Hibbett, Inc., as expected, reported first-quarter results well below year-ago levels that were also just short of Wall Street’s consensus targets. Hibbett said results were in line with internal plans while reiterating full-year guidance. Comps were down 18.9 percent year over year but ahead 22.9 percent against the pre-pandemic first quarter of 2019.
Hibbett’s first quarter ended April 30.
Mike Longo, president and chief executive officer, stated, “During the first quarter, our team effectively executed our strategic plan and delivered comparable store sales and financial results in line with our expectations. As we’ve previously discussed, our customer’s spending habits were affected by lower discretionary income due to the absence of stimulus payments received in the first quarter of last year. We are pleased to report that the supply chain disruption we experienced at the end of last year has improved and our current inventory position is strong and consistent with our forecast.”
Longo continued, “Our inventory increased by approximately $94 million during the first quarter, with a significant portion arriving late in the quarter. As a result, we have improved our inventory levels in a number of high-demand products and are well-positioned to achieve our sales targets moving forward. We also remain on plan to open 30 to 40 net new stores in underserved areas with little or no competition. This approach has proven to be a significant competitive advantage for us, and our team remains disciplined in the site selection process. Additionally, we believe the investments we made to build our Hibbett and City Gear brands will continue to drive results as market conditions improve. As always, we continue to manage our business for the long-term and strive to create sustainable revenue and profitability growth.”
Finally, Longo concluded, “Looking ahead, we remain on track to achieve the Fiscal 2023 guidance we outlined last quarter. Driving these results is our best-in-class omnichannel business model and our superior in-store customer service, which combined with a compelling merchandise assortment, differentiates Hibbett in the marketplace and keeps us top of mind for our increasingly loyal customer base. As we move through the year, we remain committed to leveraging our proven business model to optimize our performance over the long run and deliver greater value to our stockholders.”
First Quarter Results
Net sales for the 13-weeks ended April 30, 2022, decreased 16.3 percent to $424.1 million compared with $506.9 million for the 13-weeks ended May 1, 2021. The prior year’s first quarter received a significant boost from stimulus funds that did not reoccur in the current period. Comparable sales decreased 18.9 percent versus the prior year but increased by 22.9 percent in relation to the first quarter of Fiscal 2020, the most relevant comparable period prior to the pandemic. Brick-and-mortar comparable sales declined 22.0 percent while e-commerce sales increased 4.1 percent on a year-over-year basis. In relation to the first quarter of Fiscal 2020, brick-and-mortar comparable sales increased 13.6 percent and e-commerce sales grew 116.9 percent over a three-year period. E-commerce represented 14.6 percent of total net sales for the 13-weeks ended April 30, 2022, compared to 11.7 percent in the 13-weeks ended May 1, 2021, and 8.3 percent of total net sales for the 13-week period ended May 4, 2019.
Gross margin was 37.0 percent of net sales for the 13-weeks ended April 30, 2022, compared with 41.4 percent of net sales for the 13-weeks ended May 1, 2021. The approximate 440 basis point decline was driven by deleveraging of store occupancy of approximately 160 basis points, higher average product cost of approximately 150 basis points and increased freight and transportation costs of approximately 130 basis points.
Store operating, selling and administrative (SG&A) expenses were 22.5 percent of net sales for the 13-weeks ended April 30, 2022, compared with 18.1 percent of net sales for the 13-weeks ended May 1, 2021. The approximate 440 basis point increase is primarily the result of deleveraging from the year-over-year sales decline and increased costs associated with advertising, professional services and supplies necessary to support a larger store base and increased e-commerce volume.
Net income for the 13-weeks ended April 30, 2022, was $39.3 million, or $2.89 per diluted share, compared with net income of $84.8 million, or $5.00 per diluted share, for the 13-weeks ended May 1, 2021.
For the 13-weeks ended April 30, 2022, we opened nine net new stores, bringing the store base to 1,105 in 35 states.
As of April 30, 2022, we had $23.2 million of available cash and cash equivalents on our unaudited condensed consolidated balance sheet. As of April 30, 2022, we had $20.4 million of debt outstanding and $104.6 million available under our $125.0 million unsecured credit facility.
