points.

· Somewhat offsetting the increases above were decreases in stock-based compensation due to the timing of the stock awards to our Chief Executive Officer between years and in store training expenses.

Depreciation and amortization. Depreciation and amortization as a percentage of net sales was 2.9% in the thirteen weeks ended August 1, 2009 compared to 2.8% for the comparable period a year ago. The weighted-average lease term of new store leases added during the thirteen weeks ended August 1, 2009 decreased to 6.1 years compared to those added during the thirteen weeks ended August 2, 2008 of 7.6 years. We believe we have been able to secure shorter leases as a result of the current economic environment for commercial real estate. We attribute the slight increase in depreciation expense as a percent to net sales to changes in estimates of useful lives of leasehold improvements in some underperforming stores offset by a decrease in the investment in leasehold improvements in recent years as more of the build-out work is being done by landlords.

Provision for income taxes. Provision for income taxes as a percentage of net sales was 0.7% in the thirteen weeks ended August 1, 2009, compared to 2.1% for the thirteen weeks ended August 2, 2008. The combined federal, state and local effective income tax rates as a percentage of pre-tax income were 41.8% and 36.6% for the thirteen weeks ended August 1, 2009 and August 2, 2008, respectively. The increase in rate over last year is primarily the result of state tax discrete items including revision of estimates resulting from changes in state apportionment recorded in the second quarter of Fiscal 2010. In the prior year, these entries were recorded in the third quarter.

Twenty-Six Weeks Ended August 1, 2009 Compared to Twenty-Six Weeks Ended August 2, 2008

Net sales. Net sales increased $4.7 million, or 1.7%, to $280.8 million for the twenty-six weeks ended August 1, 2009 from $276.1 million for the comparable period in the prior year. Furthermore:

· We opened 23 Hibbett Sports stores and closed 9 stores in the twenty-six weeks ended August 1, 2009. New stores and stores not in the comparable store net sales calculation increased $14.2 million during the twenty-six-week period.

· We experienced a 3.6% decrease in comparable store net sales for the twenty-six weeks ended August 1, 2009.

During the twenty-six weeks ended August 1, 2009, 670 stores were included in the comparable store sales comparison. The decrease in comparable store sales was primarily attributable to a significant decline in footwear in the second quarter that we believe was the result of the lack of economic stimulus checks that were in the market one year ago and the shift of tax-free holidays from the second quarter last year to the third quarter this year. The most significant trend we experienced in the twenty-six-week period was a decline in footwear, while most other categories performed within levels we expected. The difficult macroeconomic environment and declining consumer confidence resulted in lower customer traffic in our stores. Strip center locations continue to outperform enclosed mall stores and non-urban stores continue to outperform urban locations. Strip center locations now comprise approximately 75% of our total store base.

Gross profit. Cost of goods sold includes the cost of inventory, occupancy costs for stores and occupancy and operating costs for the distribution center. Gross profit was $89.5 million, or 31.9% of net sales, in the twenty-six weeks ended August 1, 2009, compared with $90.1 million, or 32.6% of net sales, in the same period of the prior fiscal year. Our decrease in gross profit percent was due primarily to markdowns of older inventory in the second quarter. Distribution expense as a rate to net sales decreased 24 basis points primarily due to savings from lower fuel costs. Occupancy expense increased 44 basis points and saw its largest increase in rent expense as a percent to net sales resulting primarily from the de-leveraging of these expenses. Occupancy expense on a per-store basis experienced a slight decrease.

Store operating, selling and administrative expenses. Store operating, selling and administrative expenses were $63.2 million, or 22.5% of net sales, for the twenty-six weeks ended August 1, 2009, compared to $60.0 million, or 21.7% of net sales, for the comparable period a year ago. We attribute this increase to the following factors:

· Salary and benefit expenses at the store level increased by 40 basis points primarily due to increases in minimum wage in the second quarter. Stock-based compensation expense increased by 13 basis points, resulting from higher fair values of equity awards in Fiscal 2010.

· Although credit card transactions are trending flat, an increase in credit card expenses accounted for an increase of 12 basis points. We also saw increases in supply expenses for our stores.

· Somewhat offsetting the increases above was a decrease in store training expenses.

Depreciation and amortization. Depreciation and amortization as a percentage of net sales was 2.4% in the twenty-six weeks ended August 1, 2009 compared to 2.5% for the comparable period a year ago. The weighted-average lease term of new store leases added during the twenty-six weeks ended August 1, 2009 decreased to 6.0 years compared to those added during the twenty-six weeks ended August 2, 2008 of 7.1 years. We believe we have been able to secure shorter leases as a result of the current economic environment for commercial real estate. We attribute the slight decrease in depreciation expense as a percent to net sales to a decrease in the cost of leasehold improvements in recent years, as more of the build-out work is being done by landlords, offset by changes in estimates of useful lives of some underperforming stores.

Provision for income taxes. Provision for income taxes as a percentage of net sales was 2.7% in the twenty-six weeks ended August 1, 2009, compared to 3.2% for the twenty-six weeks ended August 2, 2008. The combined federal, state and local effective income tax rates as a percentage of pre-tax income were 38.2% and 38.1% for the twenty-six weeks ended August 1, 2009 and August 2, 2008, respectively.

Liquidity and Capital Resources

Our capital requirements relate primarily to new store openings, stock repurchases and working capital requirements. Our working capital requirements are somewhat seasonal in nature and typically reach their peak near the end of the third and the beginning of the fourth quarters of our fiscal year. Historically, we have funded our cash requirements primarily through our cash flow from operations and occasionally from borrowings under our revolving credit facilities.

