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Our long term ‘Outperform’ recommendation on the sports gear retailer Hibbett Sports Inc. (HIBB - Analyst Report) is backed by its sales momentum and strong operational efficiencies. This also helped the company post solid second-quarter fiscal 2013 earnings results.

Moreover, Hibbett’s sharp focus on mid-sized and smaller markets and strategic product mix furnish it with an edge over its rivals, Dick's Sporting Goods Inc. (DKS - Analyst Report) and Big 5 Sporting Goods Corporation (BGFV - Analyst Report).

Driven by robust sales performance in every category along with operational efficiencies, Hibbett’s earnings for second-quarter fiscal 2013 surged approximately 42.9% to 30 cents per share. The quarterly earnings also beat the Zacks Consensus Estimate of 27 cents per share.

Buoyed by better-than-expected results, the company raised its expectations for fiscal 2013. It now forecasts earnings in the range of $2.57 – $2.67 per share on the back of mid-single digit growth in comparable sales, up from $2.50 – $2.65 forecasted earlier.

Moreover, Hibbett continues with its vigorous store expansion program and plans to augment its network by approximately 55 to 60 new stores during fiscal year ending on January 31, 2013. Hibbett has already identified over 400 locations for future stores and has ramped up its distribution center to support over 1,200 stores from 1,000 stores earlier. This provides a strong upside potential to the company.

Taking a long-term view, Hibbett has a strategic plan to double the size of its distribution facility to 360,000 square feet area by fall 2014 by shifting its Birmingham-based wholesaling and logistics facility to Alabaster, Alabama. We believe this plan fully supports Hibbett’s ongoing store expansion program. The company expects this large distribution facility to enable it to bolster its store count to over 2,000 stores. Further, the new facility will aid the company’s continued growth in mid-sized and smaller markets, which is the company’s primary focus.

In addition, Hibbett has a healthy balance sheet with no debt. The company ended second-quarter 2013 with cash and cash equivalents of $71.5 million coupled with full availability under its $80 million unsecured credit facilities. This offers Hibbett the financial flexibility to drive future top-line expansion.

Currently, Hibbett has a Zacks #2 Rank, indicating a short-term positive (Buy) outlook on the stock and in sync with our long-term recommendation.

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