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Here's Why Hibbett (HIBB) is Marching Ahead of Its Industry

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Shares of Hibbett, Inc. (HIBB - Free Report) have been riding high on solid demand despite market uncertainties. The continued momentum in consumer demand at both stores and online has been contributing to the top and bottom-line gains for quite some time now.

The company’s top and bottom lines surpassed the Zacks Consensus Estimate in second-quarter fiscal 2022. This marked the fifth straight quarter of an earnings beat. 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. Although year-over-year results remain sluggish, the company witnessed sturdy sales growth on a two-year basis.

The top line gained from double-digit growth in women’s license products and team sports. The women’s business performed exceptionally well, with triple-digit growth on a two-year basis. Sturdy demand for lifestyle products and performance products also remained upsides. Comps skyrocketed 72.8%, while in-store comps surged 64.5% on a two-year basis, driven by improved customer engagement, in-demand products, and improved store and online traffic.

Consequently, shares of this Zacks Rank #1 (Strong Buy) company have surged 75.8% year to date compared with the industry’s growth of 4.7%. Hibbett has also comfortably outpaced the Retail-Wholesale sector’s decline of 3.6% and the S&P 500 index’s growth of 21.1% during the same period.

 

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In the past 30 days, the company’s estimates for fiscal 2022 and 2023 earnings per share have moved up 26.3% and 5.9%, respectively. For fiscal 2022, its earnings estimates are pegged at $11.30 per share, suggesting growth of 84.6% from $6.12 reported in the prior-year quarter.

What Else Should You Know?

Strength in e-commerce acts as a major growth driver for Hibbett. Some notable efforts include the expansion of the loyalty program as well as enhanced omnichannel facilities such as home delivery, buy online and pick-up in store, reserve online and pick-up in store, buy online ship to store facility, same-day delivery and mobile app services. Expanded product assortment and improved supply-chain process also bode well. As a result, e-commerce comps sales skyrocketed 153.3% in second-quarter fiscal 2022 on a two-year basis. Alongside these, the company is on track with store expansion and inventory-management initiatives.

Driven by these factors, management raised the view for fiscal 2022. The company noted that it doesn’t foresee any material difference between GAAP and non-GAAP figures. It now expects comp growth in mid-teens for fiscal 2022, up from the earlier mentioned high-single-digit to low-double-digit growth. Hibbett reiterated its view of positive GAAP and non-GAAP gross margin for fiscal 2022. SG&A, as a percentage of sales, is estimated to decline in fiscal 2022. Adjusted earnings now are envisioned to be $11-$1.50 per share, which reflects an improvement from the previously mentioned $8.50-$9.00.

However, it is still reeling under elevated costs stemming from increased store expense, as stores were operating at regular hours with a full staff, and investments to attract customers and improve back-office processes. SG&A expenses, as a percentage of sales, are projected to increase in the second half of fiscal 2022 from the first half.

Supply-chain disruptions also pose threats to Hibbett, which, in turn, may lead to higher freight expenses. The company predicts increased shipping costs and higher store occupancy costs. As a result, management anticipates a lower gross margin in the second half of fiscal 2022 as compared to the first half.

Bottom Line

We believe that Hibbett is likely to offset cost woes and keep its stellar show on, as evident from its solid momentum in the online business, favorable demand and strength in its women’s business. A VGM Score of A and a long-term earnings growth rate of 22.4% reflect its inherent strength.

More Top-Ranked Stocks in the Retail Space

Abercrombie & Fitch (ANF - Free Report) presently sports a Zacks Rank #1. It has an expected long-term earnings growth rate of 18%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Children’s Place (PLCE - Free Report) has a long-term expected earnings growth rate of 8% and it currently flaunts a Zacks Rank #1.

Foot Locker (FL - Free Report) , a Zacks Rank #1 stock at present, has an expected long-term earnings growth rate of 4%.

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