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Hibbett (HIBB) Lags Q3 Earnings Estimates, Trims FY19 View

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Hibbett Sports Inc. (HIBB - Free Report) reported dismal third-quarter fiscal 2019 results, wherein earnings lagged estimates while sales were almost in line. Additionally, both top and bottom lines declined year over year. This marked the company’s third straight bottom-line miss. Moreover, management trimmed its earnings guidance for the fiscal year and raised forecast for comps.

Shares of the company did not react much to the earnings results. However, this Zacks Rank #5 (Strong Sell) stock has declined 9.3% in the past three months against the industry’s 3.2% growth.

 



Q3 Highlights

Hibbett reported adjusted earnings of 14 cents per share, down 62.2% from 37 cents in the year-ago quarter. Further, the bottom line lagged the Zacks Consensus Estimate of 19 cents.

Hibbett Sports, Inc. Price, Consensus and EPS Surprise

 

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

Net sales dipped 8.8% to $216.9 million but marginally beat the Zacks Consensus Estimate of $216.3 million. The year-over-year decline is attributed to strong comparisons from last year due to the additional 53rd week as well as an impact from the sale of Team Division in December 2017. However, the top line continued to gain from strong momentum in the branded apparel business and robust e-commerce growth.

Notably, e-commerce sales increased 62.2% and accounted for nearly 8.8% of total sales in the fiscal third quarter. The company expects continued growth in the e-commerce business as enhancements in mobile app, as well as its newly launched “Buy Online, Pick Up in Store” and “Reserve in Store” capabilities, are delivering results.

Comparable store sales (comps) inched up 0.1% in the fiscal third quarter, owing to comps growth of 2.8% in August and 1.6% in October, which was mostly offset by decline of 5% in September.

Category-wise, the company witnessed significant improvement in branded apparel while sportswear and footwear were also positive. However, its licensed, teamsports, and women’s and kids businesses remained soft.

Gross profit declined 7.4% to $70.5 million while gross margin expanded 51 basis points (bps) to 32.5%. The upside was primarily driven by fewer clearance markdowns and more full-priced sales. Further, lower logistics and store occupancy expenses aided gross margin.
 
Operating income of $1.8 million declined 84.7% from $11.8 million in the year-ago quarter. Operating margin contracted 420 bps to 0.8% primarily due to higher store operating, selling and administrative (SG&A) expenses, somewhat mitigated by increase in gross margin. SG&A expenses increased 7.5% and 436 bps as a percentage of sales, driven by increased e-commerce-related operating expenses, non-recurring costs associated with the acquisition of City Gear and a deleverage due to lower sales.

Other Financial Aspects

Hibbett ended the fiscal third quarter with $121.2 million in cash and cash equivalents, $25 million in debt outstanding (long-term debt), and $75 million available under its unsecured credit facilities. Total shareholders’ investment as of Nov 3 totaled roughly $328.5 million.

Further, Hibbett repurchased 395,450 shares for $7.6 million. As of Nov 3, it had roughly $188 million remaining under its standing share repurchase authorization.

Store Update

In third-quarter fiscal 2019, Hibbett introduced seven new stores; expanded, relocated or remodeled one store while shut down 24 underperforming outlets. Consequently, it ended the quarter with 1,042 stores across 35 states.

The company now expects to open nearly 30 stores and close 82 outlets in fiscal 2019. This will include 2 closures due to the impact of hurricane and nearly 25 closures expected in the fiscal fourth quarter. Earlier, the company anticipated opening 30-35 stores and closing 55-60 outlets in fiscal 2019.

Outlook

Reflecting the year-to-date results, management has updated its guidance for fiscal 2019. It raised its comps view while lowered its adjusted earnings per share outlook. Comps are now anticipated to be flat to up 1% versus the earlier projection of negative 1% to positive 1%. SG&A expenses are likely to increase 7-9%, excluding City Gear acquisition costs. However, it is estimated to increase 8.8-11.2%, including the acquisition costs.

Excluding non-recurring costs associated with the acquisition of City Gear, management now envisions adjusted earnings of $1.55-$1.65 per share, down from $1.57-$1.75 expected earlier. In fiscal 2018, the company delivered earnings of $1.71 per share. Including the acquisition-related costs of 17-20 cents per share, earnings per share are expected to be $1.35-$1.48.

Share buybacks in fiscal 2019 are now estimated to be $18-$23 million compared with $40-$80 million mentioned earlier.

Want Better-Ranked Retail Stocks, Check These

MarineMax, Inc. (HZO - Free Report) has reported an average positive earnings surprise of 640.9% in the trailing four quarters. The company currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Five Below, Inc. (FIVE - Free Report) has an impressive long-term earnings growth rate of 30% and a Zacks Rank of 2 (Buy).

DICK’S Sporting Goods, Inc. (DKS - Free Report) , also a Zacks Rank #2 stock, delivered an average positive earnings surprise of 18.2% in the last four quarters.

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