Q4 2024 Hibbett Inc Earnings Call

Participants

Michael Longo; President, Chief Executive Officer, Director; Hibbett Inc

Jared Briskin; Executive Vice President - Merchandising; Hibbett Inc

Robert Volke; Chief Financial Officer, Senior Vice President, Director; Hibbett Inc

William Quinn; Senior Vice President - Digital Commerce; Hibbett Inc

Mitch Kummetz; Analyst; Seaport Global Securities LLC

Justin Kleber; Analyst; Robert W. Baird & Co Inc

Cristina Fernández; Analyst; Telsey Advisory Group

Sam Poser; Analyst; Williams Trading, LLC

Presentation

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 via the investor relations link found at the bottom of the home page or at investors.hibbett.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, were 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 discussed in 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.

Michael Longo

Good morning, and welcome to the Hibbett fourth-quarter earnings call. For those of you following along the slides, I'm on slide 3, entitled Overview.
Hibbett delivered a solid financial and operating performance for the fourth quarter of fiscal 20 for 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 and best-in-class omnichannel shopping experience, strong vendor relationships and strategic store placement in underserved markets are distinct competitive advantage advantages that allowed us to continue to gain market share in fiscal '24. Footwear sales continued 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 program. Our loyalty customers now benefit from an enhanced retail experience when it purchased Nike and Jordan product, whether 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 this 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 the goal to add 45 to 50 stores in the year ahead.
Our sophisticated omnichannel platform remains a key competitive advantage. So we we'll continue to focus on providing the latest technology and functionality to improve the overall customer experience before turning the call over to Jerry, 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 or 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 local customers.
I'll now turn the call over to Jared.

Jared Briskin

Thank you, Mike, and morning.
Please turn to slide 5 entitled merchandising fourth quarter opened with a strong start to the holiday season, but stated 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 continued 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, 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 10s decrease in inventory compared to the end of fiscal 23. Inventory levels declined in the low 10s from the end of the third quarter of fiscal 24 promotional efforts as well as support from our key brand partners aimed at achieving our inventory reduction goals.
I'll now hand it over to Bob to cover our financial results.

Robert Volke

Thanks, 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. Ecommerce 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 100, 25 basis points, an approximate 55 basis point increase in store occupancy, freight, shipping and logistics excuse me, freight shipping, logistics costs and shrink have improved as a percent of sales on a year-over-year basis, partially offsetting the favorable The unfavorable average product margin and store occupancy performance. Freight was favorable by approximately 60 basis points. Logistic service 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 with 21.6% of net sales for the fourth quarter of last year. This approximate one or 40 basis point increase is primarily the result of higher store wages and the related benefit costs driven by inflation, our 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 three 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 third, 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 28th, 23. We ended the fourth quarter 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 had 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 for full year comparable sales decreased 3.1% versus the equivalent 52 weeks in fiscal 23. 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, and 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 third, 24 compared to 22.8% in the 52 weeks ended January 28th 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 187 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 one and $28.1 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. For your capital expenditures 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 eight 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 for recurring quarterly dividends throughout fiscal 24 for total outflow of 12.4 million 53rd week in fiscal 24 resulted in net product sales of approximately $22.9 million incremental. We contributed approximately 26 or sorry, 2.6 to 2.8 million in net income to both the fourth quarter and the full year diluted EPS standpoint, the 53rd week impacted the fourth quarter by approximately 21 to $0.23 and impacted the full year by approximately 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 has 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.

William Quinn

Thank you, back to 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, an 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 program. 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 helped 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 sales, marketing investments in customers utilizing more online services, including online, buy online, pick up in store, buy now pay later.
Lastly, for the overall business. We are continuing to keep a pulse on how our customers are feeling this quarter. Customers tend 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 refunds. Also, customers continue to have elevated concerns around inflation. Based on our research. We expect a more cautious and selective consumer going into FY25.
Now I'll hand the call back to Bob to discuss fiscal 2025.

