Hibbett Inc
NASDAQ:HIBB
Earnings Call Analysis
Q4-2024 Analysis
Hibbett Inc
Hibbett reported a strong finish to fiscal year 2024 with a record-setting $1.73 billion in annual sales, indicating a continuation of the company's profitable growth trajectory and surpassing the previous fiscal year's figures. Despite the retail environment remaining challenging due to inflation that has led consumers to be more cautious with discretionary spending, Hibbett's strategic focus has allowed for consistent market share gains.
The company's fourth-quarter performance was bolstered by holiday sales that met expectations and was supported by competitive advantages such as superior customer service, a robust omnichannel shopping experience, and strategic store placement in underrepresented markets, contributing to market share growth in fiscal 2024.
Footwear remained the main driver of Hibbett's sales, with premium brands leading the charge. The quarter witnessed a series of exciting new product launches which, along with the successful integration of Hibbett and Nike's loyalty programs, provided an enhanced retail experience. These strategies have proven effective in attracting more customers to both physical stores and the omnichannel platform, setting the stage for further market share capture and growth ahead.
While footwear upheld its strong performance with only mid-single-digit comp sales declines, other categories such as apparel and team sports faced greater downturns, attributed to weather patterns and marketwide promotional activities. Nonetheless, the company concluded fiscal 2024 with a significant inventory reduction, achieving its targets with the aid of promotional efforts and support from key brand partners.
In fiscal 2024's fourth quarter, total net sales saw a 1.8% increase, reaching $466.6 million, though there was a 6.4% dip in overall comp sales compared to the strong fourth quarter of the previous year. E-commerce continued to grow, contributing to 18.9% of net sales. Gross margin narrowed by approximately 70 basis points due to lower average product margins and increased store occupancy costs. Meanwhile, SG&A expenses increased to 23% of net sales, up from 21.6% the year prior, influenced by factors such as inflation and investments in technology.
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Greetings. Welcome to Hibbett's Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Gavin Bell, Vice President of Finance and Investor Relations. Thank you. You may begin.
Thank you, and good morning. Please note that we have prepared a slide deck that we will refer to during our prepared remarks. The slide deck is available on hibbett.com in the Investor Relations link found at the bottom of the home page or at investors.hibbet.com under the News and Events section. These materials may help you follow along with our discussion this morning. Before we begin, I'd like to remind everyone that some of the management's comments during this conference call are forward-looking statements. These statements, which reflect the company's current views with respect to future events and financial performance, are made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to uncertainties and risks. It should be noted that the company's future results may differ materially from those anticipated and discussed in the forward-looking statements. Some of the factors that could cause or contribute to such differences have been described in the news release issued this morning and are noted on Slide 2 of the earnings presentation and the company's annual report on Form 10-K and in other filings with the Securities and Exchange Commission. We refer you to those sources for more information. Also to the extent non-GAAP financial measures are discussed on the call, you may find a reconciliation to the most directly comparable GAAP measures on our website. Lastly, I'd like to point out that management's remarks during this conference call are based on information and understandings believed accurate as of today's date, March 15, 2024. Because of the time-sensitive nature of this information, it is the policy of Hibbett Inc. to achieve the -- to limit the archived replay of this conference call webcast to a period of 30 days. The participants on this call are Mike Longo, President and Chief Executive Officer; Jared Briskin, Executive Vice President, Merchandising; Bob Volke, Senior Vice President and Chief Financial Officer; Bill Quinn, Senior Vice President of Marketing and Digital; and Ben Knighten, Senior Vice President of Operations. I'll now turn the call over to Mike Longo.
Good morning, and welcome to the Hibbett fourth quarter earnings call. For those of you following well on the slides, I'm on Slide 3 entitled Overview. Hibbett delivered a solid financial and operating performance for the fourth quarter of fiscal '24, capping off another year of profitable growth. We're especially proud to reach $1.73 billion in annual sales for the year, surpassing fiscal '23 sales and setting a new company record.
