Hibbett Inc. raised its outlook for the year after reporting second-quarter results that came in well above Wall Street targets. Same-store sales declined 6.4 percent year over year but represented a surge of 72.8 percent compared to the second quarter of 2019.

For the six months,  the comp sales increase came to 30.3 percent versus a year ago and the two-year comp increase was 63.4 percent.

Mike Longo, president and chief executive officer, stated, “Our current year second-quarter results were strong and compare favorably to the prior year second quarter that experienced a significant boost from market disruption, pent up demand and the first round of stimulus payments. We believe our significant revenue growth and profitability over the previous two years ago demonstrates that our strategy of delivering a compelling assortment of highly coveted merchandise coupled with superior customer service and a best-in-class omnichannel platform will continue to drive strong top and bottom-line performance.”

Longo continued, “Our inventory position improved during the quarter despite ongoing disruptions in the supply chain and helped drive quarterly sales. Foundational enhancements to the customer experience and our ability to attract and stay connected to underserved customers continue to strengthen our relationships with our vendor partners.”

Finally, Longo concluded, “The dedication from all of our team members continues to be a key component of our rapid growth and strong financial performance. We believe that our investments in employees, stores, the online experience, distribution capabilities, and our vendor relationships have positioned the Hibbett and City Gear brands to take advantage of the ongoing market disruption and to generate sustainable, profitable growth into the future.”

Second Quarter Results
Net sales for the 13-week period ended July 31, 2021, decreased 5.1 percent to $419.3 million compared with $441.6 million for the 13-week period ended August 1, 2020, but reflected a two-year increase of 66.1 percent compared to the $252.4 million for the 13-week period ended August 3, 2019. Results significantly topped Wall Street’s consensus estimate of $320.89 million.

Compared to the 13-week period ended August 1, 2020, comparable sales decreased 6.4 percent, as brick and mortar comparable sales declined 3.8 percent and e-commerce sales decreased 20.4 percent. E-commerce represented 13.1 percent of total net sales for the 13-week period ended July 31, 2021, compared to 15.7 percent for the 13-week period ended August 1, 2020. On a two-year basis, comparable sales increased 72.8 percent versus the 13-week period ended August 3, 2019. Brick and mortar comparable sales increased 64.5 percent and e-commerce sales grew 153.3 percent over this 2-year period. As a reminder, sales in the 13-week period ended August 1, 2020, were positively impacted by pent-up consumer demand, temporary and permanent store closures by its competitors, and stimulus money which increased traffic to its stores and website. This year, despite reduced stimulus payments and less disruption to its largest competitors, Hibbett said it believes its increased market share, improved customer engagement, and availability of in-demand products were significant offsets to these headwinds.

Gross margin was 39.0 percent of net sales for the 13-week period ended July 31, 2021, compared with 37.0 percent of net sales for the 13-week period ended August 1, 2020. The approximate 200 basis point increase was driven by higher sell-through of premium-priced products, a low promotional environment, improved profitability of e-commerce sales, and a slight mix shift away from e-commerce sales which, despite an overall improved margin, still carry a lower rate due to incremental fulfillment costs. Excluding adjustments to its non-cash inventory valuation reserves in the prior-year quarter, the gross margin of 39.0 percent for the 13-week period ended July 31, 2021, is comparable to the adjusted gross margin of 36.7 percent for the 13-week period ended August 1, 2020.

Store operating, selling and administrative (SG&A) expenses were 22.3 percent of net sales for the 13-week period ended July 31, 2021, compared with 22.6 percent of net sales for the 13-week period ended August 1, 2020. This decrease was the result of having minimal costs in the current year associated with City Gear acquisition and integration activities. Excluding certain City Gear acquisition and integration expenses that occurred last year, SG&A expenses of 22.3 percent of net sales for the 13-week period ended July 31, 2021, increased approximately 300 basis points, from adjusted SG&A expenses of 19.3 percent of net sales for the 13-week period ended August 1, 2020. This increase was primarily related to the incremental cost of its stores operating at regular business hours with full staff and increased investments to attract new customers, improve the customer experience, and make back-office processes more efficient. In the 13-week period ended August 1, 2020, many of its stores operated at less than regular business hours with slightly reduced staffing levels.

Net income for the 13-week period ended July 31, 2021, was $46.7 million, or $2.86 per diluted share, compared with a net income of $40.4 million, or $2.38 per share, for the 13-week period ended August 1, 2020. As there were no adjustments in the second quarter of the current year, net income for the 13-week period ended July 31, 2021, was $46.7 million, or $2.86 per diluted share, compared to adjusted net income for the 13-week period ended August 1, 2020, of $50.0 million, or $2.95 per diluted share.

EPS of $2.86 significantly topped Wall Street’s consensus estimate of 1.42.

For the 13-week period ended July 31, 2021, Hibbett opened 11 new stores and closed two underperforming stores, bringing the store base to 1,080 in 35 states.

Hibbett ended the second quarter of Fiscal 2022 with $176.8 million of available cash and cash equivalents on its unaudited condensed consolidated balance sheet. As of July 31, 2021, Hibbett had no debt outstanding and full availability under its $100.0 million secured credit facility.

Inventory at the end of the second quarter of Fiscal 2022 was $216.8 million, a 19.1 percent increase compared to the prior year second quarter.

