Hibbett Sporting Goods, Inc. saw net income fall in the second quarter through July as a shifting athletic footwear market and tax-free weekends pushed back-to-school sales into the third quarter. But a solid start to the month of August — with comps up approximately 12% over the first 18 days of the month — helped push HIBB shares up 19% for the week to close at $25.02 on Friday.
Company Chairman and CEO Mickey Newsome pointed to the importance of tax-free weekends and the back-to-school selling season. He used the state of Alabama, where Hibbett has 67 stores, as an example as they had a tax-free holiday for the first time. He said the last week of July comped down 10% versus last year in those stores, but were up almost 18% in the first week of August thanks to the holiday. The same held true for Tennessee, where HIBB has 44 stores, as a negative 27% comp the last week of July netted a 28% positive comp the first week of August. HIBB estimated that about $1 million to $1.5 million in sales moved to August overall.
While overall comps were up just 0.6% for the quarter, strip center stores continued to show more strength than mall locations, comping up 2% for the period versus a 1% decline a the mall locations. HIBB picked up momentum throughout the second quarter, with May described as the weakest month, while June comped up in low-singles and July posting positive results despite the BTS shift.
The footwear business was up in low-single-digits versus Q2 last year, with youth footwear and cleated footwear posting the largest gains for the period. Jeff Rosenthal, VP of Merchandising, called out Under Armours cleated launch, as well as Nike cleated and marquee product, Crocs, and Asics as key contributors. He also pointed to particular strength in skateboard footwear from Etnies and DC Shoes and the Heelys phenomenon. Non-urban stores performed better than urban stores in footwear.
Branded apparel was up in low-single-digits, with growth driven by Nike, Under Armour, and Enyce. Youth and mens activewear were said to be the largest gainers. The licensed apparel business was down in mid-single-digits, but the NFL business was said to be good.
The equipment business was up in single-digits, with football and soccer leading the way with double-digit gains. Football was driven by Shock Doctor, Oakley, Under Armour, and Nike as consumers focused on eye shields and mouth guards for football season.
Product merchandise margins improved on lower markdowns in the second quarter.
Looking ahead, all three merchandise areas are up in double-digits for the third quarter-to-date, with licensed apparel up in single-digits. Footwear is up in double-digits so far and has benefited from a strong launch of the New Balance ZIP product, the Asics Gel Kayano, Nike Air product, Shox, and Air Force 1. The football and soccer equipment categories are also up in double-digits for the month-to-date period. Rosenthal said technical apparel from Nike and Under Armour continues to show strength. Heelys will be rolled out to more stores as the fall season progresses and HIBB will also focus more open-to-buy on skateboard shoes and Under Armour fleece.
Third quarter and full year comps are expected to finish out in the positive 2% to 3% range, netting EPS of 26 cents to 29 cents per diluted share for Q3 and full year earnings estimated in the $1.08 to $1.12 per diluted share.
|Hibbett Sporting Goods|
|Second Quarter Results|
|(in $ millions)||2006||2005||Change|
|GP %||31.3%||31.5%||-10 bps|