Throughout the year, our team did an outstanding job of consistent execution of our strategy as we continue to win market share. Notably, we have achieved these results in what has continued to be a challenging retail environment. Consumers are still facing inflationary pressures with higher prices on many essential items and are, therefore, being more selective in their discretionary spending. A distinct competitive advantage for Hibbett is the quality and variety of our product mix. We've worked hard to offer a compelling range of trend-relevant brands and products that are in line with current spending patterns. Our results for the fourth quarter were boosted by holiday sales, which were in line with expectations. Additionally, our superior customer service of best-in-class omnichannel shopping experience, strong vendor relationships and strategic store placement in underserved markets are distinct competitive advantages that allowed us to continue to gain market share in fiscal '24. Footwear sales continue to be the key driver of our sales, especially for our premium brands. During the fourth quarter, we had a robust schedule of new product launches, which continue to generate excitement from our brand loyal customers. This was also the first full quarter under our new connected partnership connecting Hibbett and Nike's loyalty programs. Our loyalty customers now benefit from an enhanced retail experience when they purchased Nike and Jordan products whether in one of our stores or online. Our loyalty programs have also been extremely popular with our customers, adding value to the overall shopping experience and driving more traffic to our stores and our omnichannel platform. Looking ahead to fiscal '25, we expect to follow the same growth trajectory and continue to gain market share. Our sales guidance for the upcoming year reflects confidence, testament to our proven ability to execute our strategy. At the same time, we intend to make significant capital investments in our infrastructure, which will affect our short-term profitability. However, as always, we are investing for the long term. We believe these investments will further enhance our strong value proposition and drive sustainable, profitable growth. We'll also be intentional about adding new stores in underserved markets with a goal to add 45 to 50 stores in the year ahead. Our sophisticated omnichannel platform remains a key competitive advantage and we will continue to focus on providing the latest technology and functionality to improve the overall customer experience. Before turning the call over to Jared, I'd like to thank our approximately 12,000 team members across the organization for their dedication and hard work in a challenging environment. Whether across our nearly 1,200 stores, our omnichannel platform, our logistics facilities or the store support center, they proudly represent Hibbett with an unwavering commitment to the integrity of our brand and outstanding support for our loyal customers. I'll now turn the call over to Jared.
Thank you, Mike. Good morning. Please turn to Slide 5 entitled Merchandising. The fourth quarter opened with a strong start to the holiday season, but faded at the end of December and in January. Footwear was our strongest category during the quarter with comp sales down mid-single digits. Strong trends we're seeing in lifestyle, basketball and running. This was offset with some weakness in the performance of some launches in the latter part of the quarter. Apparel and Team Sports were both negative comps for the quarter, down high single digits and low 30s, respectively. Seasonal categories were weak due to the warm and dry weather patterns. Apparel also continues to be affected by promotional activity due to elevated levels of inventory in the market. While apparel was a challenge, overall, socks and accessories continue to be strong performers. Specific to footwear and apparel, comp sales in the men's business were down mid-single digits with Kids' business down high single digits. Women's was our best performer, up low single digits. Men's was affected by high single-digit declines in apparel, with footwear down mid-single digits. Kids' was down low 20s in apparel, while footwear was down mid-single digits. Women's was up low single digits, driven by a high single-digit increase in footwear, offset by a low 20s decrease in apparel results. As expected, we ended fiscal year '24 with a high-teens decrease in inventory compared to the end of fiscal '23. Inventory levels declined in the low teens from the end of the third quarter of fiscal '24. Promotional efforts as well as support from our key brand partners aided in achieving our inventory reduction goals. I'll now hand it over to Bob to cover our financial results.
Thank you, Jared, and good morning. Please refer to Slide 6 for an overview of Q4 results. As a reminder, all financial results are reported on a consolidated basis that includes both the Hibbett and City Gear brands. I would also like to call out that the fourth quarter of fiscal 2024 was a 14-week quarter, and fiscal 2024 was a 53-week year. Comp sales figures for the current quarter and the year exclude this extra week. Total net sales for the fourth quarter of fiscal '24 increased 1.8% to $466.6 million from $458.3 million in the fourth quarter of fiscal '23. Overall comp sales decreased 6.4% versus the prior year fourth quarter. Please note that we had a very strong fourth quarter performance last year, generating overall 15.5% comp. Brick-and-mortar comp sales declined 9.2% compared to the prior year's fourth quarter, while e-commerce comp sales actually increased 6.9% compared to the same period in fiscal 2023.
