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Hibbett (HIBB) to Report Q1 Earnings: What's in the Offing?

Zacks Equity Research

Hibbett Sports, Inc. HIBB is slated to release first-quarter fiscal 2020 results on May 24, before the market opens. The company reported positive earnings surprise of 50% in the fourth quarter of fiscal 2019. However, its earnings surprise history mirrors a dismal performance, with a miss in the preceding three quarters. Consequently, it delivered average negative surprise of nearly 38.1% in the trailing four quarters.

The Zacks Consensus Estimate for earnings for the fiscal first quarter is pegged at $1.29, which remained unchanged in the last 30 days. However, it suggests growth of 15.2% from $1.12 earned in the prior-year quarter. Nonetheless, the Zacks Consensus Estimate for revenues is pegged at $327.2 million, implying an increase of 19.1% from the year-ago period.

Hibbett Sports, Inc. Price and EPS Surprise


Hibbett Sports, Inc. Price and EPS Surprise

Hibbett Sports, Inc. price-eps-surprise | Hibbett Sports, Inc. Quote

Let’s see how things are shaping up prior to this earnings announcement.

Factors Likely to Influence 1Q20

Hibbett is progressing with its solid omni-channel efforts, including store rationalization and e-commerce capabilities. The company is smoothly progressing with internal initiatives, which covers improving e-commerce penetration and expanding loyalty program. Additionally, management remains focused on expanding customer base by connecting with more customers through e-commerce and selective store expansion. This is likely to boost online sales in the to-be-reported quarter.

In fourth-quarter fiscal 2019, e-commerce sales increased 60% and accounted for nearly 10.6% of total sales.

Furthermore, Hibbett is on track with store rationalization as it continues to strengthen its foothold. The company targets to grow to more than 1,500 stores in underserved markets. In the fiscal fourth quarter, Hibbett opened 12 stores, including two City Gear outlets, expanded one high-performing store and shut down 27 underperforming outlets. Management intends to accelerate its store closure plan by focusing on increasing store productivity and reinforcing the omni-channel business. It decided to close roughly 95 Hibbett stores and open 10-15 Hibbett and City Gear stores in fiscal 2020.

Following the strong fourth-quarter fiscal 2019, Hibbett envisions adjusted earnings per share of $1.80-$2.00 for fiscal 2020, up from $1.77 earned in the last fiscal year.

However, the company issued a bearish fiscal 2020 guidance for comps and gross margin. Comps are anticipated to be down 1% to up 1% compared with rise of 2.2% in fiscal 2019. Including non-recurring costs, gross margin is estimated to contract 25-45 basis points (bps). These non-recurring costs are related to the integration of City Gear coupled with store closure expenses. Further, adjusted gross margin is expected to decline 35-55 bps.

The company is witnessing strained operating margin for the last few quarters due to higher SG&A expenses. In the fiscal fourth quarter, adjusted operating income declined 12.6%, with adjusted operating margin contraction of 150 basis points. Nevertheless, adjusted SG&A expenses, as a percentage of sales, are likely to remain almost flat in fiscal 2020. These trends are likely to slightly offset the gains from the company’s initiatives in first-quarter fiscal 2020.

What the Zacks Model Unveils

Our proven model does not conclusively predict that Hibbett is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Stocks with a Zacks Rank #4 or 5 (Sell-rated) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Hibbett currently has a Zacks Rank #2 and an Earnings ESP of 0.00%. While the company’s favorable Zacks Rank increases the predictive power of Earnings ESP, an Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Target Corp. TGT has an Earnings ESP of +0.42% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The TJX Companies, Inc. TJX currently has an Earnings ESP of +0.09% and a Zacks Rank #2.

Abercrombie & Fitch Company ANF presently has an Earnings ESP of +2.76% and a Zacks Rank #3.

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