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Can Online & Store Efforts Aid Hibbett (HIBB) Amid Inflation?
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Hibbett (HIBB - Free Report) has been witnessing inflation, job losses, higher interest rates and weak consumer confidence. This led to a weak year-over-year performance in second-quarter fiscal 2024. Adjusted earnings of 85 cents per share declined 54% from the $1.86 reported in the prior-year quarter. Net sales fell 4.6% year over year to $375 million for the quarter under review. Comparable store sales (comps) fell 7.3%.
As a result, the company retained its drab fiscal 2024 view. Hibbett expects year over year sales to remain flat to up 2% compared with the prior mentioned mid-single-digit growth for fiscal 2024, including the impacts of the 53rd week. Meanwhile, we expect the metric to grow 0.2%. It anticipates a comparable sales decline of low-single digits against earlier mentioned low-single-digit growth.
The company expects in-store comps to decline year over year in the low-single digits, which compares unfavorably with the previous guidance of flat to low-single-digit growth and our estimate of a 2.6% decline. Meanwhile, e-commerce is anticipated to decline in the low-single-digit range, down from the prior stated high-single-digit growth. Earnings are anticipated to be $7-$7.75, down from the earlier mentioned $9.50-$10.00 per share but in sync with our estimate of $7.25.
Also, a lower average product margin from higher promotional activity across footwear and apparel dented margins in the said quarter. Gross margin contracted 160 basis points (bps) to 32.8% while operating margin contracted 410 bps to 4.3% for the reported quarter.
The company has been reeling under higher costs for essential items like food, utilities and gas, resulting in reduced discretionary spending. The current environment also remains challenging due to economic uncertainty and selective consumer spending. Persistent inflation has continued to affect consumer sentiment and spending patterns, which, in turn, led to increases in operating costs, including higher wages and prices for various goods and services.
Fiscal 2024 SG&A, as a percent of net sales, is estimated to be 23.3-23.5%, up from the previously mentioned 23.2-23.3%. Also, interest expenses, as a percentage of net sales, are projected to be 0.4-0.45%, up from the prior mentioned 0.25-0.3%.
In second-quarter fiscal 2024, inventory rose 17.6% year over year to $430.8 million due to product cost inflation and an unfavorable mix. Management expects a continued promotional environment and muted consumer spending, at least in the third quarter. It also predicts year-over-year inventory to remain volatile due to supply-chain challenges.
Image Source: Zacks Investment Research
We note that shares of this company have lost 32.1% in the year-to-date period against the industry's 2.9% growth.
Efforts to Aid
Despite these downsides, a strong start to the busy back-to-school season at the end of the fiscal second quarter is a sign of relief for HIBB. Also, positive customer response to product launches, stemming from compelling product assortment and market share gains, bodes well. The company continues to benefit from strength across Hibbett and City Gear Brands.
HIBB is focused on increasing its 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. Hibbett is progressing well with its loyalty program in order to enhance its omni-channel initiatives.
Also, the company continues to strengthen its presence across the country. The company has a target of growing to more than 1,500 stores in underserved markets. In second-quarter fiscal 2024, it opened five stores. For fiscal 2024, management revealed plans to open 40-50 stores.
Conclusion
Although inflation-related headwinds are likely to linger in the short term, we believe that Hibbett’s store expansion efforts, online strength and a positive back-to-school season will help this Zacks Rank #3 (Hold) stock get back on track.
The Zacks Consensus Estimate for HIBB’s fiscal 2024 earnings has inched up 0.8% in the past 30 days. The PEG ratio for Hibbett is just 0.77, far lower than the industry average of 1.31. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, HIBB is a solid choice on the value front from multiple angles. Topping it, a Value Score of A reflect its inherent strength.
The Zacks Consensus Estimate for BJRI’s 2023 sales and EPS indicates 5.6% and 405.9% growth, respectively, from the year-ago period’s reported levels. It has a trailing four-quarter earnings surprise of 121.2%, on average.
Urban Outfitters, which engages in retail and wholesale of general consumer products, currently flaunts a Zacks Rank #1. The expected EPS growth rate for three to five years is 18%.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year earnings suggests growth of 57.1% from the year-ago reported number. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.
Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 5.5%.
The Zacks Consensus Estimate for Walmart’s current financial-year sales implies an improvement of 4.2% from the year-ago period’s actual. WMT has a trailing four-quarter earnings surprise of 12%, on average.
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Can Online & Store Efforts Aid Hibbett (HIBB) Amid Inflation?