E-commerce sales accounted for 18.9% of total net sales during the current quarter compared to 17.4% in the fourth quarter of fiscal '23. Gross margin was 34.5% of net sales for the fourth quarter of fiscal '24 compared with 35.2% in the fourth quarter of last year. This approximate 70 basis point decline was driven primarily by lower average product margin of approximately 125 basis points on approximately 55 basis point increase in store occupancy, freight shipping, logistics costs and shrink have improved as a percent of sales on a year-over-year basis, partially offsetting the unfavorable average product margin and store occupancy performance. Rate was favorable by approximately 60 basis points, logistics is served by approximately 30 basis points and shrink was favorable by approximately 10 basis points. SG&A expenses were 23% of net sales for the fourth quarter of fiscal '24 compared to 21.6% of net sales for the fourth quarter of last year. This approximate 140 basis point increase is primarily the result of higher store wages and the related benefit costs driven by inflation, a growing store base and increased data processing costs associated with ongoing investment in cloud-based back-office systems and technology. Depreciation and amortization in the fourth quarter of fiscal '24 increased approximately $1.4 million in comparison to the same period last year, reflecting increased capital investment on store development, technology initiatives and various infrastructure projects over the last 3 fiscal years. We generated $40.6 million of operating income or 8.7% of net sales in the fourth quarter this year compared to $50.7 million or 11.1% of net sales in the prior year's fourth quarter. Net income for the 14 weeks ended February 3, 2024, was $30.9 million or $2.55 per diluted share compared to $38.4 million or $2.91 per diluted share 13 weeks ended January 28, '23. At the end of the fourth quarter of fiscal '24, with $21.2 million of available cash, cash equivalents on our unaudited condensed consolidated balance sheet and $45.3 million of debt outstanding on our $160 million unsecured line of credit. Net inventory at the end of the fourth quarter was $344.3 million, an 18.2% decrease from the beginning of the year. Capital expenditures during the fourth quarter were $20.7 million with approximately 73% attributed to store development projects, including new stores, remodels, relocations and new signage. We opened 11 new -- net new stores in the fourth quarter, bringing the store base to 1,169 in 36 states. We paid a recurring quarterly dividend in the fourth quarter in the amount of $0.25 per [ eligible ] common share for a total outflow of approximately $2.9 million. There were no repurchases of shares during the fourth quarter, similar to the prior year fourth quarter. Moving on to Slide 7 to discuss full year results. Total net sales for the 53 weeks of fiscal '24 increased 1.2% to $1.73 billion, while full year comparable sales decreased 3.1% versus the equivalent 52 weeks in fiscal '23. The brick-and-mortar comp sales declined 4.4% and e-commerce comp sales increased 4.1% compared to the prior year. Full year gross margin was 33.8% of net sales versus 35.2% of net sales last year. This is an approximate 140 basis point decline. The decline in year-over-year gross margin was primarily due to lower average product margin of approximately 210 basis points and higher store occupancy costs of approximately 40 basis points. On the positive side, we experienced year-over-year improvement in freight, shipping and logistics costs as a percent of net sales. Freight was favorable by approximately 70 basis points, logistics was favorable by approximately 30 basis points and shrink was favorable by approximately 10 basis points. SG&A expenses were 23% of net sales for the 53 weeks ended February 3, '24 compared to 22.8% in the 52 