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Strong Demand & Solid E-Commerce Trends to Aid Hibbett (HIBB)

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Hibbett, Inc. (HIBB - Free Report) looks well-positioned on the back of 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 the Hibbett and City Gear brands in the second-quarter fiscal 2022.

The company witnessed sturdy sales growth compared with the pre-pandemic levels in the last reported quarter. 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.

Hibbett remains focused on its e-commerce business and the expansion of the loyalty program. 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 comp sales skyrocketed 153.3% in second-quarter fiscal 2022 on a two-year basis.

Other retail players like DICK'S Sporting Goods (DKS - Free Report) , American Eagle Outfitters (AEO - Free Report) and Gap (GPS - Free Report) witnessed persistent online strength in the second quarter of fiscal 2021. On a two-year basis, e-commerce sales surged 111% for DICK'S Sporting, 66% for American Eagle and 65% for Gap in the said quarter.

Coming back to Hibbett, it is on track with store expansion and inventory-management initiatives. The company has a target of growing to more than 1,500 stores in underserved markets. In second-quarter fiscal 2022, it opened 11 stores and shut two underperforming outlets, bringing the total store count to 1,080.

Driven by the factors, management raised the view for fiscal 2022. The company 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. 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, the company is still witnessing elevated costs due to 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 for 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 from that reported in the first half.

We believe that Hibbett is likely to offset cost woes and keep its stellar show on, which is evident from its solid momentum in the online business, favorable demand and strength in its women’s business.