Canaccord Genuity hiked its rating on Hibbett Sports to “Buy” from “Hold,” lifted its price target to $30 from $17, and increased its fiscal 2019 EPS target to $2.00 from $1.59 previously.
Wall Street’s consensus for fiscal 2019 is $1.58.
Camilo Lyon, the lead analyst, said the sporting goods chain’s earnings this coming year should benefit from four factors. First, tax reform coupled with potential for incremental buybacks. Lyon expects Hibbett’s tax rate to decrease to 21.6 percent in fiscal 2019 vs. 37 percent previously.
Second, e-commerce, which was launched last year, is “gaining scale rapidly with improving margins.” With inventory in better shape, more full-price sales are expected to be sold online for Hibbett.
Third, the chain is expected to close fiscal 2018 with a clean inventory position that should result in improving margin trends in fiscal 2019. Lyon said Hibbett has made “significant progress in working down slow turning footwear platforms.”
Finally, a sequentially improving product pipeline from key vendor partners is expected to support comp growth. Greater allocations of newer on-trend products coupled with more innovation arriving from Nike is expected to support both comp gains and more full-price selling. Apparel sales should benefit as Hibbett “shifts buys to stronger brands such as Adidas and NKE and away from UAA.”
Moreover, in the near-term, with 18 percent of its store base in Alabama and Georgia, “all-SEC national championship football game doesn’t hurt,” Lyon wrote.
Lyon now expects same-store sales in fiscal 2019 to climb 2.2 percent, up from 1.9 percent previously.
Photo courtesy Hibbett Sports