U.S. Markets open in 42 mins

Hibbett Posts Dismal Preliminary Sales, Earnings Outlook Cut

Zacks Equity Research

Hibbett Sports Inc. (HIBB) came up with its preliminary results for the second quarter of fiscal 2015 that reflects weak comparable store sales due to lower-than-expected traffic trends as customers are still cautious with their purchases. Consequently, the sporting goods retailer provided disappointing earnings guidance for the second quarter and also curbed its expectations for fiscal 2015.

Following the announcement, shares of Hibbett Sports plunged 6.43% during yesterday’s after-hours trade, to close at $46.85 per share.

The company expects revenue for the second quarter to be nearly $194 million, marking an increase of 4.2% from $186.2 million in the prior-year quarter. However, revenue for the quarter is expected to fall short of the Zacks Consensus Estimate of $203 million. Meanwhile, comparable store sales (comps) growth is projected to be about 0.1%.

The company sees gross margin of 33.4% compared with 34.3% reported in the second quarter of fiscal 2014. The 90 basis points contraction is due to higher markdowns to get rid of the slow moving and aged inventory. Another factor weighing on the company’s gross margin in the second quarter is the projected increase in store occupancy and logistics expenses, as a percentage of sales, due to weaker comps.

Looking ahead, the company expects gross margins to continue bearing the impact of higher markdowns in the near-term, though a slight moderation is expected toward the end of fiscal 2015.

While the company notes that second quarter store operating, selling and administrative expenses were almost in line with internal expectations, it projects an increase as a percentage of sales due to the soft comps performance.

Coming to earnings, the company sounded cautious about its estimated earnings for the second quarter, while it slashed its forecast for fiscal 2015, let down by the weak comps and gross margin performance. The company expects second quarter earnings per share in the range of 30–32 cents as against 40 cents earned in the prior-year quarter. The company expects to report second quarter fiscal 2015 results on Aug 22, 2014.

For fiscal 2015, the company now anticipates earnings per share of $2.63–$2.73 with comps growth in the low single-digit range. Earlier, the company had projected earnings to be in the $2.78–$2.98 per share range, while comps stood to grow in the low-to-mid single-digit range.

Though disappointed by the second quarter results, the company remains optimistic about its back-to-school performance as sales trends improved slightly in July. Moreover, it remains confident of incremental revenue contributions from its new stores as results in these stores have been encouraging, reflecting improved new store productivity.

Other Stocks to Consider

Currently, Hibbett carries a Zacks Rank #3 (Hold). Better-ranked stocks in the related sector include KAR Auction Services Inc. (KAR), Barnes & Noble Inc. (BKS) and ULTA Salon, Fragrance & Cosmetics Inc. (ULTA). While KAR Auction has a Zacks Rank #1 (Strong Buy), Barnes & Noble and ULTA Salon carry a Zacks Rank #2 (Buy).

Read the Full Research Report on HIBB
Read the Full Research Report on BKS
Read the Full Research Report on ULTA
Read the Full Research Report on KAR

Zacks Investment Research