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High Demand, Online Strength Aid Hibbett (HIBB) Amid Cost Woes
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Hibbett, Inc. (HIBB - Free Report) has been benefitting from strong product demand, robust omni-channel capabilities and store-related initiatives. Strength in footwear and accessories acted as major growth drivers. HIBB has highlighted that its new stores have been performing well and it is on track to extend its market reach.
Notably, fiscal third quarter adjusted earnings of $1.94 per share rose 16% from $1.68 reported in the prior-year quarter. Net sales advanced 13.5% year over year to $433.2 million for the quarter under review. Comparable store sales (comps) grew 9.9%, while in-store comps rose 7.9% for the quarter under review.
In third-quarter fiscal 2023, the company witnessed growth from the pre-pandemic levels. Comparable store sales (comps) rose 51.7% and in-store comps grew 42.5% on a three-year basis. Also, the company witnessed revenues above the pre-pandemic levels across all product categories.
Consequently, this Zacks Rank #3 (Hold) stock has gained 21.8% in the past three months compared with the industry’s growth of 8.9%.
Image Source: Zacks Investment Research
Let’s Delve Deeper
Hibbett is focused on the e-commerce front and expansion of the loyalty program. It has been increasing the customer base by connecting with more customers through e-commerce and selective store expansion.
Further, it is leveraging its omni-channel capabilities 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 to fulfill online orders and serve customers.
The company witnessed a strong online show, with year-over-year e-commerce sales growth of 22% in third-quarter fiscal 2023, driven by better inventory, robust traffic across the website and app, and improved digital customer experience. The metric rose 124.7% on a three-year basis. It accounted for 15% of the total sales, up from 14% in the prior-year quarter.
Hibbett is progressing well with its loyalty program in order to enhance its omni-channel initiatives. Going into fiscal 2023, e-commerce comps are expected to grow in the high-single digits.
It has been on track with store expansion and inventory-management initiatives. The company is gaining from its small market strategy as it continues to strengthen its presence across the country. Hibbett targets expansion in markets that offer increased growth potential. The company has a target of growing to more than 1,500 stores in underserved markets. In third-quarter fiscal 2023, it opened nine stores. HIBB is likely to open 30-40 stores in fiscal 2023.
Driven by these factors, management 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 between flat and low-double-digit growth versus low-double-digit growth stated earlier. In-store comps are likely to be flat to grow in the low-double digits, while e-commerce is anticipated to grow in the high-single-digit range.
However, the company continues to reel under high freight and fuel costs, and wage inflation. This dented margins in the fiscal third quarter. The gross margin contracted 200 basis points (bps) to 34.3% due to lower average product margins, somewhat offset by reduced logistic costs. The operating margin contracted 90 bps to 7.9% for the reported quarter. Store operating, selling and administrative (SG&A) expenses rose 7.5% year over year.
Going into fiscal 2023, the gross margin is envisioned to contract 290-310 bps year over year, with the metric likely to be 35.1-35.3% due to lower product margins, higher freight and transportation costs, and 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 e-commerce growth, a larger store count and back-office infrastructure investments in fiscal 2022. Earnings are anticipated to be $9.75-$10.50 per share, whereas the company posted $11.19 last year.
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. It expects to witness supply-chain disruptions in the coming days, which, in turn, may lead to higher freight expenses. The company expects elevated shipping costs and deleverage from store occupancy costs. It expects the supply chain to remain challenged in fiscal 2023.
Bottom Line
Although supply-chain woes and rising costs remain concerning, we hope that solid demand and online strength will aid the stock and help drive growth. Notably, a VGM Score of B and a long-term earnings growth rate of 3.7% reflect its inherent strength.
Ross Stores, an off-price retailer of apparel and home accessories in the United States, currently sports a Zacks Rank #1 (Strong Buy). ROST has an expected EPS growth rate of 10.5% for three to five years. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Ross Stores’ current-year sales and EPS suggests declines of 1.6% and 11.7%, respectively, from the year-ago period’s reported figures. ROST has a trailing four-quarter earnings surprise of 10.5%, on average.
Tecnoglass, the manufacturer and seller of architectural glass and windows, and aluminum products for the residential and commercial construction industries, currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for TGLS’ 2023 sales and EPS suggests growth of 11.2% and 9%, respectively, from the year-ago period’s reported levels. TGLS has a trailing four-quarter earnings surprise of 26.9%, on average.
Wingstop, an operator of franchises and restaurants, currently carries a Zacks Rank #2 (Buy). WING has a long-term earnings growth rate of 11%.
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.