weeks ended January 28 of '23. The approximate increase of 20 basis points is primarily the result of increased store wages and data processing costs, partially offset by lower professional fees and advertising. We generated $137 million of operating income or 7.9% of net sales during fiscal '24 compared to $168.4 million or 9.9% of net sales in fiscal '23. Net income for the current year was $103.2 million or $8.17 per diluted share compared with $128.1 million or $9.62 per diluted share in the prior year. Capital expenditures in fiscal '24 were $57.9 million compared to $62.8 million in fiscal '23. Current year capital expenses were predominantly related to store initiatives, including new store openings, relocations, expansions, remodels and technology upgrades. For the year, our store count increased by a net of 36 units comprised of 44 new locations and 8 closures. Our total store count stands at 1,169 at the end of fiscal '24. On a full year basis, we repurchased approximately 1.16 million shares under our share repurchase plan at a total cost of $53.2 million. We paid 4 recurring quarterly dividends throughout fiscal '24 for a total outflow of $12.4 million. 53rd week in fiscal '24 resulted in net product sales of approximately $22.9 million. This incremental week contributed approximately $2.6 million to $2.8 million in net income to both the fourth quarter and the full year. On a diluted EPS standpoint, 53rd week impacted the fourth quarter by approximately $0.21 to $0.23 and impacted the full year by approximately $0.21 to $0.22. In addition, we recorded a $3.5 million increase to revenue in the fourth quarter due to a change in our estimate of gift card breakage. This change in estimate was supported by the historical redemption pattern of gift cards outstanding is applied prospectively. The impact to the fourth quarter EPS was approximately $0.23 and the full year impact was approximately $0.22. I'll now turn the call over to Bill Quinn to discuss consumer insights.
Thank you, Bob. In Q4, loyalty sales grew high single digits. This was driven by more member shoppers and average ticket growth. New member shoppers grew low double digits and existing member shoppers grew high single digits. Higher average unit retails drove increases in average ticket. There was a lot of energy around our loyalty program in Q4. This was the first full quarter under our new connected partnership, connecting Hibbett and Nike's loyalty programs. Customers have been receptive to the program, and we are pleased with the results we are seeing. We are seeing healthy sign-ups as well as favorable purchase behavior. In FY '25, the continuation of connected membership will advance the ways in which we engage and delight our members across all omnichannel touch points. During Q4, we also made investments in our digital channel to acquire more loyalty customers. Those efforts help fuel our overall loyalty program sales growth and drove online sales. In Q4, total online sales increased 10.5% versus last year. E-commerce represented approximately 19% of total sales for the quarter versus last year's 17%. Online traffic, conversion and average ticket all increased in Q4 driven by key footwear styles, marketing investments and customers utilizing more online services, including online, buy online pick up in store, buy now pay later. Lastly, through the overall business, we are continuing to keep a pulse on how our customers are feeling. This quarter, customers intend to spend more on athletic footwear and apparel than last year. However, there has been some uncertainty from customers around the size and timing of their tax refund. Also, customers continue to have elevated concerns around inflation. Based on our research, we expect a more cautious and selective consumer going into FY '25. Now I'll hand the call back to Bob to discuss fiscal 2025 guidance.