Robert Volke

We're now moving forward to slide 9, but about the guidance. Please note that fiscal 2025 will end on February first, 2025 will be comprised of 52 weeks versus 53 weeks. We just experienced in fiscal '24. 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 remain elevated. The continued use of selective promotional activity to drive traffic, ongoing wage pressures, a more cautious and selective consumer and ongoing GFO 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 to be compared to weeks two through 53 in fiscal 24. We anticipate the most material impact of this 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, Q3 will have a smaller portion of back-to-school sales. The quarterly impact of the weak shift on reported fiscal 20 for 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 of total e-commerce revenue for the full year and comparable e-commerce revenue adjusted for the one week shift was 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%, 4.5% of net sales. Sg&a percent of net sales 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 and transaction fees and data processing costs in a process of cost include the 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. As 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 closely to the timing of receipts sitting at our peak selling seasons. Interest expense for the full year is projected to be approximately 10 to 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%, 0.2% and an estimated weighted average diluted share, 11.6 to 11.7 million. Capital expenditures are anticipated to be in the range of 65 to $75 million, with the largest share of this investment, principally focused on new-store growth, remodels, relocations, new store sizes, 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.

Question and Answer Session

Operator

(Operator instructions) Mitch Kummetz, Seaport Research.

Mitch Kummetz

Yes, thanks for taking my questions. So maybe I missed the comments with the release, but did you give your your fiscal 25 sales outlook a quarter, I believe in the past you've kind of given the breakout by percentage of the year. If you have that, it's Bob, that we kind of pulled that out this year, I think was the week shift. It gets a little bit more challenging. We don't think there's a huge amount of change within the quarters throughout the year, with the exception, we mentioned on your prepared comments as far as back-to-school, but it's 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 beginning, if you do these impacts effectively.
Okay. And then on the footwear side, down mid singles this quarter, I think last quarter, it was up low single. And how do you explain that sequential softening? I'm curious how much of that might have been seasonal versus on anything else that you're seeing in the assortment between those two areas?

Michael Longo

Yes, that's as Jared pointed out, yes, I think first and foremost, obviously, we're up against very significant comps, but are really strong footwear results first and foremost, our seasonal business was a challenge for us, but the primary driver was weakness at the end of the quarter. We got to the last week of December and January time type of consumer. We feel good that even more selective than they have been. That's been something we've been seeing here for the last couple of quarters. Once we got out of it, and it was pretty clear they were being super selective panic. And fortunately, some of the some of the parts of our assortment and some of the things in the launch calendar were somewhat repetitive and really didn't through that was the real driver of what happened in footwear, especially towards for the quarter.

Mitch Kummetz

And then my last question, maybe this is a follow on to that, Tom, the weakness that you saw at the end of the quarter, is there any way you can kind of parse of the 1 billion by month or maybe talking about how January performed versus November December. I'm curious that maybe some of that that weakness at the end of the quarter is carried over into February.

Michael Longo

Yes.
I mean, obviously, we don't really comment on inter-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 probably.

Mitch Kummetz

Thanks, guys. Good luck you.

Operator

Our next question is from Justine Peebler with Baird. Please proceed.

Justin Kleber

Hey, good morning, everyone. It's Justin Kleber and thanks for taking the questions. Bob, or 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 was that always in the guidance or was that was that not in the guidance?

Michael Longo

Yes. So the absolute dollar amount that impacted revenue was $3.5 million. Go back, make sure it's off, I think, correctly here. So again, as I said earlier, and after that to get into too much accounting mumbo-jumbo. But obviously, we looked at some historical patterns and felt that we were under recognizing that gift card breakage. So 3.5 million was recorded in Q4. It impacted the quarter by about $0.23 impact of the full year by about 22. And by the time we issued our third quarter results and guidance we were already working on that actually had a pretty solid estimate of equity going in.
Yes.

Justin Kleber

Okay. Got you. And then the view that the promotional environment I guess in this upcoming year is going to it's going to moderate. Obviously, the fourth quarter seeing seems quite promotional. And I guess what gives you confidence that that promotions will on less than 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 adjusted morning share.

Jared Briskin

Yes, so two parts and we look first and foremost, our team worked incredibly hard. We were flat last year, in particular for the back half or so to get our inventory levels rightsized that to get us in positions there. We'll have a credit pending the completion of our inventory for us throughout fiscal 25. We feel great about that. So while there are still some inventory that's elevated with the marketplace. And hopefully there'll still be some time based on where inventory is the work that was done, how clean the inventory has become the support we're getting from the vendor community. And we feel like our ratio of full price certainly will be much better where we still might have some promotions from a competitive standpoint in the marketplace. But and we'll have significantly less markdowns that we're dealing with of all the inventory it.

