Hibbett Sports Stay at Outperform

We are maintaining a long-term 'Outperform' recommendation on Hibbett Sports Inc. (HIBB - Analyst Report) with a target price of $39.00 per share.

The company has a Zacks #2 Rank, implying a short-term 'Buy' rating on the stock.

Hibbett Sports operates sporting goods stores in small to mid-sized markets in the Southeast, Mid-Atlantic, and lower Midwest regions of the U.S. Hibbett is strongly focused toward small towns and counties with populations of 25,000 to 75,000.

The company has created a niche market for itself by strategically aligning its merchandise to regional/local sporting and community interests, which in turn, has given it a competitive edge over larger rivals, such as Dick's Sporting Goods Inc. (DKS - Snapshot Report) and Big 5 Sporting Goods Corporation (BGFV - Analyst Report).

Hibbett's second-quarter 2011 adjusted earnings of 21 cents per share surpassed the Zacks Consensus Estimate of 19 cents and surged 50% from 14 cents in the prior-year period. The result was driven by a strong top-line performance and improved margins.

Bolstered by better-than-expected quarterly results, management now expects a mid single-digit increase in comparable store sales in the current fiscal year ending January 2012, instead of low to mid single-digit increase forecasted earlier. Accordingly, management has increased its earnings guidance for the fiscal year to between $1.90 and $2.00 per share from $1.80 to $1.95 per share.

Moreover, the company is in the midst of a brisk store expansion program and plans to augment its network by approximately 50 to 55 new stores during the fiscal year ending January 2012. Hibbett’s management has already identified 350 to 375 potential locations for its future stores and recently ramped up its distribution center to support over 1,200 stores from 1,000 stores earlier. This has bolstered the company's position in the market.

Furthermore, Hibbett has a healthy debt-free balance sheet with cash and cash equivalents of $65.2 million at the end of the second-quarter, coupled with full availability under its $80 million unsecured credit facilities. This offers Hibbett the financial flexibility to drive future top-line expansion.

In addition, the company offers an extensive selection of quality branded merchandise that emphasizes team sports designed to appeal to a wide range of customers within each individual market. This provides a significant upside potential to the company.

Read the full analyst report on HIBB

Read the full analyst report on BGFV

Read the full analyst report on DKS