While HIBB posted solid comps (+5%), FL was nothing to write home about – about in line at -0.5%. But with sales up 1.5% in total, we saw inventory down 3.5%. The key was that gross margins came in +419bps vs. last year. As a frame of reference, my quarterly model goes back to the late 1990s, and I cannot find a single quarter that comes close to +419bps in order of magnitude. What I like is that the strength I’m seeing now is entirely from managing the balance sheet, and any business strength (which I think will come) will be leg 2 of this call.
I hate to sound like a broken record, but I see no reason why FL cannot, and will not, revert to a mid-single digit EBIT margin over 2-3 years.