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Hibbett (HIBB) Stock Gains 20% on Q4 Earnings & Sales Beat

Zacks Equity Research

Hibbett Sports Inc. HIBB reported solid fourth-quarter fiscal 2019 results, wherein earnings and sales surpassed the Zacks Consensus Estimate. Both the top and bottom line also improved on a year-over-year basis. Notably, the company reverted to positive earnings trend after three straight misses with a second consecutive sales beat.

Moreover, management issued upbeat earnings guidance for fiscal 2020, which fueled investors’ confidence. As a result, shares of the company increased 20.3% on Mar 22. In the past three months, this Zacks Rank #3 (Hold) stock has rallied 62.9%, outperforming the industry’s 24.3% growth.



Q4 Highlights

Hibbett reported adjusted earnings of 57 cents per share, up 29.5% from 44 cents registered in the year-ago quarter. The bottom line also outpaced the Zacks Consensus Estimate of 38 cents.

Net sales of $306 million for 13 weeks (ended Feb 2, 2019) grew 14.7% from the year-ago quarter that included 14 weeks. The top line also surpassed the Zacks Consensus Estimate of $299 million. Markedly, the reported sales figure includes contributions of $49.1 million from the City Gear business.

Additionally, e-commerce sales surged 60% and accounted for nearly 10.6% of total sales in the fiscal fourth quarter. The company expects continued growth in the e-commerce business owing to enhancements in mobile app as well as “Buy Online, Pick Up in Store” and “Reserve in Store” capabilities.

Comparable store sales (comps), excluding City Gear sales, rose 3.8% in the fiscal fourth quarter on 6.2% and 11.2% comps growth in December and January, respectively, which was offset by a 5.5% decline in November.

Category-wise, the company witnessed growth in footwear and men’s business, which also drove comps growth. However, its licensed, apparel, women’s and kids businesses remained soft in the quarter under review.

Hibbett Sports, Inc. Price, Consensus and EPS Surprise

Hibbett Sports, Inc. Price, Consensus and EPS Surprise | Hibbett Sports, Inc. Quote

Adjusted gross profit rose 15.5% to $97 million, with adjusted gross margin expansion of 20 basis points (bps) to 31.7%. The upside was primarily backed by higher sales.

Adjusted operating income decreased 12.6% to $13.9 million. Further, adjusted operating margin contracted 150 bps to 4.5% primarily due to higher adjusted store operating, selling and administrative (SG&A) expenses, somewhat mitigated by gross margin expansion. Adjusted store operating, SG&A expenses increased 130 bps as a percentage of sales.

Other Financial Aspects

Hibbett ended the quarter with $61.8 million in cash and cash equivalents, $35 million in debt outstanding (long-term debt), and $65 million available under its credit facilities. Total shareholders’ investment as of Feb 2, 2019, totaled roughly $336 million.

Further, Hibbett repurchased 3,900 shares for $0.1 million in the fiscal fourth quarter. In fiscal 2019, it repurchased 775,951 shares for $16.5 million. As of Feb 2, it had roughly $188 million remaining under its authorization for share repurchases through Jan 29, 2022.

For fiscal 2020, management anticipates share buyback of roughly $10-$15 million.

Store Update

In fourth-quarter fiscal 2019, Hibbett introduced 12 new stores including two City Gear outlets and expanded one high-performing store, while shut down 27 underperforming outlets. Consequently, it ended the quarter with 1,163 stores across 35 states.

Moreover, the company is likely to accelerate its store closure plan by focusing on increasing the store productivity besides reinforcing the omni-channel business. Consequently, management has decided to shut down roughly 95 Hibbett stores in fiscal 2020. Also, it will introduce 10-15 Hibbett and City Gear stores.

Other Developments

Hibbett also notified about the planned retirement of Jeff Rosenthal, the company’s president and chief executive officer. He will continue to work in his current position until the appointment of a new CEO. On the completion of the leadership transition, Rosenthal is likely to serve as a board member.

Outlook

Following the robust fourth-quarter fiscal 2019 results, management issued guidance for fiscal 2020. Comps are anticipated to be negative 1% to positive 1% compared with a rise of 2.2% in fiscal 2019. Further, gross margin is estimated to decline in the 25-45 bps range and adjusted gross margin is expected to fall in 35-55 bps.

SG&A expenses, as a percentage of sales, are likely to remain almost flat excluding non-recurring costs. However, it is estimated to increase 15-25 bps, including these costs. Further, the tax rate is projected at roughly 24.5%.

Excluding non-recurring costs, management envisions adjusted earnings of $1.80-$2.00 per share, up from $1.77 earned in fiscal 2019. Including the non-recurring costs related to the integration of City Gear as well as store closures expenses of 25-35 cents per share, earnings per share are expected to be $1.50-$1.70. The Zacks Consensus Estimate for the fiscal year is pegged at $1.69.

Furthermore, capital expenditures are expected to be nearly $18-$22 million for the fiscal year. Moreover, the company projects full-debt repayment of $35 million associated with the City Gear acquisition.

3 Better-Ranked Stocks in the Retail Space

Abercrombie & Fitch Co. ANF outpaced the earnings estimates in each of the trailing four quarters by an average of 88.3%. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

MarineMax, Inc. HZO delivered average positive earnings surprise of 53.4% in the trailing four quarters. The company currently carries a Zacks Rank #2 (Buy).

Nordstrom, Inc. JWN, also a Zacks Rank #2 stock, delivered average trailing four-quarter earnings surprise of 11.2%.

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