Justin Kleber

That's great color. Thanks, Roger. And the last question for me guys. Just on the on maybe Mike, or 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 for the consumer. And then you talked about these enhancing your profitability longer term. As you would expect, these investments are bending the curve on profitability.

Robert Volke

I think it is there's a couple of different. This is Bob. By the way, there's a couple of different aspects to this. One is certainly the stuff you see more of the front-of-house, which would be the digital experience. Some of the technology that we've got in the stores, we can say to that, I think are first sources and proficient in another big chunk of this is what we've done in the back office. So we've added, you know, 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 and we're starting to get some benefits from some of the things we've invested in over, say, 12 to 18 months ago. So in process, putting some of those things in place. We expect that the leverage will start pretty disappointed both.

Justin Kleber

Got it. Thanks, guys. Best of luck.
Thank you.
Yes, thanks for taking my question. I just want to follow up on the first question that was asked sort of within the comps by flat to down low single digit comp guidance for the year just wanted to maybe clarify some of your comments, Bob. So you say that 1Q and 4Q similar to last year, would that imply that you're sort of thinking about those flat comps in those quarters prior to Q2 bit better pull forward impact, full spend and maybe 3Q a bit worse and out of the quarter, is that sort of how we get to that guide for the year. I'm thinking more about the percentage of sales that fall into each of the quarters. So I wasn't really referring quick lube and there's obviously some alignment with those numbers first and really just looking forward how the revenue is going to spread across by selectively percent of revenue. You'll see if you want last year, you have extra fixed by the back end, really part of future.
What's that from? And then I wanted to ask about the store openings a bit more on maybe just talk about what you're seeing in terms of your new store performance, the view, if you look at some of the first 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 where you guys are sort of mostly infill of existing markets.

Jared Briskin

Thank you, bigger, more analysis to urge that, look, we're really pleased with our new stores of pharmacy spend, exceptional timing that they're going up at a faster pace. Historically, one of the challenges we've had is getting them open, frankly, to have, you know, some delays in permitting inspections. Things of that nature is presented a little choppiness teams were three incredibly hard to redefine our timelines and processes to take a competitor that gets down. We have 45 to 50 this year and then grow that number and over the next years of absolutely foundry their target markets and infill. We tend to target when we market a year or two years ago, it was the Las Vegas market, not only strip on last year, it was more we'll wind up with one market again this year as well. And then the rest is infill. And as we've said before, it's an opportunity to go to change so that we can double the change over time. But very, very pleased with our new stores in the way there Warner.

Robert Volke

That's incredibly helpful us. But going forward.

Michael Longo

Thank you.

Operator

Our next question is from Cristina Fernández with Telsey Group.

Cristina Fernández

Hi, good morning. Thanks for taking my questions. I wanted to ask about the product trends in the market some of the launches late in the quarter where we didn't really hit it with customers. So how do we feel about the level of newness coming in this year and accessed products and brands that are more satisfied are doing better currently?

Michael Longo

Yes.
I think to trying to separate the question a little bit of geography motive.
Yes, I think first and foremost, and with regard to partnerships with vendors, our access points are application where we feel great about where we are. Obviously, we've reduced the inventory significantly 18%. We especially we can maintain inventory. I'm about a bubble, but with a much higher concentration of the best product and the high product. So we feel great about that. We still feel overall from an innovation pipeline, things are growing a little bit slower than we'd like. And there are certainly some things that the team has invested is that we're seeing some nice reflection on whether some of those things are scalable or not is still things that we're trying to determine on and more and more of those will come in throughout the year. So we're starting to feel and some of the innovations start to kick in a little bit more. We have more things that we can make investments and our team has been really aggressive in trying to find some of those new things that we can we can get good tests on and then hopefully scale as we get into the latter part of this year. And into next year or so, things are starting to materialize. Some. We'd like to see the innovation pipeline go a little bit faster on. But again, we'll feel good about where we're positioned and our partnerships with all the key vendors.

Cristina Fernández

And then on the on the apparel side, that's been off for now for many quarters now, how do you feel about the level of inventory there of potential stabilization in that category?

Jared Briskin

Yes, I think, Joe, overall, our inventory in apparel is in great shape on teams worked incredibly hard at that. So we're we're very confident in the level of our inventory. The marketplace does not have. And 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, but we feel can become significant drivers for us as we get into the second half of the year and one more if I can.

