Hibbett (HIBB) Beats Q3 Earnings Estimates, Raises EPS View

Hibbett, Inc. HIBB posted third-quarter fiscal 2024 results, wherein earnings and sales surpassed the Zacks Consensus Estimate. The bottom line increased year over year, while the top line declined. The company attributes its solid results to the consistent execution of its business strategy, indicating the effectiveness of its approach in a challenging retail environment.

Hibbett reported a positive back-to-school performance in the first month of the third quarter. The establishment of a partnership with Nike was a significant development in the fiscal third quarter, involving the connection of loyalty programs to offer exclusive experiences for customers. Banking on the fourth quarter and the holiday season, the company is confident of achieving a strong finish to fiscal 2024.

Shares of this Zacks Rank #3 (Hold) company have gained 56.8% in the past three months compared with the industry's 6.6% growth.

Hibbett, Inc. Price, Consensus and EPS Surprise


Hibbett, Inc. price-consensus-eps-surprise-chart | Hibbett, Inc. Quote

Quarterly Highlights

Hibbett's adjusted earnings of $2.05 per share increased 5.7% from the $1.94 reported in the prior-year quarter. Also, the figure surpassed the Zacks Consensus Estimate of $1.13 per share.

Net sales fell 0.3% year over year to $431.9 million for the quarter under review. However, the figure beat the Zacks Consensus Estimate of $416 million.

Comparable sales declined 2.7% year over year and lagged our estimate of a 7% decline. Brick-and-mortar comparable sales specifically experienced a 5.4% decrease on a year-over-year basis, whereas e-commerce sales demonstrated a noteworthy increase of 12.6%.

The gross profit decreased 1.6% year over year to $146.3 million for the reported quarter, which beat our estimate of $137.6 million. Meanwhile, the gross margin contracted 40 basis points (bps) to 33.9%, driven by a decrease in the average product margin, which was roughly 130 basis points lower than the previous year. Also, the decrease was largely influenced by increased promotional activity in footwear and apparel.

Furthermore, the slight year-over-year sales decrease led to the deleverage of store occupancy costs, accounting for the gross margin decline. Despite these unfavorable factors, there was partial mitigation through lower freight, shipping, shrink and logistics expenses in comparison to the year-ago period.

Operating income was $34.5 million, up 0.9% year over year. The metric surpassed our estimate of $20.9 million. Meanwhile, the operating margin expanded 10 bps to 8% for the reported quarter.

Store operating, selling and administrative (SG&A) expenses, as a percentage of sales, contracted 90 bps to 23% due to its sustained efforts in expense management. This includes enhancing the efficiency of store labor and making strategic reductions in discretionary expense categories like professional fees and advertising.

Other Financials

As of Oct 28, Hibbett had $29.6 million in cash and cash equivalents, and $96.9 million of debt outstanding on its $160.0-million unsecured line of credit. In the fiscal third quarter, Hibbett repurchased 707,621 shares for $32 million. Management paid out a quarterly dividend of 25 cents per share.

Store Update

In third-quarter fiscal 2024, the company opened 10 stores. As of Oct 28, 2023, it had 1,158 stores across 36 states.

FY2024 Guidance

Management retained its fiscal 2024 net sales view. Hibbett expects net sales between flat and a 2% rise. The company anticipates comparable sales and in-store comps to decline in the low-single digits each, and e-commerce sales to be flat to up in the low-single digits. It was slightly higher than the previous guidance of a low-single-digit decline.

The gross margin is envisioned to be 33.9-34%, whereas the operating margin is predicted to be 7.6-8% higher than the previously mentioned 7.4-7.8%. SG&A, as a percent of net sales, is estimated to be 23.1-23.3% compared with the previously stated 23.3-23.5%. Also, interest expenses, as a percentage of net sales, are projected to be 0.35-0.4%, down from the previously stated 0.4-0.45%.

The company raised its EPS guidance as well. Earnings are anticipated to be $8-$8.30 per share compared with the earlier mentioned $7-$7.75. Also, the effective tax rate is expected to be 23.1-23.3%. For fiscal 2024, capital expenditure is expected to be $60-$70 million for investment in new stores, remodels, technology advancement and infrastructure.

Stocks to Consider

A few better-ranked stocks in the same space are The Gap, Inc. GPS, Skechers U.S.A., Inc. SKX and Deckers Outdoor Corporation DECK.

The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. The company currently sports a Zacks Rank #1 (Strong Buy). GPS delivered a significant earnings surprise in the last reported quarter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for The Gap’s current fiscal-year earnings implies growth of 332.5% from the previous year’s reported number. GPS has a trailing four-quarter average earnings surprise of 137.9%.

Skechers U.S.A. designs, develops, markets and distributes footwear for men, women and children. It currently carries a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Skechers’ current financial-year earnings and sales indicates growth of 44.5% and 8.2%, respectively, from the previous year’s reported figures. SKX has a trailing four-quarter average earnings surprise of 50.3%.

Deckers Outdoor is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It currently carries a Zacks Rank #2.

The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 20.9% and 11.4%, respectively, from the previous year’s reported figures. DECK has a trailing four-quarter average earnings surprise of 26.3%.

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