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Hibbett (HIBB) Tops Q2 Earnings & Sales Estimates, Ups View

Hibbett's (HIBB) fiscal Q2 results gain from pent-up demand, government stimulus and strong vendor relationships. Management raised fiscal 2022 view.

This story originally appeared on Zacks

Hibbett Sports Inc. HIBB posted second-quarter fiscal 2022 results, wherein the bottom and top lines surpassed the Zacks Consensus Estimate. Yet, both top and bottom lines declined year over year. Despite supply-chain disruptions, the results gained from pent-up demand, government stimulus, enhanced assortment of highly coveted merchandise and improved omni-channel capabilities. Increased focus on stores and the online business as well as strong vendor relationships contributed to growth in Hibbett and City Gear brands.

The stock plunged more than 9% during the close of the trading session on Aug 27, mainly due to year-over-year sales decline, both in-store and online. Nonetheless, shares of this Zacks Rank #3 (Hold) company have gained 6.3% in the past three months against the industry’s 7.9% decline.

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Quarterly Highlights

Hibbett’s adjusted earnings of $2.86 per share declined 3.1% from $2.95 reported in the prior-year quarter. The figure surpassed the Zacks Consensus Estimate of $1.24.

Net sales decreased 5.1% year over year to $419.3 million for the quarter under review but beat the Zacks Consensus Estimate of $331 million. The metric surged 66.1% from second-quarter fiscal 2020.

During the quarter, it witnessed double-digit growth in women’s license products and team sports, which somewhat offset sluggishness in men's and kid's businesses. The women’s business performed exceptionally well, with triple-digit growth on a two-year basis. Sturdy demand in lifestyle products and performance products also aided the results. Yet, apparel and footwear businesses remained drab for the reported quarter.

E-commerce sales slumped 20.4% for the quarter under review, accounting for 13.1% of total sales.

Comparable store sales (comps) fell 6.4% while in-store comps declined 3.8% for the quarter under review. Comps skyrocketed 72.8% while in-store comps surged 64.5% on a two-year basis driven by pent-up consumer demand, store closure of its rivals, improved customer engagement, in-demand products as well as improved store and online traffic.

Gross profit inched up 0.7% year over year to $163.3 million for the reported quarter and adjusted gross margin expanded 230 basis points (bps) to 39%. Adjusted operating income was $61.5 million, down 11.8% year over year while adjusted operating margin contracted 110 bps to 14.7% for the reported quarter.

Adjusted store operating, selling and administrative (SG&A) expenses, as a percentage of sales, expanded nearly 300 bps to 22.3% owing to increased store costs, as stores were operating at regular hours with full staffs, and investments to attract new customers and improve back-office processes.

Zacks Investment Research

Image Source: Zacks Investment Research

Other Financials

Hibbett ended the quarter with $176.8 million in cash and cash equivalents, and $100 million available under its credit facilities. Total stockholders’ investment, as of Jul 31, was $400.2 million.

During the fiscal second quarter, Hibbett repurchased 989,388 shares worth $83.5 million, with $516 million remaining in the existing share repurchase plan. Management declared a quarterly dividend of 25 cents in the quarter under review. The company partnered with Regions Bank for a new five-year $100-million unsecured credit agreement in the quarter under review.

Capital expenditures were $13.8 million during the reported quarter.

Store Update

In second-quarter fiscal 2022, the company opened 11 stores and shut two underperforming outlets. Hence, it ended the quarter with 1,080 stores across 35 states.

Hibbett, Inc. Price, Consensus and EPS Surprise

Hibbett, Inc. Price, Consensus and EPS Surprise

Hibbett, Inc. price-consensus-eps-surprise-chart | Hibbett, Inc. Quote

Looking Ahead

Driven by solid quarterly results, new customer acquisitions stemming from pent-up customer demand, government stimulus payments, continued online momentum, strong vendor relationships, gains from store refresh program and improved supply chain, management raised its GAAP view for fiscal 2022. The company noted that it doesn’t foresee any material difference between GAAP and non-GAAP figures.

The company now expects comps to grow in mid-teens for fiscal 2022, up from the earlier view of high-single digits to low-double digits growth. For the second half of fiscal 2022, gross margin is anticipated to be relatively lower than first-half fiscal 2022. Hibbett reiterated its view of positive GAAP and non-GAAP gross margin for fiscal 2022.

SG&A expense, as a percentage of sales, is projected to increase in second-half fiscal 2022 from the first half. SG&A, as a percentage of sales, is estimated to decline in fiscal 2022. Adjusted earnings are envisioned to be $11-$1.50 per share, which reflects an improvement from the prior view of $8.50-$9.00. The company projects an effective tax rate of 25% for fiscal 2022.

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