Hibbett, Inc. reported third-quarter results came in below Wall Street estimates with margins impacted by higher logistics and wage costs, but the retailer reiterated its outlook for the year. 

Earnings in the quarter of $1.94 came in below Wall Street’s consensus estimate of $2.46. Revenue for the quarter came in at $433.2 million versus the consensus estimate of $438.51 million.

Mike Longo, president and chief executive officer, stated, “Our third quarter performance was highlighted by solid top-line growth, with comparable sales up nearly 10 percent over the prior year period including an impressive e-commerce increase of 22.0 percent. These results reflect a strong back-to-school season, which fell more in the third quarter this year than the second quarter as consumers waited closer to the start of school to make purchases. We experienced strong demand for our popular lines of footwear, reflecting continued consumer loyalty to our key brands while our apparel sales for the quarter were pressured by a more competitive pricing environment. Additionally, margins were affected by continued high freight and fuel costs and wage inflation.”

Longo continued, “We are very proud of our team as they continue to execute both strategically and operationally in a dynamic environment. We have a proven business model, and we remain laser-focused on enhancing the consumer experience with best-in-class service both in stores and online. We believe a compelling, quality product mix that appeals to our fashion-conscious customers is an important differentiator for Hibbett. Our omnichannel platform has also continued to perform well, and we are excited about the opportunities to expand our capabilities across this important sales channel.

Longo concluded, “As we enter the fourth quarter and the busy holiday selling season, we believe we are well positioned to meet our objectives for Fiscal 2023. As a result, we are confirming our previous full-year guidance. We have a strong inventory position and favorable vendor relationships to ensure we can meet the demands of our customers. Our new store openings are performing above expectations, and we will continue to identify opportunities to extend our market reach. We look forward to a successful year for Hibbett with a commitment to delivering a performance that rewards our loyal customers and creates value for our stockholders.”

Third Quarter Results
Net sales for the 13 weeks ended October 29, 2022, increased 13.5 percent to $433.2 million compared with $381.7 million for the 13 weeks ended October 30, 2021. Comparable sales increased 9.9 percent versus the prior year and increased by 51.7 percent compared to the 13 weeks ended November 2, 2019 (“Fiscal 2020”), the most relevant comparable period prior to the pandemic. Brick-and-mortar comparable sales were up 7.9 percent while e-commerce sales increased 22.0 percent on a year-over-year basis. In relation to the 13 weeks that ended November 2, 2019, brick-and-mortar comparable sales increased 42.5 percent and e-commerce sales grew 124.7 percent. E-commerce represented 15.0 percent of total net sales for the 13 weeks ended October 29, 2022, compared to 14.0 percent in the 13 weeks ended October 30, 2021, and 10.5 percent of total net sales for the 13-weeks ended November 2, 2019.

Gross margin was 34.3 percent of net sales for the 13 weeks ended October 29, 2022, compared with 36.3 percent of net sales for the 13 weeks ended October 30, 2021. The approximate 200 basis point decline was driven by a lower average product margin of approximately 245 basis points partially offset by expense leverage in its logistics operations of approximately 45 basis points.

Store operating, selling and administrative (“SG&A”) expenses were 23.9 percent of net sales for the 13 weeks ended October 29, 2022, compared with 25.2 percent of net sales for the 13 weeks ended October 30, 2021. The decrease of 130 basis points is primarily the result of leverage from the year-over-year sales increase.

Net income for the 13 weeks ended October 29, 2022, was $25.6 million, or $1.94 per diluted share, compared with net income of $25.2 million, or $1.68 per diluted share, for the 13 weeks ended October 30, 2021.

For the 13 weeks ended October 29, 2022, Hibbett opened nine net new stores, bringing the store base to 1,126 in 36 states.

As of October 29, 2022, Hibbett had $25.1 million of available cash and cash equivalents on its unaudited condensed consolidated balance sheet and $51.7 million of debt outstanding, leaving $73.3 million available under its $125.0 million unsecured credit facility.

Inventory as of October 29, 2022, was $404.8 million, a 56.4 percent increase compared to the prior year’s third quarter and up 83.0 percent from the beginning of the year.

During the 13 weeks ended October 29, 2022, Hibbett repurchased 160,637 shares of common stock under its Stock Repurchase Program for a total expenditure of $9.0 million. The company also paid a quarterly dividend equal to $0.25 per outstanding common share that resulted in a cash outlay of $3.2 million.