Capital expenditures during the 13-week period ended July 31, 2021, were $13.8 million compared to $8.4 million in the 13-week period ended August 1, 2020. Current year capital expenditures were predominantly related to store development activities including new store openings, relocations, expansions, and remodels.

During the 13-week period ended July 31, 2021, the company repurchased 989,388 shares of common stock for a total expenditure of $83.5 million, including 4,125 shares acquired from holders of restricted stock unit awards to satisfy tax withholding requirements of $0.3 million. The company also initiated a recurring quarterly dividend equal to $0.25 per outstanding common share that resulted in a cash outlay of $3.8 million.

Fiscal Year-to-Date Results
Net sales for the 26-week period ended July 31, 2021, increased 30.2 percent to $926.1 million compared with $711.4 million for the 26-week period ended August 1, 2020, and increased 55.5 percent over two years from $595.7 million in the 26-week period ended August 3, 2019. Comparable sales increased 30.3 percent versus the 26-week period ended August 1, 2020. Brick and mortar comparable sales were up 39.9 percent and e-commerce sales decreased 11.4 percent, representing 12.4 percent of total sales in the 26-week period ended July 31, 2021 compared to 18.2 percent of total sales in the 26-week period ended August 1, 2020. Over two years, comparable sales increased 63.5 percent versus the 26-week period ended August 3, 2019. Brick and mortar comparable sales increased 56.9 percent and e-commerce sales grew 127.7 percent over this 2-year period.

Gross margin was 40.3 percent of net sales for the 26-week period ended July 31, 2021, compared with 33.4 percent for the 26-week period ended August 1, 2020. Excluding adjustments to its non-cash inventory valuation reserves in the 26-week period ended August 1, 2020, the current year gross margin of 40.3 percent is comparable to the adjusted gross margin of 33.9 percent in the prior year.

SG&A expenses were 20.0 percent of net sales for the 26-week period ended July 31, 2021, compared with 26.6 percent of net sales for the 26-week period ended August 1, 2020. Excluding certain City Gear acquisition and integration expenses and pandemic related impairment and valuation costs that occurred in the 26-week period ended August 1, 2020, current year SG&A expenses of 20.0 percent of net sales reflected an improvement of approximately 100 basis points from adjusted SG&A expenses of 21.0 percent of net sales for the 26-week period ended August 1, 2020.

Net income for the 26-week period ended July 31, 2021, was $131.5 million, or $7.90 per diluted share, compared to $25.1 million, or $1.50 per diluted share, for the 26-week period ended August 1, 2020. On an adjusted basis, net income for the 26-week period ended July 31, 2021, was $131.5 million, or $7.90 per diluted share, compared to $55.3 million, or $3.30 per diluted share, for the 26-week period ended August 1, 2020.

Fiscal 2022 Outlook
Given the strong performance in the second quarter, Hibbett updated its financial guidance for Fiscal 2022, which ends January 29, 2022. Due to continuing uncertainty in the business environment, potential legislation that could negatively impact its business, changes in consumer spending habits, and ongoing supply chain disruptions, forecasting future results remains difficult said the retail and therefore providing limited forward guidance regarding its updated outlook for Fiscal 2022.

Hibbett’s projected financial results for Fiscal 2022 are influenced by many factors, several of which are discussed below:

  • Hibbett attracted new customers to its store locations and to its omnichannel platform in Fiscal 2021 due to pent-up demand, market disruption and government stimulus payments. Many of these new customers made repeat purchases. Hibbett said it expects to continue to attract and retain new customers during Fiscal 2022.
  • Accelerating consumer adoption of e-commerce, which Hibbett believes is likely a permanent change, will continue to benefit its omnichannel business.
  • Hibbett’s strong vendor relationships allow it to meet customer demand for athletic-inspired fashion footwear, apparel and accessories both in-store and online.
  • Other initiatives, including net low double-digit unit store growth per brand, an improved in-store experience resulting from its store refresh program, increased speed to market via supply chain enhancements and an improved focus on its sales culture.

Specific items not factored into its outlook include further government stimulus payments, unannounced and/or unexpected market disruption, changes to the Federal minimum wage or significant wage inflation, increases in corporate tax rates and shifts in consumer spending habits.

Based on the considerations above and its results in the first half of the year, Hibbett forecasted the following GAAP results for Fiscal 2022:

  • Comparable sales versus the prior year are expected to be in the positive mid-teens, up from the previous guidance range of positive high-single digits to positive low-double digits;
  • Gross margin is expected to be lower in the second half of Fiscal 2022 in relation to the first half of Fiscal 2022, but is expected to be favorable to both GAAP and adjusted Fiscal 2021 gross margin on a full-year basis, which is consistent with the previous guidance;
  • SG&A is expected to increase as a percent of sales in the second half of Fiscal 2022 in comparison to the first half of Fiscal 2022, but is still anticipated to decline as a percent of sales in comparison to both GAAP and adjusted SG&A in Fiscal 2021 on a full-year basis, which is consistent with the previous guidance; and
  • Diluted earnings per share in the range of $11.00 to $11.50, assuming an effective tax rate of approximately 25.0 percent and a weighted average diluted share count of approximately 16.2 million.
 Previously, guidance called for earnings in the range of  $8.50 to $9.00.

Photo courtesy Hibbett