Susquehanna Financial Group has upgraded its rating on Hibbett Sports as it expects its stores and recently launched e-commerce site to benefit from footwear replacement needs caused by hurricanes Harvey and Irma.

Hibbett has over 32 percent exposure to hurricane-affected regions, which are expected to drive “significant increases” in replacement footwear sales, said Susquehanna analyst Sam Poser in a note issued Wednesday. Stores in Florida, Georgia, Louisiana and Texas are expected to see similar benefits as those gained from Katrina in 2005.

Beyond the direct need for replacement footwear from residents whose homes were impacted by flooding, spending on footwear should be supported by FEMA aid and insurance payouts; and the arrival of many contractors, and sometimes their families, come to flood-damaged areas to help with recovery efforts. With many residents unable to use home delivery, Hibbett’s physical stores are expected to see a benefit.

Still, hurricane-induced foot traffic into stores should help increase awareness and sales for its new online platform. Poser wrote that initial results from the launch were better than expected and the fact that “no major hiccups” were seen during the back-to-school season bodes well for online sales during the holiday period.

“We are convinced that the new digital platforms will work,” Poser wrote in the note. “However, prior to the storms, the timing of the benefits from HIBB’s new digital presence was unclear. Now, we believe that hurricane-induced demand will act as a bridge to the sustainable improvements supported by HIBB’s beefed-up digital presence.”

Susquehanna raised its rating to “positive” from “neutral” and its price target from $11 to $17.

For the third quarter, Susquehanna increased its same-store estimates from down 8 percent to down 6.5 percent as compared to consensus of down 8.4 percent. The EPS estimate was increased from 22 cents to 28 cents a share and versus consensus of 21 cents.

For the fourth quarter, Susquehanna increased its same-store estimate from down 5 percent to down 4.5 percent as compared to consensus of negative 5.8 percent. The EPS estimate was raised from 23 cents to 25 cents. The consensus calls for EPS of 24 cents.

For FY18 and FY19, Susquehanna raised its EPS estimate from $1.28 and $1.43 to $1.35 and $1.51, respectively.

Photo courtesy Hibbett Sports