Fiscal 2023 Year-to-Date Results
Net sales for the 39 weeks ended October 29, 2022, decreased 4.4 percent to $1.25 billion compared with $1.31 billion for the 39 weeks ended October 30, 2021. Comparable sales decreased 7.4 percent versus the 39 weeks ended October 30, 2021, but increased by 41.3 percent compared to the 39 weeks ended November 2, 2019. Brick-and-mortar comparable sales declined 10.2 percent and e-commerce sales increased 11.2 percent compared to the 39 weeks ended October 30, 2021. In relation to the 39 weeks ended November 2, 2019, brick-and-mortar comparable sales increased 31.0 percent and e-commerce sales grew 135.5 percent over the three-year period. E-commerce represented 14.9 percent of total net sales for the 39 weeks ended October 29, 2022, compared to 12.8 percent in the 39 weeks ended October 30, 2021, and 9.1 percent of total net sales for the 39 weeks ended November 2, 2019.

Gross margin was 35.3 percent of net sales for the 39 weeks ended October 29, 2022, compared with 39.1 percent of net sales for the 39 weeks ended October 30, 2021. The approximate 380 basis point decline was due to a lower average product margin of approximately 225 basis points, higher freight and transportation costs of approximately 90 basis points and deleverage of store occupancy costs of approximately 90 basis points. These unfavorable impacts on gross margin were partially offset by expense leverage of approximately 25 basis points in its logistics operations.

SG&A expenses were 23.2 percent of net sales for the 39 weeks ended October 29, 2022, compared with 21.5 percent of net sales for the 39 weeks ended October 30, 2021. The approximate 170 basis point increase is primarily the result of deleveraging from the year-over-year sales decline in categories such as wages, data processing, and advertising.

Net income for the 39 weeks ended October 29, 2022, was $89.6 million, or $6.71 per diluted share, compared with $156.7 million, or $9.74 per diluted share for the 39 weeks ended October 30, 2021.

Capital expenditures during the 39 weeks ended October 29, 2022, were $47.5 million compared to $43.9 million in the 39 weeks ended October 30, 2021. Capital expenditures were predominantly related to store initiatives including new store openings, relocations, expansions, remodels, and technology upgrades.

Fiscal 2023 Outlook
Hibbett said, “Hibbett said it expects to continue facing a number of business and economic challenges in the fourth quarter of the 52-week fiscal year ending January 28, 2023 (“Fiscal 2023”) as noted below. However, given the performance, we have experienced year-to-date and our outlook for the remainder of the fiscal year, we are reiterating the guidance for Fiscal 2023 that we presented on August 25, 2022, in conjunction with the release of our fiscal second-quarter results.

“Risks to be considered in the fourth of Fiscal 2023 include the potential for ongoing supply chain disruptions, higher freight and transportation costs, inflation, a tight labor market, geopolitical conflicts and a more cautious consumer. These factors may contribute to the complexity and volatility in forecasting Fiscal 2023 results.”

To reiterate, its current guidance is as follows:

  • Total net sales for the full year are expected to increase in the low-single-digit range in dollars compared to Fiscal 2022 results. This implies comparable sales are expected to be in the range of flat to positive low-single-digits for the full year. Full-year brick-and-mortar comparable sales are expected to be in the flat to the positive low-single-digit range while full-year e-commerce revenue growth is anticipated to be in the positive high-single-digit range;
  • Net new store growth is expected to be in the range of 30-to-40 stores;
  • As a result of product margin headwinds, higher freight and transportation costs, store occupancy deleverage, and a higher mix of e-commerce sales, gross margin as a percent of net sales is anticipated to decline by approximately 290 to 310 basis points compared to Fiscal 2022 results. This expected full-year gross margin range of 35.1 percent to 35.3 percent remains above pre-pandemic levels;
  • SG&A as a percent of net sales is expected to increase by 10 to 20 basis points in comparison to Fiscal 2022 results due to wage inflation, costs associated with growth in e-commerce, a larger store count and annualization of back-office infrastructure investments in Fiscal 2022. The expected full-year SG&A expense range of 22.7 percent to 22.8 percent as a percent of net sales is below pre-pandemic levels;
  • Operating income is expected to be in the low double-digit range as a percent of sales, also remaining above pre-pandemic levels;
  • Diluted earnings per share are anticipated to be in the range of $9.75 – $10.50 using an estimated full-year tax rate of approximately 24.5 percent and an estimated weighted average diluted share count of 13.3 million; and
  • Capital expenditures are expected in the range of $60 to $70 million with a focus on new store growth, remodels and additional technology and infrastructure investments.

Photo courtesy Hibbett