We're now moving forward to Slide 9, talk about the guidance. Please note that fiscal 2025 will end on February 1, 2025, when we comprise the 52 weeks versus the 53 weeks we just experienced in fiscal '24. The number of business and economic challenges we faced in fiscal '24 will continue to impact our business in fiscal '25. These challenges include the potential for inflation and interest rates to remain elevated, the continued use of selected promotional activity to drive traffic, ongoing wage pressures, a more cautious and selective consumer and ongoing geopolitical conflicts. These factors contribute to the complexity and volatility in forecasting fiscal '25 results. Our estimated full year guidance for fiscal 2025 is as follows: total net sales in fiscal '25 are anticipated to be flat [ to ] up approximately 2% compared to our full year fiscal '24 results. Through the transition from a 53-week year in fiscal '24 to a 52-week year in fiscal '25, comparable sales for fiscal 2025 will be compared to weeks 2 through 53 in fiscal '24. We anticipate the most material impact of the shift will be associated with the back-to-school selling season. We expect a larger portion of back-to-school sales will land in our second quarter this year. On the flip side, the third quarter will have a smaller portion of back-to-school sales. The quarterly impact of the weak shift on reported fiscal '24 comp sales and net sales is highlighted in the table on the last page of this morning's press release. Total comparable sales are expected to be flat to negative low single digits for the year. Brick-and-mortar comparable sales are also expected to range from flat to negative low single digits. Both total e-commerce revenue for the full year and comparable e-commerce revenue adjusted for the 1-week shift is anticipated to be up in the mid- to high single-digit range. Net new store growth is expected to be approximately 45 to 50 stores. First quarter is projected to have the lowest growth with net new units anticipated to be more evenly distributed across the remaining quarters. Gross margin expectations include a less impactful promotional environment and small leverage gains in freight and logistics, partially offset by headwinds in store occupancy. These factors are expected to drive approximately 40 to 70 basis points of improvement in the gross profit percentage in comparison to fiscal '24 results. Expected full year gross margin is anticipated to be in the range of 34.2% [indiscernible] of net sales. SG&A as a percentage of net sales is expected to increase by approximately 90 to 120 basis points in comparison to fiscal '24 due to new store growth, wage inflation, increased incentive compensation, transaction fees and data processing costs. Data processing costs includes incremental investment in cloud-based technology solutions. Expected full year SG&A expense range is estimated to be 23.9% to 24.2% of net sales. Operating profit is expected to be in the range of 7% to 7.4% of net sales, a net decline of approximately 50 to 90 basis points in comparison to fiscal '24. It is anticipated there will be debt outstanding on our line of credit for much of the year, although we expect average daily borrowings to be lower than fiscal '24. We believe peak borrowings will be tied mostly to the timing of receipts, setting up for peak selling seasons. Interest expense for the full year is projected to be approximately [ 10, 20 ] basis points of net sales. Diluted earnings per share are anticipated to be in the range of $8 to $8.75 using an estimated full year tax rate of between 22.9% [indiscernible] and an estimated weighted average diluted share of [ $11.6 million to $11.7 million. ] Capital expenditures are anticipated to be in the range of $65 million to $75 million, with the largest share of this investment once we focus on new store growth, remodels, relocations, new store signage and improving the consumer experience. Our capital allocation strategy continues to include share repurchases, recurring quarterly dividends in addition to the capital expenditures noted previously. That concludes our prepared remarks. Operator, please open the line for questions.
[Operator Instructions] Our first question is from Mitch Kummetz with Seaport Research.
Maybe I missed comments on the release, but could you give your fiscal '25 sales outlook [ per ] quarter. I believe in the past, you've kind of given the breakout by percentage of the year? Do you have that?
Mitch, it's Bob. We kind of pulled that out this year. I think with the week shift, it gets a little bit more challenging. We don't think there's a huge amount of change within the quarters after I deal with the exception of what we mentioned on the prepared comments as far as back-to-school. But I still expect Q1 and Q4 to be relatively similar to what we saw last year. You have that kind of right at the end of Q2, right at the beginning of Q3, there will be [indiscernible] impact effectively.
Okay. And then on the footwear side, down mid-singles this quarter. I think last quarter, it was up low single. How do you explain that sequential softening? I'm curious how much of that might have been seasonal versus anything else that you are seeing in the assortment between those 2 periods?
This is Jared. Yes, so I think first and foremost [indiscernible] obviously, we were up against a very significant comp, we had really strong footwear results first and foremost. Seasonal business was a challenge for. But the primary driver was weakness at the end of the quarter. We got to the last week in December and January and how the consumer even more selective than they have been something we've still seen here for the last couple of quarters. Once we got out of holiday, it was pretty clear they were being super selective. And unfortunately, some of the parts of our assortment and some of the things in the launch calendar were somewhat repetitive and really just been cut through. That was the real driver of what happened in footwear, especially towards the [ end of the ] quarter.
And then my last question, maybe just as a follow-on to that. The weakness that you saw at the end of the quarter, is there any way you can kind of maybe parse [indiscernible] combined by month or maybe talk about how January performed versus November, December. And I'm curious that maybe some of that weakness at the end of the quarter is carried over into February.
