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Hibbett Stock Surges 66% YTD on Sturdy Omni-Channel Efforts

Zacks Equity Research

Hibbett Sports, Inc. HIBB has managed to stay in investors’ good books, owing to solid omni-channel efforts — including store rationalization and e-commerce expansion. In addition, management remains confident of its product offerings and City Gear’s performance, which are likely to aid growth.

Shares of the athletic-inspired fashion retailer have jumped 66.4% on a year-to-date basis, outpacing the industry’s 10.2% rally. The Zacks Rank #2 (Buy) company has expected long-term earnings growth rate of 10.9% and a VGM Score of B. Let’s look into the factors driving the stock.

Growth Strategies

Hibbett is progressing well on the e-commerce front and expansion of the loyalty program. Notably, the company continues to increase its customer base through e-commerce growth and selective store expansion. It is experiencing continued growth in its e-commerce business on enhancements in mobile app as well as the “Buy Online, Pick Up in Store” and “Reserve online, pickup in store” capabilities.

As a result, digital sales grew 25% and accounted for nearly 8.6% of the total sales in second-quarter fiscal 2020. Additionally, its email program and new sign ups rose 51% year over year in the last reported quarter. Moreover, the company will test and implement digital projects, which are likely to boost digital gross margin. These positives should continue driving its e-commerce business.

 


Meanwhile, Hibbett’s loyalty program’s progress is expected to enhance the omni-channel experience. Impressively, sales from the loyalty program represented about 64% of the company's sales in the fiscal second quarter, up from 61% in the prior-year period. Moreover, loyalty enrollments grew 17% year over year. In addition, the company expects its small market strategy along with growth of omni-channel capabilities to enrich customer experience. This is likely to position Hibbett well for long-term growth.

On the store front, the company targets to expand in markets with increased potential. It plans to grow to more than 1,500 stores in underserved markets. In second-quarter fiscal 2020, it introduced two stores, rebranded two flagship stores to City Gear outlets and expanded three high-performing stores. However, the company shut 40 underperforming outlets. Furthermore, management accelerated store closure plan by focusing on increasing store productivity. It expects 80-85 net store closures for the current fiscal year.

Hibbett’s Performance & FY20 View

A glimpse of the company’s earnings performance in the trailing four quarters shows that it outpaced the Zacks Consensus Estimate by an average surprise of 12.1%. Moreover, it reported the third consecutive quarter of positive comparable-store sales (comps) in second-quarter fiscal 2020. The metric rose in low-single digits in May and June but declined in July due to the back-to-school selling season. Category-wise, the company registered low-single-digit growth in footwear sales, recording the eighth successive quarter of positive comps. Men’s footwear sales rose in low-single digits and women’s footwear witnessed double-digit growth while kids’ footwear recorded mid-single-digit growth. Also, sturdy sales in activewear and accessories aided growth. Comps growth was somewhat offset by softness in the apparel and licensed businesses.

In the last earnings call, management had anticipated the back-to-school season to finish on a strong note. City Gear’s robust assortment of latest and fashion-forward inventory, and expected migration of its website to the company's digital platform are also expected to drive performance. Moreover, the company will continue focusing on sneakers and launching the toe-to-head concept. Driven by these strengths, comps are now anticipated to be up 1-2% compared with 0.5-2% rise mentioned earlier.

As a result, adjusted earnings for fiscal 2020 are envisioned to be $2.15-$2.25 per share, up from $2.00-$2.15 mentioned earlier. The company earned $1.77 in fiscal 2019. The Zacks Consensus Estimate for the current fiscal year’s earnings is now pegged at $2.19, which moved up 1.9% in the last 60 days.

Other Promising Retail Stocks

Regis Corporation RGS has an expected long-term earnings growth rate of 7.5%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Michaels Companies, Inc MIK delivered average positive earnings surprise of 11.4% in the trailing four quarters. It currently carries a Zacks Rank #2.

Canada Goose Holdings Inc GOOS has an impressive long-term earnings growth rate of 28.5% and a Zacks Rank #2 at present.

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