Cristina Fernández

What I wanted to ask about the SG&A increases, is there any way you can bucket sort of the category is much more within the 90 to 100 basis point increase was what are the biggest chunks on just to understand if it's incentive comp or the investments in the stores, maybe you can break it down for us a little more are the German developers we have a couple of figures only looked at kind of above the biggest headwinds were deal sizes.

Robert Volke

Are you still putting a lot of wage inflation at the store levels, we came off a year where you're probably estimating somewhere in the neighborhood of 6% of wage increase. We think that number's 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 cost. Traditionally, those might have been things you invested capital dollars in and went through depreciation. But because of the cloud-based systems, the accounting rules require us to run that through our operating expense. That's what we refer to this data processing bucket. That would be things like our ERP systems and our merchandising system. And the last piece I did mention is that we set ourselves some pretty aggressive targets for internal compensation purposes. We have obviously tried to live up to those expectations had a little bit about a shortfall last couple of years. We're putting a full value back into that, and that's why we talk about incentive compensation. We've also restructured a lot of targets within the store operations group, again to make this much more aligned with what our goals are. So we do feel that there's going to be some upside opportunity for this for the employees to have some additional incentive compensation.

Michael Longo

And this is Mike. So we'll have 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, you want to add some flavor to this yet, and I'll tag on Cassini on the spin lighten up to some of what Bob and Mike said, we have seen that wage pressure kind of throughout the year, continued in Q4, about the same pace release we saw in the first three quarters, but one of the ways we want to do is to continue investing in our mobile environment, and that has contributed to an increase in productivity, but it also improves the consumer experience and that's where our real focus has been on. We do think wage will soften a bit this year, but it will be will be similar to last year on that mobile platform has really helped us on a couple of different ways and really 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 sales associates on the floor. Other also includes additional tools to really help the customer at the end of the day, our so the customers are used to having access to their devices and their data, the 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 on number one, it allows us to hire, train and retain the right associates in our stores while also improving the store experience for the consumer that continues in the current year will continue in the future, and we do expect to see dividends from even more so in the future, particularly around productivity and costs.

William Quinn

Yes.

Cristina Fernández

Appreciate the call and thank you.

Operator

Sam Poser with Williams Trading. Please proceed.

Sam Poser

And good morning, everybody. I have a I have a handful, please. I'm just going to start with the easy stuff can can you give us what, Jerry, just what was the comps by month, but in general, those are the topic we don't give comps by month.

Jared Briskin

But again, as I said November, December were pretty strong.
We felt pretty good about it.
And the last week of December, January really, really were very difficult.
And the primary driver, I mean are we talking about like like low to mid-single-digit comps following up to down doubles in that left in that last six weeks, I would say more flattish.
But again, we're up against a plus 15. So it's certainly had a big hurdle to get over from a comp standpoint for flattish.
And then I went through all of that.

Sam Poser

Okay. Your your e-commerce business is very good. But your short your store comps aren't as good and you're sort of guiding for that to continue, or 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.

Robert Volke

Bill, you want to give a little more detail than that?

William Quinn

Yes, absolutely. As Dan.
Good morning. This is Bill.
So more Yes, definitely, omnichannel. I can drive a lot of traffic to the stores. I'll give you a few examples in a Buy Online Pickup and store that definitely drives traffic and we see good attachment. We saw that increase and that continues to increase. So that's one one example. Our loyalty program is by far our largest omnichannel program 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 our store traffic as well.
Another thing that we're making investment this year is around mobile, in particular around our launch process and how to make that even better on day one and then the following day. So that's another investment that we're making to drive store traffic.

Sam Poser

You might want to mention some of the innovation at raffle without giving too much away.

William Quinn

Yes, yes, certainly. And it there is that on day one and 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 and that are going to increase sell-through on that day one 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 something that we're going to invest.

Sam Poser

Thank you. And then the use. This is just not directly related to business, but there was a lot of moving around with your earnings dates. And I wonder are you is there are you are you working or involved in any M&A right now.

Michael Longo

So we don't entertain those sorts of questions. But to your first part of the question and the moving of the earnings date was my decision, we were trying to collect additional data as a side 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 as by mine.

Sam Poser

Okay.Thank you very much.

Operator

Thank you. 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.

Michael Longo

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 have worked so hard in our distribution center and the people who work in the store support center there the reason we get in here every day 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.