Yes. I mean, obviously, we don't really comment on the intra-quarter, but certainly, the November and December time period, we felt pretty good about our business and particularly strong. And once we got out of holiday, things started to materially slow down for us again, end of December and into January.
Our next question is from Justin Kleber with Baird.
Bob, first, just the revenue related to the change in gift card redemptions, can you just walk through those numbers again? You cited, I want to make sure I got those correct. And then just -- was that always in the guidance? Or was that not in the guidance?
Yes. So the absolute dollar amount of impact of revenue was $3.5 million. Let me go back and make sure, I just hope [indiscernible] correctly here. So Again, as I said earlier, not just I mean to get into too much acknowledging member jump, but obviously, we looked at some historical patterns and felt that we were underrecognized in that gift card. So the $3.5 million was recorded in Q4 impacted the quarter by about $0.23, impacted the full year by about $0.22. And by the time we issued our third quarter results and guidance, we're already working on that. So we had a pretty solid estimate about that when we going into the fourth quarter.
Okay. Got you. And then the view that the promotional environment, I guess, in this upcoming year is going to moderate. Obviously, the fourth quarter seems quite promotional. And I guess what gives you confidence that promotions will lessen this year? Is that just what you're seeing not only within your inventory but also inventories across the channel? Just any color there would be helpful.
Justin, it's Jared. Yes. So 2 parts. I mean the first and foremost, our team worked incredibly hard last year and in particular, in the back half of the year. Again, our inventory levels rightsized to get us in a position to have a [indiscernible] of our inventory throughout fiscal '25. So we feel great about that. So while there's still some inventory that's elevated in the marketplace and likely there will still be some [ tons. ] Based on where our inventory is, the work that was done, how clean the inventory has become the support we're getting from the vendor community. We feel like our ratio of full price selling will be much higher, where we still might have some promotions from a competitive standpoint in the marketplace. But we'll have significantly less markdowns that we're dealing with as a result of old inventory.
That's great color. And the last question for me guys, just on the -- maybe Mike, can you just expand on some of the investments you alluded to, specific -- specifically the customer-facing technologies, what changes are going to be visible to the consumer? And then you talked about these enhancing your profitability longer term, I was curious when you would expect these investments to bending the curve on profitability?
Yes, I think there's a couple of different -- this is Bob, by the way. There's a couple of different aspects. This one is certainly the stuff you see more in the front of house, which would be the digital experience and some of the technology that we've got in the stores, we continue to [indiscernible] our association is efficient. Another big chunk of this is what we've done in the back office. So we've added more sophisticated financial, human resource systems as well as now we're upgrading all of our merchandising systems. So the expectation is that we're still kind of in that investment mode. We're starting to get some benefits from some of the things we've invested in over, say, 12 to 18 months ago, but so in process putting some of those things in place, we expect that the leverage will [ extend for fiscal '26 ] forward.
Our next question is from Alex Perry with Bank of America.
I just wanted to follow up on the first question that was asked, sort of within the comps flat to down low digit comp guidance through the year, I just wanted to maybe clarify some of your comments, Bob. So do you say that 1Q and 4Q similar to last year, would that imply that you're sort of thinking about those as flat comps in those quarters where 2Q is a bit better [ due to ] pull forward impact full spend and then maybe 3Q a bit worse, is that out of the quarter? Is that sort of how we get to that guide for the year?
I think it's more about the percent of sales that fall into the quarter. So I wasn't really referring to specifically [indiscernible] there's obviously some alignment with those numbers as far as I really just looking more at how the revenue is going to spread across. To your question I believe that percent of revenue you've seen in [indiscernible] last year to shift in the back end early part of future.
Got you. That. And then I wanted to ask about the store openings a bit more. Maybe just talk about what you're seeing in terms of your new store performance? If you look at some of the stores you opened in 2023, for instance, are you seeing those sort of ramp in the same way as previous cohorts? Maybe talk a little bit about where the new stores are concentrated? Are these new markets for you guys are sort of mostly [ infill ] of existing markets?