Hibbett (HIBB - Free Report) has been witnessing inflation, job losses, higher interest rates and weak consumer confidence. This led to a weak year-over-year performance in second-quarter fiscal 2024. Adjusted earnings of 85 cents per share declined 54% from the $1.86 reported in the prior-year quarter. Net sales fell 4.6% year over year to $375 million for the quarter under review. Comparable store sales (comps) fell 7.3%.
As a result, the company retained its drab fiscal 2024 view. Hibbett expects year over year sales to remain flat to up 2% compared with the prior mentioned mid-single-digit growth for fiscal 2024, including the impacts of the 53rd week. Meanwhile, we expect the metric to grow 0.2%. It anticipates a comparable sales decline of low-single digits against earlier mentioned low-single-digit growth.
The company expects in-store comps to decline year over year in the low-single digits, which compares unfavorably with the previous guidance of flat to low-single-digit growth and our estimate of a 2.6% decline. Meanwhile, e-commerce is anticipated to decline in the low-single-digit range, down from the prior stated high-single-digit growth. Earnings are anticipated to be $7-$7.75, down from the earlier mentioned $9.50-$10.00 per share but in sync with our estimate of $7.25.
Also, a lower average product margin from higher promotional activity across footwear and apparel dented margins in the said quarter. Gross margin contracted 160 basis points (bps) to 32.8% while operating margin contracted 410 bps to 4.3% for the reported quarter.
The company has been reeling under higher costs for essential items like food, utilities and gas, resulting in reduced discretionary spending. The current environment also remains challenging due to economic uncertainty and selective consumer spending. Persistent inflation has continued to affect consumer sentiment and spending patterns, which, in turn, led to increases in operating costs, including higher wages and prices for various goods and services.
Fiscal 2024 SG&A, as a percent of net sales, is estimated to be 23.3-23.5%, up from the previously mentioned 23.2-23.3%. Also, interest expenses, as a percentage of net sales, are projected to be 0.4-0.45%, up from the prior mentioned 0.25-0.3%.
In second-quarter fiscal 2024, inventory rose 17.6% year over year to $430.8 million due to product cost inflation and an unfavorable mix. Management expects a continued promotional environment and muted consumer spending, at least in the third quarter. It also predicts year-over-year inventory to remain volatile due to supply-chain challenges.
Image Source: Zacks Investment Research
We note that shares of this company have lost 32.1% in the year-to-date period against the industry's 2.9% growth.
Efforts to Aid
Despite these downsides, a strong start to the busy back-to-school season at the end of the fiscal second quarter is a sign of relief for HIBB. Also, positive customer response to product launches, stemming from compelling product assortment and market share gains, bodes well. The company continues to benefit from strength across Hibbett and City Gear Brands.
HIBB is focused on increasing its 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. Hibbett is progressing well with its loyalty program in order to enhance its omni-channel initiatives.
Also, the company continues to strengthen its presence across the country. The company has a target of growing to more than 1,500 stores in underserved markets. In second-quarter fiscal 2024, it opened five stores. For fiscal 2024, management revealed plans to open 40-50 stores.
Conclusion
Although inflation-related headwinds are likely to linger in the short term, we believe that Hibbett’s store expansion efforts, online strength and a positive back-to-school season will help this Zacks Rank #3 (Hold) stock get back on track.
The Zacks Consensus Estimate for HIBB’s fiscal 2024 earnings has inched up 0.8% in the past 30 days. The PEG ratio for Hibbett is just 0.77, far lower than the industry average of 1.31. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, HIBB is a solid choice on the value front from multiple angles. Topping it, a Value Score of A reflect its inherent strength.
Key Picks
Some better-ranked stocks are BJ's Restaurants (BJRI - Free Report) , Urban Outfitters (URBN - Free Report) and Walmart (WMT - Free Report) .
BJ's Restaurants, which operates a chain of high-end casual dining restaurants in the United States, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BJRI’s 2023 sales and EPS indicates 5.6% and 405.9% growth, respectively, from the year-ago period’s reported levels. It has a trailing four-quarter earnings surprise of 121.2%, on average.
Urban Outfitters, which engages in retail and wholesale of general consumer products, currently flaunts a Zacks Rank #1. The expected EPS growth rate for three to five years is 18%.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year earnings suggests growth of 57.1% from the year-ago reported number. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.
Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 5.5%.
The Zacks Consensus Estimate for Walmart’s current financial-year sales implies an improvement of 4.2% from the year-ago period’s actual. WMT has a trailing four-quarter earnings surprise of 12%, on average.