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Hibbett (HIBB) Q2 Earnings & Sales Lag, View Up, Stock Gains

·5 min read

Hibbett Sports Inc. HIBB posted second-quarter fiscal 2023 results, wherein earnings and sales missed the respective Zacks Consensus Estimate. Also, both metrics declined year over year, given lower average product margins and higher freight and transportation costs.

Nonetheless, given the expectation of continued improvement in the supply chain and favorable sales trends for the back-to-school shopping season, the company has increased its comparable sales guidance for the second half of fiscal 2023.

Shares of HIBB have gained 5.9% on Aug 25, 2022, following the earnings release. Shares also gained 15.7% in the past three months against the industry's 2.7% decline.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Quarterly Highlights

Hibbett's adjusted earnings of $1.86 per share declined 35% from $2.86 reported in the prior-year quarter. The figure lagged the Zacks Consensus Estimate of $2.26.

Net sales slumped 6.3% year over year to $392.8 million for the quarter under review and missed the Zacks Consensus Estimate of $398 million.

Comparable store sales (comps) fell 9.2%, while in-store comps declined 11.9% for the quarter under review. However, comps rose 54.4% and in-store comps grew 13.6% on a three-year basis.

E-commerce sales rose 8.3% for the quarter under review. It accounted for 15.2% of total sales, up from 13.1% of total sales in the prior-year quarter.

The gross profit decreased 17.3% year over year to $135.2 million for the reported quarter. The gross margin contracted 460 basis points (bps) to 34.4% due to elevated store occupancy, lower average product margins and higher freight and transportation costs. Operating income was $32.8 million, down 46.6% year over year, while the operating margin contracted 630 bps to 8.4% for the reported quarter.

Store operating, selling and administrative (SG&A) expenses, as a percentage of sales, expanded nearly 100 bps to 23.3% due to lower sales and higher expenses in categories like wages, employee benefits, repairs and maintenance.

Hibbett, Inc. Price, Consensus and EPS Surprise

Hibbett, Inc. Price, Consensus and EPS Surprise
Hibbett, Inc. Price, Consensus and EPS Surprise

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

Other Financials

Hibbett ended the quarter with $28.4 million in cash and cash equivalents and $36.5 million available under its unsecured credit facilities. Total stockholders' investment, as of Jul 30, was $322.5 million.

In the fiscal second quarter, Hibbett repurchased 145,178 shares worth $7 million. Management paid a quarterly dividend of 25 cents.

Capital expenditure was $30.5 million in the first six months of fiscal 2023 quarter, stemming from store initiatives, including store openings, relocations, expansions, remodels and technology upgrades. For fiscal 2023, capital expenditure is expected to be $60-$70 million for investment in new stores, remodels, technology advancement and infrastructure.

Store Update

In second-quarter fiscal 2023, the company opened 13 stores and shut down one underperforming outlet. As of Jul 30, 2022, it had 1,117 stores across 36 states. HIBB is likely to open 30-40 stores in fiscal 2023.

Looking Ahead

This Zacks Rank #3 (Hold) company raised its guidance for comparable sales for fiscal 2023 despite the ongoing supply-chain disruptions, rising inflation, wage pressures and geopolitical challenges.

The company now anticipates comparable sales growth to be positive low-double digits versus the positive high-single digits growth expected earlier for the second half of fiscal 2023. For fiscal 2023, the company expects comparable sales to be between flat and positive low-single digits from the earlier expectation of negative low-single digits.

Hibbett expects net sales to increase in the low-single-digit range for fiscal 2023. It currently expects sales growth on a year-over-year basis in the third and fourth quarters, which will likely result in a return to better leverage of fixed costs.

Meanwhile, e-commerce revenues are expected to grow in positive high-single digits.

The gross margin is envisioned to contract 290-310 basis points year over year, with the metric likely to be 35.1-35.3%. SG&A, as a percent of net sales, is estimated to rise 10-20 bps year over year due to wage inflation, higher costs related to growth in e-commerce, a larger store count and back-office infrastructure investments in fiscal 2022.

The operating margin is predicted to be in the low-double-digit range and is likely to remain above the pre-pandemic reported level. Earnings are anticipated to be $9.75-$10.50 per share, whereas it posted $11.19 last year.

Key Picks

Some better-ranked stocks in the Zacks Retail-Wholesale sector are Potbelly Corporation PBPB, Arcos Dorados Holdings Inc. ARCO and Dollar Tree Inc. DLTR.

Potbelly has a Zacks Rank #2 (Buy), at present. PBPB has a trailing four-quarter earnings surprise of 26.2%, on average. Shares of PBPB have lost 12.8% in the past year. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

The Zacks Consensus Estimate for Potbelly’s 2022 sales and EPS suggests growth of 17.5% and 100%, respectively, from the corresponding year-ago period’s levels.

Arcos Dorados carries a Zacks Rank #2. ARCO has a long-term earnings growth of 34.4%. Shares of the company have increased 38.9% in the past year.

The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 27.1% and 104.2%, respectively, from the year-ago period’s levels.

Dollar Tree carries a Zacks Rank #2. DLTR has a trailing four-quarter earnings surprise of 13.1%, on average. The stock has gained 64% in the past year.

The Zacks Consensus Estimate for Dollar Tree’s 2022 sales and EPS suggests growth of 6.7% and 40.9%, respectively, from the corresponding year-ago period’s levels.


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