Alex, It's Jared. Yes, look, we're really pleased with our new stores. The performance has been exceptional. And they're ramping up faster than we've seen historically, one of the challenges we've had is getting them open, frankly, some delays with permitting inspections, things of that nature has presented a little challenge, teams working incredibly hard to redefine our timelines and processes to take [indiscernible] 45 to 50 this year and then grow that number over the next years, absolutely. With regard to the markets and infill, we tend to target one new market a year. 2 years ago with the Las Vegas market, not on the strip. Last year, it was more on [indiscernible] the market again, this year as well. And then the rest is infill. And as we've said before, we've got a significant opportunity to grow the chain. We still feel that we can double the change over time. But very, very pleased with our new stores and the way they're performing.
Our next question in Cristina Fernández with Telsey Group.
I wanted to ask about the product trends you mentioned in the remarks that some of the launches made in the quarter where [indiscernible] hit it with customers. So how do we feel about the level of newness coming in this year, in access products and brands that are more [ transit ] or doing better currently?
Yes. So I think -- I'll try to separate the question a little bit. It's Jared. I think first and foremost, with regard to partnerships with vendors, our access points, our allocation, we feel great about where we are. Obviously, we've reduced the inventory significantly, 18%. We expect that we can maintain inventory about at this level, but with a much higher concentration of the best product and the high quality products. So we feel great about that. Still feel overall from an innovation pipeline, things are going a little bit slower than we like. There are certainly some things that the team has invested that we're seeing some nice results in, whether some of those things are scalable or not, there's still things that we're trying to determine. And more and more of those will come in throughout the year. So we're starting to feel some of the innovations start to kick in a little bit more. We have more things that we can make investments in, and our team has been really aggressive in trying to find some of those new things that we can get good tests on and then hopefully scale as we get into the latter part of this year and into next year. So Things are starting to materialize. We'd like to see the innovation pipeline go a little bit faster. But again, we'll feel good about where we are positioned and our partnerships with all the key vendors.
And then on the apparel side, that's been [indiscernible] for many quarters now. How do you feel about the level of inventory there, potential stabilization in that category?
Yes. I think overall, our inventory in apparel is in great shape, teams worked incredibly hard at that. So we're very confident in the level of inventory and the [indiscernible]of the inventory and the marketplace also is heavy. So we're still fighting some of that, but we're absolutely seeing some things starting to materialize, particularly in our [ streetwear ] business and in our denim businesses as examples that we feel can become significant drivers for us as we get into the second half of the year.
And one more, if I can. I wanted to ask about the SG&A increases. Is there any way you can bucket sort of the category, what's more within the 90 to 100 basis point increase? What are the biggest chunks? Just to understand if it's incentive comp or the investment in the stores, maybe you can break it down for us a little more?
Yes. Again, this is Bob, Cristina. So I think, again, when you look at kind of the biggest headwinds we're dealing with is still riding a lot of wage inflation at the store level. So we came off a year where we're probably estimating somewhere in the near of 6% of wage increase. We think that number is going to be relatively close to that, maybe slightly lower than that as we move forward. So that is still something that we're obviously accounting for going forward. The other thing is we are investing, like I said, in some of the back-office technologies and those things are bringing in SG&A costs. Traditionally, those might have been things you invested capital, dollars in and went through depreciation. But because of our cloud-based systems, the accounting rules, of course, to run that through our operating expense. That's why we refer to this data processing bucket, and that would be things like our ERP systems and our merchandising systems. And the last piece you did mention is we set ourselves some pretty aggressive targets for internal compensation purposes. We have obviously tried to live up to those expectations. We have had a little bit of a shortfall in the last couple of years, we're putting a full value back into that, and that's why we talked about incentive compensation. We've also restructured a lot of targets within the store operations group again, to make us much more aligned with what our goals are. So we do feel that there's going to be some upside opportunity for the employees to have some additional incentive compensation.
