Hibbett Sports Inc. slightly lowered its full-year earnings guidance after reporting third-quarter earnings came a penny below Wall Street’s targets. Comps in the quarter were basically flat. The sporting goods chain marginally lifted its comp guidance for the year with footwear comps seen improving in the fourth quarter.

Third Quarter Results

Comparable sales for the 13-week period ended November 3, 2018 increased 0.1 percent. E-commerce sales increased 62.2 percent, and represented 8.8 percent of total net sales for the third quarter.

Total net sales decreased $20.9 million (8.8 percent) to $216.9 million compared with $237.8 million for the 13-week period ended October 28, 2017. Wall Street’s consensus estimate had been $217.4 million.

The year-over-year decrease in net sales included a decrease of approximately $17.3 million due to the week shift resulting from the 53rd week last year, and a decrease of $2.4 million due to the sale of the company’s Team Division in December 2017.

Gross margin was 32.5 percent of net sales for the 13-week period ended November 3, 2018, compared with 32.0 percent for the 13-week period ended October 28, 2017. The increase was mainly due to fewer clearance markdowns. Logistics and store occupancy expenses declined 3.3 percent for the third quarter, but increased as a percentage of net sales due to the week shift.
Store operating, selling and administrative expenses were 28.7 percent of net sales for the 13-week period ended November 3, 2018, compared with 24.4 percent of net sales for the 13-week period ended October 28, 2017. The increase was due to higher operating expenses related to e-commerce, $1.5 million in non-recurring costs related to the previously announced acquisition of City Gear, LLC and de-leverage associated with lower net sales. Excluding the acquisition costs, non-GAAP store operating, selling and administrative expenses were 28.0 percent of net sales for the 13-week period ended November 3, 2018.

Net income for the 13-week period ended November 3, 2018, was $1.5 million compared with net income of $7.6 million for the 13-week period ended October 28, 2017. Excluding the costs related to the acquisition of City Gear, non-GAAP net income was $2.6 million for the 13-week period ended November 3, 2018. Earnings per diluted share was $0.08 for the 13-week period ended November 3, 2018, compared with earnings per diluted share of $0.37 for the 13-week period ended October 28, 2017. Excluding the acquisition costs, non-GAAP earnings per diluted share was $0.14 for the 13-week period ended November 3, 2018.

Adjusted earnings of 14 cents a share were below Wall Street’s consensus target of 16 cents.

Jeff Rosenthal, president and chief executive officer, stated, “We continue to see good momentum in our branded apparel business, which helped offset softness in our licensed, equipment, and accessories business in the quarter. Footwear comparable sales were relatively flat, although we see potential upside in the fourth quarter as the depth of our premium products continues to improve. Our e-commerce business continues to exceed expectations, and we expect continued traction as we benefit from enhancements to our mobile app and our new Buy Online, Pick up in Store and Reserve Online capabilities.”

For the quarter, Hibbett opened seven new stores, expanded or relocated one store and closed 24 underperforming stores, bringing the store base to 1,042 in 35 states as of November 3, 2018.

Fiscal Year to Date Results

Net sales for the 39-week period ended November 3, 2018, increased 0.2 percent to $702.7 million compared with $701.5 million for the 39-week period ended October 28, 2017. Comparable sales increased 1.4 percent.

Gross margin was 33.3 percent of net sales for the 39-week period ended November 3, 2018, compared with 32.6 percent for the 39-week period ended October 28, 2017.

Store operating, selling and administrative expenses were 26.5 percent of net sales for the 39-week period ended November 3, 2018, compared with 24.2 percent of net sales for the 39-week period ended October 28, 2017. Excluding the costs relating to the acquisition of City Gear, non-GAAP store operating, selling and administrative expenses were 26.3 percent of net sales for the 39-week period ended November 3, 2018.

Net income for the 39-week period ended November 3, 2018, was $21.8 million compared with $25.3 million for the 39-week period ended October 28, 2017. Excluding the costs relating to the acquisition of City Gear, non-GAAP net income for the 39-week period ended November 3, 2018, was $22.9 million. Earnings per diluted share was $1.15 for the 39-week period ended November 3, 2018, compared with $1.21 for the 39-week period ended October 28, 2017. Excluding the acquisition costs in the third quarter, non-GAAP earnings per diluted share was $1.21 for the 39-week period ended November 3, 2018.

Liquidity and Stock Repurchases

Hibbett ended the third quarter of Fiscal 2019 with $121.2 million of available cash and cash equivalents on the consolidated balance sheet. As of November 3, 2018, Hibbett had $25.0 million in debt outstanding and $75.0 million available under its unsecured credit facilities.

During the third quarter, the company repurchased 395,450 shares of common stock for a total expenditure of $7.6 million. Approximately $188.0 million of the total authorization remained for future stock repurchases as of November 3, 2018.

Fiscal 2019 Outlook

The company is updating its full year guidance for Fiscal 2019 with the following changes:

  • Earnings per diluted share in the range of $1.35 to $1.48, which includes $0.17 to $0.20 per diluted share for non-recurring costs associated with the acquisition of City Gear. Excluding the acquisition costs, non-GAAP earnings per diluted share are expected to be in the range of $1.55 to $1.65, which compares with previous guidance of $1.57 to $1.75.
  • Comparable sales in the range of flat to 1.0 percent, which compares with previous guidance in the range of -1.0 percent to 1.0 percent.
  • Approximately 30 new store openings and 82 store closures, which includes 2 closures due to hurricane impact and 25 anticipated closures in the fourth quarter. This compares with previous guidance of approximately 30 to 35 new store openings and approximately 55 to 60 store closures.
  • SG&A expense increase of 8.8 percent to 11.2 percent, including City Gear acquisition costs, and an increase of 7.0 percent to 9.0 percent, excluding such acquisition costs.
  • Share buyback of approximately $18.0 million to $23.0 million, which compares with previous guidance of approximately $40.0 million to $50.0 million.

Image courtesy Hibbett Sporting Goods