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Hibbett (HIBB) Down 32.3% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Hibbett Sports (HIBB - Free Report) . Shares have lost about 32.3% in that time frame, underperforming the S&P 500.

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

Hibbett Reports Q2 Loss & Sales Miss, Trimmed '19 View

Hibbett reported loss along with lower-than-expected top and bottom line in second-quarter fiscal 2019. Notably, this marked the company’s second straight top- and bottom-line miss. Moreover, management trimmed its guidance for the fiscal year, which is also shy of analysts’ expectations.

Q2 Highlights

Hibbett incurred quarterly loss of 6 cents per share, narrower than loss of 15 cents in the year-ago quarter. However, the Zacks Consensus Estimate for the second quarter stood at earnings of 8 cents.

Net sales grew 12.3% to $211.1 million but came below the Zacks Consensus Estimate of $219 million. The year-over-year improvement in the metric was driven by comparable sales (comps) and e-commerce growth coupled with favorable week shift from the 53rd week prior year. Comps edged up 4.1% in the quarter owing to comps growth of 3% in May, 5.4% in June and 3.7% in July. Notably, e-commerce sales accounted for nearly 8% of total sales in the fiscal second quarter.

Although, the company witnessed significant improvement in branded apparel and footwear in the reported quarter, its license, equipment and accessory businesses remained soft.

Gross profit increased 22.1% to $66.4 million, with gross margin expansion of 248 basis points (bps) to 31.4%. The upside was primarily driven by fewer clearance markdowns along with lower logistics and store occupancy expenses, and higher sales.
 
Hibbett incurred operating loss of $1.9 million compared with a loss of $5.2 million in the year-ago quarter. This can be attributed to higher store operating, selling and administrative expenses, somewhat mitigated by increase in gross margin. The increase in SG&A expenses stemmed from marketing and omni-channel investments along with increased employee benefit costs.

Other Financial Aspects

Hibbett ended the fiscal second quarter with $119.6 million in cash and cash equivalents, no bank debt outstanding and full availability under its $60-million unsecured credit facility. Total shareholders’ investment, as of Aug 4, totaled roughly $333.6 million.

Further, Hibbett repurchased 336,302 shares for $8 million. As of Aug 4, it had roughly $195.7 million remaining under its standing share repurchase authorization.

Store Update

In second-quarter fiscal 2019, Hibbett introduced six new stores, expanded, relocated or remodeled three stores while shut down 15 underperforming outlets. Consequently, it ended the quarter with 1,059 stores across 35 states.

Outlook

Following Hibbett’s soft quarterly results, management updated its guidance for fiscal 2019. Comps are now anticipated in the range of negative 1% to positive 1%, versus earlier projection in the band of negative 1% to positive 2%. Further, SG&A expenses are likely to increase between 7% and 9% compared with 6-8% increase guided earlier.

Management envisions earnings of $1.57-$1.75 per share, down from $1.65-$1.95 range expected earlier. In fiscal 2018, the company delivered earnings of $1.71 per share.

Capital expenditures are expected to be between $18 million and $22 million compared with $20 million and $25 million projected earlier.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Hibbett has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Hibbett has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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