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Hibbett (HIBB) Stock Up 32% on Robust Omni-Channel Efforts

Zacks Equity Research

Hibbett Sports, Inc.’s HIBB robust omni-channel efforts including store rationalization and e-commerce capabilities are commendable. In addition, the company is benefiting from smooth progress on its internal initiatives, such as improvement of e-commerce penetration and expansion of its loyalty program. Moreover, Hibbett looks well poised for growth on the back of its small market strategy, through which it targets to strenghten foothold across the country.

Buoyed by such well-chalked strategies, shares of this athletic-inspired retailer have surged 32.1% year to date, comfortably outperforming the industry’s 20.6% rally. This impressive performance can also be attributed to this Zacks Rank #1 (Strong Buy) company’s robust surprise history. Hibbett delivered second straight positive earnings surprise, with a third consecutive sales beat, when it reported first-quarter fiscal 2020 results. You can see the complete list of today’s Zacks #1 Rank stocks here.

Let’s Delve Deeper

Hibbett remains focused on expanding its customer base by connecting with more customers through e-commerce and selective store expansion. The company expects continued growth in its e-commerce business owing to steady improvements in mobile app as well as the “Buy Online, Pick Up in Store” and “Reserve online, pickup in store” capabilities.

Additionally, in a bid to enhance its omni-channel initiatives, Hibbett is progressing well with its loyalty program. Notably, consolidated e-commerce sales surged 49.7% and accounted for nearly 8.3% of total sales in the fiscal first quarter.

Apart from boosting e-commerce capabilities, Hibbett remains on track with store rationalization and inventory management initiatives to drive the top and bottom lines. In fact, the company focuses on expanding in such markets, which offer increased potential for future growth. It has a target of growing more than 1,500 stores in underserved markets.

In first-quarter fiscal 2020, Hibbett introduced three new stores, rebranded two of its flagship stores to City Gear outlets and expanded one high-performing store. However, the company shut down 24 underperforming outlets. Management also accelerated the store closure plan in order to increase the store productivity.

Currently, the company remains on track to shut down roughly 95 Hibbett stores in fiscal 2020. In addition, Hibbett expects 80-85 net store closings this fiscal year.

These factors have been driving Hibbett’s comparable sales (comps) since the past few quarters. Strength in footwear, and sneaker-connected apparel & accessories are also fueling comps growth. In fact, the footwear business reported comps increase for seven straight quarters now. The metric improved 5.1% in the first quarter of 2020, following a respective rise of 3.8%, 0.1% and 4.1% in the fourth, third and second quarters of fiscal 2019. For fiscal 2020, management anticipates comps to grow in the range of 0.5-2%.

Wrapping Up

Given Hibbett’s robust omni-channel endeavors and other strategic factors, we expect the company to maintain the momentum going ahead. Further, it has a long-term expected earnings growth rate of 6.5% and a VGM Score of A.

It is also worth mentioning that Hibbett raised its earnings outlook for fiscal 2020, following solid first-quarter results. Adjusted earnings are now envisioned to be $2.00-$2.15 per share, up from $1.77 earned in fiscal 2019.

3 Other Key Retail Picks

DICK'S Sporting Goods, Inc. DKS delivered an average positive earnings surprise of 16.2% in the last four quarters. The company has a Zacks Rank #2 (Buy).

Stitch Fix, Inc. SFIX, which presently carries a Zacks Rank #2, has an impressive long-term earnings growth rate of 22.5%.

Build-A-Bear Workshop, Inc. BBW, also a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 9%.

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