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Hibbett (HIBB) Q3 Earnings & Sales Lag Estimates, Rise Y/Y

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Hibbett, Inc. (HIBB - Free Report) posted third-quarter fiscal 2023 results, wherein earnings and sales missed the Zacks Consensus Estimate. However, both metrics improved year over year.

Results gained from compelling products, a quality product mix, robust omni-channel capabilities and a strong back-to-school season. Strength in footwear and accessories acted as major growth drivers. However, high freight and fuel costs, and wage inflation remained headwinds.

Driven by a strong inventory position and favorable vendor relationships, this Zacks Rank #3 (Hold) company retained its fiscal 2023 view. Also, HIBB highlighted that its new stores have been performing well and it is on track to extend its market reach.

Shares of this company have lost 1.4% in the past three months against the industry's 4.9% growth.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

Quarterly Highlights

Hibbett's adjusted earnings of $1.94 per share rose 16% from $1.68 reported in the prior-year quarter. However, the figure lagged the Zacks Consensus Estimate of $2.56.

Net sales advanced 13.5% year over year to $433.2 million for the quarter under review and jumped 57% on a three-year basis. However, the figure missed the Zacks Consensus Estimate of $438 million.

Comparable store sales (comps) grew 9.9%, while in-store comps rose 7.9% for the quarter under review. Also, comps rose 51.7% and in-store comps grew 42.5% on a three-year basis.

E-commerce sales rose 22% year over year and 124.7% on a three-year basis. It accounted for 15% of the total sales, up from 14% in the prior-year quarter.

The gross profit increased 7.2% year over year to $148.7 million for the reported quarter. Meanwhile, the gross margin contracted 200 basis points (bps) to 34.3% due to lower average product margins, somewhat offset by reduced logistics costs. Operating income was $34.2 million, up 2.4% year over year, while the operating margin contracted 90 bps to 7.9% for the reported quarter.

Store operating, selling and administrative (SG&A) expenses, as a percentage of sales, contracted nearly 130 bps to 23.9%, driven by higher sales.

Other Financials

Hibbett ended the quarter with $25.1 million in cash and cash equivalents and $73.3 million available under its unsecured credit facilities. Total stockholders' investment, as of Oct 29, was $337.8 million.

In the fiscal third quarter, Hibbett repurchased 160,637 shares worth $9 million. Management paid out a quarterly dividend of 25 cents.

Capital expenditure was $17 million in the said quarter, stemming from store initiatives, including store openings, relocations, expansions, remodels and technology upgrades. For fiscal 2023, capital expenditure is expected to be $60-$70 million for investment in new stores, remodels, technology advancement and infrastructure.

Store Update

In third-quarter fiscal 2023, the company opened nine stores. As of Oct 29, 2022, it had 1,126 stores across 36 states. HIBB is likely to open 30-40 stores in fiscal 2023.

Hibbett, Inc. Price, Consensus and EPS Surprise

 

Hibbett, Inc. Price, Consensus and EPS Surprise

Hibbett, Inc. price-consensus-eps-surprise-chart | Hibbett, Inc. Quote

Looking Ahead

Management expects business and economic challenges, including ongoing supply-chain disruptions, higher freight and transportation costs, inflation, tight labor market, geopolitical conflicts, and reduced consumer spending, for the fourth quarter of fiscal 2023. However, it retained its fiscal 2023 view.

Hibbett expects net sales to increase in the low-single-digit range for fiscal 2023. The company anticipates comparable sales growth to be flat to low-double digits versus the low-double-digit growth stated earlier. In-store comps are likely to be flat to low-double-digit growth, while e-commerce is anticipated to grow in the high-single-digit range.

The gross margin is envisioned to contract 290-310 basis points year over year, with the metric likely to be 35.1-35.3% due to lower product margins, higher freight and transportation costs, as well as higher store occupancy costs and e-commerce sales. SG&A, as a percent of net sales, is estimated to rise 10-20 bps year over year due to wage inflation, higher costs related to growth in e-commerce, a larger store count and back-office infrastructure investments in fiscal 2022. SG&A, as a percentage of sales, is predicted to be 22.7-22.8%, which is likely to be below the pre-pandemic levels.

The operating margin is predicted to be in the low-double-digit range and is likely to remain above the pre-pandemic level. Earnings are anticipated to be $9.75-$10.50 per share, whereas the company posted $11.19 last year. Also, the effective tax rate is expected to be 24.5%.

Stocks to Consider

Here are three better-ranked stocks to consider, namely Wingstop (WING - Free Report) , Dollar General (DG - Free Report) and Chipotle Mexican Grill (CMG - Free Report) .

Wingstop currently sports a Zacks Rank #1 (Strong Buy). WING has a long-term earnings growth rate of 11%. Shares of WING have declined 9.2% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18.1% and 16.4%, respectively, from the year-ago period’s reported levels.

Dollar General, a discount retailer, currently carries a Zacks Rank #2 (Buy). DG has an expected EPS growth rate of 11.1% for three to five years.

The Zacks Consensus Estimate for Dollar General’s current financial-year revenues and EPS suggests growth of 10.8% and 13.8%, respectively, from the year-ago reported figures. DG has a trailing four-quarter earnings surprise of 2.2%, on average.

Chipotle Mexican Grill, an operator of fast-casual restaurants, currently carries a Zacks Rank of 2. CMG’s expected EPS growth rate for three to five years is 23.4%.

The Zacks Consensus Estimate for Chipotle Mexican Grill’s current financial-year revenues and EPS suggests growth of 15.2% and 30.8%, respectively, from the year-ago reported figures. CMG has a trailing four-quarter earnings surprise of 4.1%, on average.

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