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Why Is Hibbett Sports (HIBB) Down 18.5% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for Hibbett Sports, Inc. (HIBB - Free Report) . Shares have lost about 18.5% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is HIBB due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Hibbett Q1 Earnings and Sales Miss

Hibbett reported earnings of $1.12 per share in first-quarter fiscal 2019, missing the Zacks Consensus Estimate of $1.13. However, earnings improved 15% from 97 cents earned in the prior-year quarter. The lag can be attributed to soft margins and higher SG&A expenses.

Net sales dipped 0.4% to $274.7 million, lagging the Zacks Consensus Estimate of $277 million. The decline is attributed to soft same-store sales (comps), offset by strong e-commerce growth. Comps fell 0.3% due to negative 7.3% comps in February, offset by comps growth of 6.1% and 0.6% in March and April, respectively.

During the reported quarter, branded apparel remained extremely strong with high single-digit comps growth. Additionally, footwear and cleats reported positive comps. Notably, e-commerce sales accounted for nearly 7% of total sales in the fiscal first quarter.

Hibbett’s gross profit declined 1.4% to nearly $96.8 million while gross margin contracted 40 basis points (bps) to 35.2%. The decline in margin was due to higher sales of clearance merchandise and freight related with e-commerce sales.
 
Operating income of $28.6 million declined 16.4% from $34.2 million in the year-ago quarter. Additionally, operating margin contracted 200 bps to 10.4%, attributed to lower gross margin as well as higher SG&A expenses. The increase in SG&A expenses stemmed from additional operating expenses associated with reinvestment of tax reform savings to benefit the company’s team members, additional marketing expenses to drive e-commerce sales and investments for the launch of its new mobile app.

Other Financial Aspects

Hibbett ended the fiscal first quarter with nearly $115.8 million in cash and cash equivalents, no bank debt outstanding and full availability under its $60-million revolving credit facility. Total shareholders’ investment, as of May 5, was roughly $341.7 million.

The company’s capital expenditure was $4.1 million in the quarter, mainly directed toward its major initiatives and new store openings. Further, Hibbett repurchased 40,299 shares for $0.9 million. As of May 5, it had roughly $203.6 million remaining under its standing share repurchase authorization.

Store Update

In first-quarter fiscal 2019, Hibbett introduced seven new stores, expanded four high-performing stores and shut down 18 underperforming ones. Consequently, it ended the quarter with 1,068 stores across 35 states.

Outlook

Following a soft fiscal first quarter, the company believes that it is well positioned for the fiscal second quarter, given its fresh assortments and easier comparisons as it prepares for the back-to-school season. Going into the fiscal second quarter, the company sees more opportunities with cleaner inventory levels and higher volumes of new product. Further, it expects to benefit from healthier branded apparel and footwear categories compared with the prior-year quarter.

The company expects gross margin comparisons to be relatively easier as product margin is expected to improve significantly due to fresher product and significant leverage on store occupancy expenses due to the week shift caused by the 53rd week last year.

For fiscal 2019, the company reiterated its previously-stated outlook, projecting earnings of $1.65-$1.95 per share compared with $1.71 earned in fiscal 2018.

How Have Estimates Been Moving Since Then?

It turns out, estimates revisions flatlined during the past month. There have been two revisions higher for the current quarter compared to two lower.

Hibbett Sports, Inc. Price and Consensus

 

Hibbett Sports, Inc. Price and Consensus | Hibbett Sports, Inc. Quote

VGM Scores

At this time, HIBB has a strong Growth Score of A, though it is lagging a lot on the momentum front with a D. The stock was also allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

HIBB has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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