Shares of Hibbett Sports Inc. (HIBB - Free Report) plunged 10.8% after the company posted dismal third-quarter fiscal 2017 results, wherein earnings crushed its four-quarter long trend of posting positive surprises, whereas sales marked its seventh consecutive miss. Moreover, the company slashed its fiscal 2017 guidance, further adding to investors’ concerns.
Hibbett’s quarterly earnings per share of 66 cents slumped 16.5% year over year, also lagging the Zacks Consensus Estimate of 74 cents.
Net sales advanced 3.8% year over year to $237 million, while comparable-store sales (comps) inched up 0.7%. Sales mainly gained from the continued strength noted in the company’s footwear business, along with an impressive back-to-school selling season performance. However, the company witnessed sluggish sales in September and October, as the cold weather weighed upon apparel sales. Further, its top line fell short of the Zacks Consensus Estimate of $238 million.
Hibbett’s gross profit climbed 1.7% to $83.8 million, while the gross margin contracted 70 basis points (bps) to 35.4%. The decline in margin was accountable to unfavorable markdowns and product mix, along with logistics and store occupancy cost deleverage.
Also, the operating income tumbled 22.4% to $23.2 million, with the operating margin contracting 330 bps to 9.8%, mainly due to higher store operating, selling and administrative expenses (also as a percentage of sales). The escalated expenses stemmed from incremental costs associated with the company’s omnichannel initiatives, employee benefit expenses and store maintenance expenses.
Other Financial Aspects
Hibbett ended the quarter with $41.2 million in cash and cash equivalents and no outstanding borrowings. Total shareholders’ investment, as of Oct 29, 2016, was $332.2 million.
During the third quarter, Hibbett spent $6.9 million as capital expenditure and repurchased 54,000 shares for $1.9 million. As of the end of the quarter, the company had nearly $269 million authorization available for repurchase under its $300 million program approved in Nov 2015.
In the fiscal third quarter, Hibbett introduced 13 stores, expanded two high-performing stores and shut down five underperforming ones. As a result, it ended the quarter with 1,067 stores across 34 states. Additionally, Hibbett introduced its first California store at the end of the quarter and remains optimistic about growth in that region.
Management remains satisfied with the progress related to its omnichannel endeavors. Also, the company anticipates reaping benefits from its new POS system and store-to-home capacities in the first half of fiscal 2018. However, given the miserable third quarter and sluggish sales trends, management lowered its outlook for fiscal 2017.
The company now envisions earnings in the range of $2.82−$2.88 per share, down from its previous guidance of $2.93–$3.02. Further, it now anticipates the merchandise margin rate for fiscal 2017 to remain flat, against the old projection range of flat to slightly positive.
Hibbett currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include Big 5 Sporting Goods Corp. (BGFV - Free Report) , Dick's Sporting Goods Inc. (DKS - Free Report) and ULTA Salon, Cosmetics & Fragrance, Inc. (ULTA - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Big 5 Sporting has an average positive earnings surprise of 4.8% in the trailing four quarters. The stock, with a long-term growth rate of 12%, has seen positive estimate revisions in the last 30 days.
Dick's Sporting has an average earnings beat of 8.8% in the last four quarters. Moreover, the company’s long-term growth rate of 12.7% and positive estimate revisions over the past seven days, bode well.
ULTA Salon’s solid long-term EPS growth rate of 19.5% and positive estimate revisions over the past seven days help it stand strong in the industry. Further, the company flaunts a spectacular earnings history.
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