Inventory as of April 30, 2022, was $314.9 million, a 72.6 percent increase compared to the prior year’s first quarter and up 40.7 percent from the beginning of the quarter.
Capital expenditures during the 13-weeks ended April 30, 2022, were $16.0 million compared to $7.0 million in the 13-weeks ended May 1, 2021. Capital expenditures were predominantly related to store initiatives including new store openings, relocations, expansions, remodels, and technology upgrades.
During the 13-weeks ended April 30, 2022, the company repurchased 491,218 shares of common stock under the Stock Repurchase Program (the “Repurchase Program”) for a total expenditure of $22.4 million. The company also paid a quarterly dividend equal to $0.25 per outstanding common share resulting in a cash outlay of $3.3 million.
Hibbett Sports’ earnings of $2.89 came in below Wall Street’s consensus estimate on Yahoo Finance of $3.05. Estimates had ranged from $2.49 to $3.37. Revenue of $424.1 million was below the consensus estimate of $428 million.
Fiscal 2023 Outlook
Hibbett said, “We expect to face a number of business and economic challenges in the 52-week fiscal year ending January 28, 2023 (“Fiscal 2023”). This includes the potential for ongoing supply chain disruptions, increases in volume and severity of COVID-19 cases, a lack of stimulus and unemployment benefits, inflation, wage pressures, geopolitical conflicts and a more cautious consumer. These factors may contribute to the complexity and volatility in forecasting Fiscal 2023 results.
“Given the performance we have experienced year-to-date and our outlook for the remainder of the fiscal year, taking into consideration the factors noted above, we are reiterating our previous financial guidance for Fiscal 2023. We estimate the following full-year results:
- Total net sales are expected to be relatively flat in dollars compared to our Fiscal 2022 results. This implies comparable sales are expected to be in the negative low-single digits for the full year. Brick and mortar comparable sales are expected to be in the negative low-single-digit range while e-commerce revenue is anticipated to be in the positive mid-single-digit range.
- It is anticipated that comparable sales will be in the negative low-teen range in the first half of the year with an expectation of positive high-single-digit comp sales in the second half of the year. Sales forecasts are based on assumptions that as the year progresses, supply chain disruptions moderate, the timing of inventory receipts becomes more consistent and predictable, and our overall inventory position remains strong.
- Net new store growth is expected to be in the range of 30-to-40 stores with units spread relatively evenly throughout the year.
- As a result of potential supply chain disruption, higher freight costs, a higher mix of e-commerce sales, inflationary pressures and some deleverage of store occupancy costs, gross margin as a percent of net sales is anticipated to decline by approximately 130 to 160 basis points compared to Fiscal 2022 results. This expected full-year gross margin range of 36.6 percent to 36.9 percent is above pre-pandemic levels. We expect gross margin results in comparison to the prior year will become more favorable as the year progresses.
- SG&A as a percent of net sales is expected to increase by 70-to-100 basis points in comparison to Fiscal 2022 results due to wage inflation, deleverage of fixed costs driven by relatively flat sales expectations and annualization of back-office infrastructure investments in Fiscal 2022. The expected full-year SG&A expense range of 23.3 percent to 23.6 percent as a percent of net sales is below pre-pandemic levels. We expect year-over-year quarterly SG&A comparisons will become less challenging in the back half of the year due to an expectation of an improving inventory and sales environment.
- Operating income is expected to be in the low double-digit range as a percent of sales, also above pre-pandemic levels.
Diluted earnings per share are anticipated to be in the range of $9.75 to $10.50 using an estimated full-year tax rate of 24.5 percent and an estimated weighted average diluted share count of 13.5 million.
- Capital expenditures are anticipated to be in the range of $60 million to $70 million dollars with a focus on new store growth, remodels and additional technology and infrastructure investments.
- Our capital allocation strategy continues to include stock repurchases and recurring quarterly dividends in addition to the capital expenditures noted above.”
Photo courtesy Hibbett