Our unaudited condensed consolidated statements of cash flows are summarized as follows (in thousands):

                                                           Twenty-Six Weeks Ended
                                                        August 1,          August 2,
                                                           2009              2008
Net cash used in operating activities:                 $     (1,557 )     $    (4,105 )
Net cash used in investing activities:                       (4,532 )          (5,485 )
Net cash provided by financing activities:                    1,007            12,962
Net (decrease) increase in cash and cash equivalents   $     (5,082 )     $     3,372

Operating Activities.

Cash flow from operations is seasonal in our business. Typically, we use cash flow from operations to increase inventory in advance of peak selling seasons, such as holiday and back-to-school. Inventory levels are reduced in connection with higher sales during the peak selling seasons and this inventory reduction, combined with proportionately higher net income, typically produces a positive cash flow. In recent periods, we have experienced a trend of increasing free rent provisions in lieu of cash construction allowances in our leases. We believe this is primarily the result of the tightening of commercial credit on our landlords. Because of this, the non-cash portion of landlord allowances has also experienced increases.

Net cash used in operating activities was $1.6 million for the twenty-six weeks ended August 1, 2009 compared with net cash used in operating activities of $4.1 million for the twenty-six weeks ended August 2, 2008. The largest use of cash during the period was an increase in inventory. The largest source of cash during the period was an increase in accounts payable. At August 1, 2009, the inventory level on a per store basis decreased by 1.3% compared to August 2, 2008. We believe this is primarily a result of our more sophisticated replenishment system and prudent inventory management. Net income and non-cash charges, including depreciation and amortization expense and stock-based compensation expense also contributed to the increase in net cash used in operating activities.

Investing Activities.

Net cash used in investing activities in the twenty-six weeks ended August 1, 2009 totaled $4.5 million compared with net cash used in investing activities of $5.5 million in the twenty-six weeks ended August 2, 2008. Net redemptions of investments were $0.1 million as of August 1, 2009 compared to net purchases of investments of $0.1 million as of August 2, 2008. Capital expenditures used $4.7 million and $5.5 million of cash in the twenty-six weeks ended August 1, 2009 and August 2, 2008, respectively. We use cash in investing activities to open new stores and remodel or relocate existing stores. The reduction of capital expenditures over last year is due to a slowing of new store openings and a lower initial investment in leasehold improvements per new store. Furthermore, net cash used in investing activities includes purchases of information technology assets and expenditures for our distribution facility and corporate headquarters.

We opened 23 new stores and relocated or remodeled 8 existing store during the twenty-six weeks ended August 1, 2009 as compared to opening 28 new stores and relocating or remodeling 6 existing store during the twenty-six weeks ended August 2, 2008.

We estimate the cash outlay for capital expenditures in Fiscal 2010 will be approximately $14.5 million, which relates to the opening of 50 to 52 new stores, remodeling of selected existing stores, information technology upgrades and enhancements and various improvements at our headquarters and distribution center. Of the total budgeted dollars for capital expenditures for Fiscal 2010, we anticipate that approximately 58% will be related to the opening of new stores and remodeling or relocating existing stores. Approximately 23% will be related to improvements in information technology and distribution with the remaining related primarily to loss prevention tools, office space improvements, equipment and automobiles.

Financing Activities.

Net cash provided by financing activities was $1.0 million in the twenty-six weeks ended August 1, 2009 compared to net cash provided by financing activities of $13.0 million in the prior year period. The cash fluctuation as compared to the same period last fiscal year was primarily due to the borrowings against our credit facilities to repurchase shares of our common stock and to finance our inventory position in preparation for the back-to-school and holiday selling seasons in the prior year. In the twenty-six weeks ended August 2, 2008, we expended $16.9 million on repurchases of our common stock and did not repurchase any of our common stock in the twenty-six weeks ended August 1, 2009. Financing activities also consisted of proceeds from transactions in our common stock and the excess tax benefit from the exercise of incentive stock options. As stock options are exercised, we will continue to receive proceeds and expect a tax deduction; however, the amounts and timing cannot be predicted.

As of August 1, 2009, we had two unsecured revolving credit facilities that allow borrowings up to $30.0 million and $50.0 million, respectively, and which renew in August and December 2009, respectively. The facilities do not require a commitment or agency fee nor are there any covenant restrictions. We plan to renew these facilities as they expire and do not anticipate any problems in doing so; however, no assurance can be given that we will be granted a renewal or terms which are acceptable to us. As of August 1, 2009, we did not have any debt outstanding under either of these facilities.

Subsequent to August 1, 2009, we renewed our existing facility of $30.0 million at a rate equal to the higher of the bank's prime rate, the Federal Funds Rate plus ½ of 1% or LIBOR. The renewal was effective August 27, 2009 and will expire on August 26, 2010. The facility is unsecured and does not require a commitment or agency fee nor are there any covenant restrictions.

Based on our current operating and store opening plans and management's plans for the repurchase of our common stock, we believe that we can fund our cash needs for the foreseeable future through cash generated from operations and, if necessary, through periodic future borrowings against our credit facilities.

Off-Balance Sheet Arrangements.

We have not provided any financial guarantees as of August 1, 2009. All purchase obligations are cancelable. We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business. We do not have any arrangements or relationships with entities that are not consolidated into the financial statements.

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. 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.

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