Sporting goods retailer, Hibbett Sports Inc. (HIBB) reported first-quarter fiscal 2014 earnings of $1.00, up 2.0% from the year-ago quarter earnings of 98 cents per share. However, quarterly earnings fell short of the Zacks Consensus Estimate of $1.07.
Highlights of the Quarter
Net sales of this Zacks Rank #4 (Sell) company jumped over 3.0% year over year to $240.0 million. However, Hibbett’s net sales remained slightly below the Zacks Consensus Estimate of $247.0 million driven by weaker sales at certain key spring assortments due to the colder weather compared to last year.
Comparable store sales (comps) for the quarter rose 11.1%, while on a calendar basis it rose 0.8%. Monthly comps reflected an increase of 0.7% in February and 3.6% in April, while it declined 0.6% in March.
Hibbett’s gross profit surged 2.8% to $90.9 million from $88.4 million in the year-ago comparable quarter. However, gross margin contracted 10 basis points (bps) to 37.9% during the quarter. Higher product margin and warehouse and store occupancy costs, as a percentage of sales, led to the decline in gross margin.
During the quarter, store operating, selling and administrative (SG&A) expenses, as a percentage of revenue, expanded 40 bps to 18.8% from 18.4% in the comparable year-ago quarter. The year-over-year increase in SG&A expenses was mainly due to higher store labor expenses resulting from lower sales and increased health care claims during the quarter. As a percentage of sales, Hibbett’s depreciation and amortization expenses expanded marginally from last year to 1.4%.
Gross margin contraction coupled with increased costs weighed upon operating income, which showcased a marginal improvement of 0.1% to $42.4 million, while operating margin contracted 50 basis points to 17.7%.
Hibbett ended the first quarter with a strong balance sheet comprising $103.2 million in cash and cash equivalents, no outstanding debt and $80 million available under its credit facility.
During the quarter, Hibbett bought back 99,430 shares for $5.4 million. As of May 4, 2013, Hibbett has nearly $244.2 million remaining under its share repurchase program worth $250.0 million, authorized on Nov 15, 2012.
During the quarter, Hibbett expanded its store base by opening 9 new stores and launching 5 high performing stores, while it shuttered 3 underperforming stores. As a result, the company’s total store count at the end of the first quarter stood at 879 in 29 states.
Fiscal 2014 Outlook
Hibbett reiterated its fiscal 2014 forecasts, expecting earnings to range from $2.85 – $3.05 per share. Comparable store sales for the fiscal are expected to increase in the low to mid-single-digit range.
Further, Hibbett expects to expand its store network in fiscal 2014 by opening about 70 to 75 new stores. Additionally, the company plans to open nearly 18 high-performing stores and close 15 to 20 stores during fiscal 2014.
Other Stocks to Consider
Other stocks worth considering in the retail-wholesale space are Big 5 Sporting Goods Corp. (BGFV), Cabela’s Inc. (CAB) and Ulta Salon, Cosmetics & Fragrance Inc. (ULTA). Of these, Big 5 has a Zacks Rank #1 (Strong Buy), while Cabela’s and Ulta hold a Zacks Rank #2 (Buy).
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