And this is Mike. So we'll add a couple of comments on the labor side. And I'll be followed by Ben, but it's the second largest expense on the P&L aside from cost of goods sold. So it does occupy a lot of our time. But it's more than just cost, it's also the consumer experience. So Ben, do you want to add some flavor to this?
Yes. And I'll tag on, Cristina -- it's Ben Knighten. To some of what Bob and Mike said, we have seen that wage pressure kind of throughout the year and continued in Q4 at about the same pace really as we saw in the first 3 quarters. But one of the ways we wanted this is to continue investing in our environment, that has contributed to an increase in productivity, but it also improves the consumer experience, and that's where our real focus has been. We do think wage will soften a bit this year, but it will be similar to last year. That mobile platform has really helped us in a couple of different ways. And really it's taking the form of moving work to the mobile devices that we have in our stores. That includes a task that we have to do with sales associates on the floor but also includes additional tools to really help the customer. At the end of the day, our associates and customers are used to having access to their devices in their day-to-day life, and we are simply kind of extending that to our store environment. That allows us to do a couple of things. Number one, it allows us to hire, train and retain the right associates in our stores while also improving the store experience with the consumer. That continues in the current year and will continue in the future, and we do expect to see [indiscernible] dividends even more so in the future, particularly around productivity and the customer experience.
Our next question is from Sam Poser with William Trading.
I have a handful, please. I'm just going to start with the easy stuff. Can you give us -- Jared, just what were the comps by months?
We don't give the comps by month. But again, as I said, November, December, we were pretty strong. We felt pretty good about it. And the last week of December and January really, really were very difficult and the primary driver...
I mean are we talking about like low to mid-single-digit comps falling off to down doubles in that last 6 weeks?
I would say more flattish. Again, we're up against the plus 15. So it's certainly had a big hurdle to get over from a comp standpoint.
Flattish, and then it went [indiscernible] Okay. Your e-commerce business is very good, but your store comps aren't as good, and you're sort of guiding for that to continue. Is there more you can be doing using the your digital omnichannel work to drive more people into the stores to help the store comps?
Short answer is yes. Bill, do you want to give a little more detail on that?
Yes, absolutely. This is Bill. So yes, definitely omnichannel can drive a lot of traffic to the stores. I'll give you a few examples, buy online pick up in store that definitely drives traffic and we see a good attachment. We saw that increase, and that continues to increase. So that's one example. Our loyalty program is by far our largest omnichannel program, and that drives over 60% of our sales. We're making significant investments in that. So in terms of acquisition as well as retention and that will drive store traffic as well. Another thing that we're making investment in this year is around mobile, in particular, around our launch process and how to make that even better on day 1 and then the following day. So that's another investment that we're making to drive store traffic.
Then you might want to mention some of the innovation in [ Raffle ] without getting too much away.
Yes. Yes. Certainly, there is -- on day 1, depending on the launch, a certain amount of unsold items. And so we're putting in new processes as well as with our customers, new marketing, that are going to increase sell-through on that day 1 and then the following day. So more to come on that, but we have a lot of exciting innovations around the launch process. There's still customer friction there, and that's something that's very important to our customers and it's something that we're going to invest in.
And then -- the -- this is just not directly related to business, but there was a lot of moving around with your earnings dates. And I mean I wonder, are you -- is there -- are you working or involved in any M&A right now?
We don't entertain those sorts of questions. But to your first part of the question, the moving of the earnings state was my decision. We were trying to collect additional data as aside from what we normally get. Last year, we probably went a week too early and this year, we backed it up. So that was the origin of it.
Well, I mean, we had originally heard that it was going to be on the 28th, and then it seemed to move towards the 15th. So I'm just trying to understand.
[indiscernible] because I changed my mind.
We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing comments.
Thank you very much for your time and attention today. We always appreciate the opportunity to talk about our business and to say thanks to our sales associates in the stores, the people who worked so hard in their distribution center and the people who work in the store support center. They're the reason we get in here everyday and work as hard as we do, so we can do a good job for our consumers. So thank you again. We look forward to seeing you in Q2.
Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.