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Yet again, Hibbett Sports Inc. (HIBB - Analyst Report) delivered better-than-expected results for the fourth quarter ended January 28, 2012, driven by robust sales performance at every category along with operational efficiencies. Hibbett’s fourth-quarter earnings of 59 cents per share outshined the Zacks Consensus Estimate of 56 cents and jumped nearly 34.1% from the prior-year quarter earnings of 44 cents.

The company remains focused on mid-sized and smaller markets as well as strategic mix of branded and localized merchandise. It is geared toward increasing operating results while creating shareholders’ value.

Getting to the Numbers

Net sales in the quarter jumped 10.1% year over year to $190.7 million, reflecting a 7.2% increase in comparable store sales. The rise in comparable store sales marked its ninth consecutive quarterly growth, primarily driven by strong performance of activewear, footwear, and apparel and accessories businesses. However, the quarterly sales missed the Zacks Consensus Estimate of $193 million.

Despite 8.7% increase in cost of goods sold, distribution center and store occupancy costs in the quarter, gross profit surged 12.7% year over year to $68.2 million. Gross margin expanded 80 basis points to 35.7% during the quarter.

Healthy gross margin coupled with improved merchandise mix drove a record 29.8% increase in operating income during the quarter. The company reported an operating income of $25.1 million compared with $19.3 million in the same period last year. Consequently, operating margin for the reported quarter improved 200 basis points to 13.1% from the prior-year quarter.

Fiscal 2012 highlights

Hibbett’s fiscal year ended January 28, 2012 earnings of $2.15 per share surpassed the Zacks Consensus Estimate of $2.13 and jumped over 34% from the previous fiscal earnings of $1.60. Net sales in the fiscal soared approximately 10.2% year over year to $732.6 million, reflecting a 6.8% increase in comparable store sales. However, the quarterly sales fell short of the Zacks Consensus Estimate of $735 million.

Other Financial Details

Hibbett ended the fiscal with cash and cash equivalents of $55.1 million with no bank debt. The company has full accessibility under its $80 million unsecured credit facilities.

The company spent $10.1 million to buyback 225,170 shares in the quarter. The company still has approximately $144.7 million of total authorization remaining for future stock repurchases under its $250 million share repurchase program.

Stores Update

During the quarter, Hibbett opened 21 new stores and closed 4 underperforming stores, bringing the store count to 832 in 26 states. The company also expanded 2 high performing stores during the quarter.

For fiscal 2013, the company expects to open 55 to 60 new stores, while it will close 18 underperforming stores and expand approximately 15 high performing stores.

Fiscal 2013 Guidance

Buoyed by better-than-expected results, management expects earnings in the range of $2.35 to $2.55 in fiscal 2013 on the back of low to mid-single digit increase in comparable store sales. The current Zacks Consensus Estimate, for fiscal 2013, of $2.46 is nearly at the mid-point of management's guided range.

Our Take

Hibbett mainlyfocuseson small towns and counties with population sizes of 25,000 to 75,000. It serves a niche market by strategically aligning its merchandise to regional/local sporting and community interests. We believe this gives the company a competitive edge over larger rivals, such as Dick's Sporting Goods Inc. (DKS - Analyst Report) and Big 5 Sporting Goods Corporation (BGFV - Analyst Report).

Moreover, the company is in the midst of a brisk store expansion program and plans to augment its network by approximately 55 to 60 new stores during fiscal 2013. Furthermore, Hibbett’s management has already identified over 400 locations for future stores and recently ramped up its distribution center to support over 1,300 stores from 1,000 stores earlier. This provides a strong upside potential to the company.

Above all, Hibbett has a healthy debt-free balance sheet with full availability under its $80 million unsecured credit facilities. This offers Hibbett the financial flexibility to open new stores and identify new market or location for future expansion.

Currently, Hibbett holds a Zacks #2 Rank, implying a short-term 'Buy' rating on the stock. Besides, the company retains a long-term 'Outperform' recommendation on the stock.

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