The leadership team at Hibbett Sports Inc. fully understands that the Birmingham, AL-based retailer is far behind competitors’ digital investments, but the company is at least aware of  shortcomings and is making concerted efforts to catch up.

Digital progress showed up in Hibbett’s first-quarter earnings, with e-commerce sales accelerating as part of overall revenue and the mix of products being sold through e-commerce sales expanding. Net income for the first quarter ended May 5 was $21.5 million, or $1.12 per diluted share, compared with $20.9 million, or 97 cents per diluted share, in Q1 2017. Results were short of Wall Street’s consensus estimate of $1.15.

The company reported net sales for Q1 of $274.7 million, down 0.4 percent compared with Q1 2017. Comparable store sales decreased 0.3 percent, while e-commerce sales represented 7 percent of total sales for the quarter—a number the company fully expects to rise.

“E-commerce sales continued to perform above expectations … ,” Jeff Rosenthal, Hibbett’s president and CEO, said on Friday’s earnings call with analysts. “We are also very encouraged with the early results of our new mobile app and believe this will be a great tool for our highly mobile customer.

Rosenthal said Hibbett is seeing 80 percent of web traffic from smartphones, while the company has 130,000 downloads of the new app and is seeing a “meaningful percent of digital sales” from the app. The company is especially excited about hosting sneaker raffles on the app and already has received 60,000 entries for those raffles in the past month.

“Additionally, we continue to make good progress on our ‘buy online, pick up in store’ and ‘reserve in store’ capabilities, and plan to launch this functionality ahead of the holiday season,” Rosenthal said. “As we start the second quarter, we believe we are well-positioned with fresh assortments and easier comparisons as we prepare for the back-to-school season.”

Meeting the needs of the “highly mobile customer” is a priority for Hibbett, which has long benefited from having brick & mortar stores in smaller markets. But that’s all changing for the retailer, and the biggest example of this shift came earlier in the month.

Rosenthal and Bill Quinn, Hibbett’s vice president of digital commerce, spoke with SGB for a May 1 article detailing the company’s mobile app and digital strategy.

They told SGB they understood that launching a mobile app in spring of 2018—well after many competitors were in the second, third or even later versions of their own—meant Hibbett would need to hit it out of the park by giving customers a sleek, user-friendly, robust product that would allow them to shop for and purchase anything from accessories to Air Jordans.

“For Hibbett, we don’t have much of a choice because we’re so late in our digital investments,” Quinn told SGB. “We had to go down the path of ‘make it as good as possible’ because our customers are already shopping and using digital. If we want them to switch over to Hibbett, we had to produce something really, really good.”

The app, which was live in the company’s hometown of Birmingham in early spring and was unveiled to the public on May 2 after more than a year of development and testing, is off to a good start with a high rating (4.2 stars out of 5) on the iTunes App Store.

Although Hibbett said it won’t break out mobile app sales in future earnings reports—and the mobile app wouldn’t have made an impact in the first quarter ended May 5—the company’s newfound emphasis on digital is starting to resonate. But getting into the mobile game so late could stunt revenue potential, according to analysts.

“Hibbett is struggling to navigate an environment where consumers are increasingly utilizing digital channels,” Jim Duffy of Stifel wrote in a note to investors. “The new e-commerce platform will help Hibbett be more competitive, though heritage brick-and-mortar store productivity is likely to remain under pressure and the ecommerce business is margin dilutive, suggesting earnings progress could prove challenging. We remain cautious on Hibbett’s valuation given structural headwinds to the business, and see a discounted multiple as appropriate.”

The company is maintaining guidance for Fiscal 2019, with earnings per diluted share in the range of $1.65 to $1.95.

Photo courtesy Hibbett Sporting Goods