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High Demand, Online Strength Aid Hibbett (HIBB) Amid Cost Woes
Hibbett, Inc. (HIBB - Free Report) has been benefitting from strong product demand, robust omni-channel capabilities and store-related initiatives. Strength in footwear and accessories acted as major growth drivers. HIBB has highlighted that its new stores have been performing well and it is on track to extend its market reach.
Notably, fiscal third quarter adjusted earnings of $1.94 per share rose 16% from $1.68 reported in the prior-year quarter. Net sales advanced 13.5% year over year to $433.2 million for the quarter under review. Comparable store sales (comps) grew 9.9%, while in-store comps rose 7.9% for the quarter under review.
In third-quarter fiscal 2023, the company witnessed growth from the pre-pandemic levels. Comparable store sales (comps) rose 51.7% and in-store comps grew 42.5% on a three-year basis. Also, the company witnessed revenues above the pre-pandemic levels across all product categories.
Consequently, this Zacks Rank #3 (Hold) stock has gained 21.8% in the past three months compared with the industry’s growth of 8.9%.
Image Source: Zacks Investment Research
Let’s Delve Deeper
Hibbett is focused on the e-commerce front and expansion of the loyalty program. It has been increasing the customer base by connecting with more customers through e-commerce and selective store expansion.
Further, it is leveraging its omni-channel capabilities 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 to fulfill online orders and serve customers.
The company witnessed a strong online show, with year-over-year e-commerce sales growth of 22% in third-quarter fiscal 2023, driven by better inventory, robust traffic across the website and app, and improved digital customer experience. The metric rose 124.7% on a three-year basis. It accounted for 15% of the total sales, up from 14% in the prior-year quarter.
Hibbett is progressing well with its loyalty program in order to enhance its omni-channel initiatives. Going into fiscal 2023, e-commerce comps are expected to grow in the high-single digits.
It has been on track with store expansion and inventory-management initiatives. The company is gaining from its small market strategy as it continues to strengthen its presence across the country. Hibbett targets expansion in markets that offer increased growth potential. The company has a target of growing to more than 1,500 stores in underserved markets. In third-quarter fiscal 2023, it opened nine stores. HIBB is likely to open 30-40 stores in fiscal 2023.
Driven by these factors, management 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 between flat and low-double-digit growth versus low-double-digit growth stated earlier. In-store comps are likely to be flat to grow in the low-double digits, while e-commerce is anticipated to grow in the high-single-digit range.
However, the company continues to reel under high freight and fuel costs, and wage inflation. This dented margins in the fiscal third quarter. The gross margin contracted 200 basis points (bps) to 34.3% due to lower average product margins, somewhat offset by reduced logistic costs. The operating margin contracted 90 bps to 7.9% for the reported quarter. Store operating, selling and administrative (SG&A) expenses rose 7.5% year over year.
Going into fiscal 2023, the gross margin is envisioned to contract 290-310 bps year over year, with the metric likely to be 35.1-35.3% due to lower product margins, higher freight and transportation costs, and 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 e-commerce growth, a larger store count and back-office infrastructure investments in fiscal 2022. Earnings are anticipated to be $9.75-$10.50 per share, whereas the company posted $11.19 last year.
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. It expects to witness supply-chain disruptions in the coming days, which, in turn, may lead to higher freight expenses. The company expects elevated shipping costs and deleverage from store occupancy costs. It expects the supply chain to remain challenged in fiscal 2023.
Bottom Line
Although supply-chain woes and rising costs remain concerning, we hope that solid demand and online strength will aid the stock and help drive growth. Notably, a VGM Score of B and a long-term earnings growth rate of 3.7% reflect its inherent strength.
Stocks to Consider
Here are three better-ranked stocks to consider, namely Wingstop (WING - Free Report) , Ross Stores (ROST - Free Report) and Technoglass (TGLS - Free Report) .
Ross Stores, an off-price retailer of apparel and home accessories in the United States, currently sports a Zacks Rank #1 (Strong Buy). ROST has an expected EPS growth rate of 10.5% for three to five years. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Ross Stores’ current-year sales and EPS suggests declines of 1.6% and 11.7%, respectively, from the year-ago period’s reported figures. ROST has a trailing four-quarter earnings surprise of 10.5%, on average.
Tecnoglass, the manufacturer and seller of architectural glass and windows, and aluminum products for the residential and commercial construction industries, currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for TGLS’ 2023 sales and EPS suggests growth of 11.2% and 9%, respectively, from the year-ago period’s reported levels. TGLS has a trailing four-quarter earnings surprise of 26.9%, on average.
Wingstop, an operator of franchises and restaurants, currently carries a Zacks Rank #2 (Buy). WING has a long-term earnings growth rate of 11%.
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.