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Hibbett's Robust Omni-Channel Initiatives Promise Growth

Zacks Equity Research

Hibbett Sports, Inc. HIBB looks quite appeasing owing to its robust omni-channel endeavors including e-commerce and store rationalization. An upbeat adjusted earnings and comparable sales (comps) view for fiscal 2020 are likely to boost the stock further. Moreover, the company’s comps growth for the third consecutive quarter in the fiscal second quarter is encouraging.

Despite reporting loss and sales miss in second-quarter fiscal 2020, management remains optimistic about the back half. The company seems to be confident about its solid strategic efforts and anticipates a strong finish to the back-to-school season and continued strength in the product offerings. Hibbett also remains buoyant about the City Gear’s performance driven by its strong assortment of latest and fashion-forward inventory, and expected migration of its website to the company’s digital platform.

As a result, shares of Hibbett have surged 15.7% year to date against the industry's 5.5% decline.

Let’s Delve Deeper

Hibbett’s overall comps inched up 0.3% in second-quarter fiscal 2020 and rose 3.1% on a year-to-date basis. The uptick can be attributed to impressive footwear business, which recorded the eighth successive quarter of positive comps. However, growth was somewhat offset by softness in the apparel and licensed businesses. For fiscal 2020, comps are now anticipated to be up 1-2% compared with 0.5-2% projected earlier.

Additionally, Hibbett is benefiting from e-commerce growth and the expansion of loyalty program. Notably, digital sales grew 25% and accounted for nearly 8.6% of the total sales in the fiscal second quarter. Going forward, management expects continued growth in the e-commerce business as enhancements in the mobile app as well as the “Buy Online, Pick Up in Store” and “Reserve online, pickup in store” capabilities are delivering solid results.

Hibbett’s consistent focus on improving its email program and new sign ups, which increased 51% year over year, is an added positive. Moreover, it will test and implement strategic digital projects that are likely to boost digital gross margins.

Meanwhile, sales from loyalty program represented about 64% of the Hibbett’s sales in the second-quarter fiscal 2020, up from 61% registered in the prior-year period. Moreover, new loyalty enrollments increased 17% year over year. The company expects its small market strategy along with solid omni-channel capabilities to enrich customers' experience, positioning Hibbett well for long-term growth.

Furthermore, Hibbett is on track with store expansion and inventory-management initiatives. The company aims at expansion in markets that offer increased potential for growth, and has a target of growing to more than 1,500 stores in underserved markets. In second-quarter fiscal 2020, Hibbett introduced two stores, rebranded two of its flagship stores to City Gear outlets and expanded three high-performing stores. However, the company shut down 40 underperforming outlets.

By focusing on increasing store productivity besides reinforcing omni-channel business, management accelerated its store closure plan. For fiscal 2020, Hibbett still expects 80-85 net store closures.

Management now envisions adjusted earnings of $2.15-$2.25 per share, up from the prior expectation of $2.00-$2.15 and $1.77 earned in fiscal 2019. The Zacks Consensus Estimate of $2.20 for the current fiscal year was revised 3.8% upward over the past 30 days.

Robust growth strategies, which include omni-channel efforts and an encouraging 2020 guidance, make this Zacks Rank #1 (Strong Buy) stock an attractive investment option now. Furthermore, Hibbett has a VGM Score of A and an expected long-term earnings growth rate of 10.9%.

3 Other Key Retail Picks

Regis Corporation RGS has delivered average positive earnings surprise of 222.3% in the trailing four quarters. The company sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

Office Depot, Inc. ODP, also a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 11.1%

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