Hibbett Sports narrowed the company’s loss in the second quarter as same-store sales grew 4.1 percent. Wall Street, however, was expecting a profit and the retailer lowered its guidance for the year.

Second Quarter Results

Net sales for the 13-week period ended August 4, 2018, increased 12.3 percent to $211.1 million compared with $188.0 million for the 13-week period ended July 29, 2017. Comparable sales increased 4.1 percent. E-Commerce sales represented 8.0 percent of total sales for the second quarter. The year over year increase in net sales also includes an increase of approximately $16.9 million due to the week shift resulting from the 53rd week last year.

Wall Street’s consensus target had been $215.6 million and a 6.8percent same-store gain.

Gross margin was 31.4 percent of net sales for the 13-week period ended August 4, 2018, compared with 28.9 percent for the 13-week period ended July 29, 2017. The increase was mainly due to fewer clearance markdowns and leverage of logistics and store occupancy expenses associated with higher net sales.

Store operating, selling and administrative expenses were 29.4 percent of net sales for the 13-week period ended August 4, 2018, compared with 28.5 percent of net sales for the 13-week period ended July 29, 2017. The increase was due to marketing and omni-channel investments, as well as increased employee benefit costs. Marketing investments were made to drive customer acquisition, increase brand awareness and improve in-store and online traffic. Omni-channel investments included costs to accelerate the development of Buy Online, Pick up in Store and Reserve in Store in an effort to launch prior to the holiday season. The increase in employee benefit costs was mainly due to health care costs.

Net loss for the 13-week period ended August 4, 2018, was $1.2 million compared with net loss of $3.2 million for the 13-week period ended July 29, 2017. Loss per share was 6 cents for the 13-week period ended August 4, 2018, compared with loss per share of 15 cents for the 13-week period ended July 29, 2017. Wall Street had been expecting earnings of 6 cents.

Jeff Rosenthal, president and chief executive officer, stated, “We continue to make investments for the long-term success of the business, and we are starting to see the benefits from these investments in our operations. Although we experienced continued softness in our licensed, equipment and accessories business in the quarter, we see good momentum in branded apparel and footwear and are very encouraged by the acceleration of our e-commerce business. Additionally, our gross margin rate continues to show significant improvement with cleaner inventory and more full-priced selling. Looking forward, we expect continued improvement in our assortments as we approach the holiday season, and we expect further benefit from our omni-channel initiatives with the rollout of Buy Online, Pick up in Store and Reserve in Store.”

For the quarter, Hibbett opened six new stores, expanded, relocated or remodeled three stores and closed 15 underperforming stores, bringing the store base to 1,059 in 35 states as of August 4, 2018.

Fiscal Year to Date Results

Net sales for the 26-week period ended August 4, 2018, increased 4.8 percent to $485.8 million compared with $463.6 million for the 26-week period ended July 29, 2017. Comparable sales increased 1.7 percent.

Gross margin was 33.6 percent of net sales for the 26-week period ended August 4, 2018, compared with 32.9 percent for the 26-week period ended July 29, 2017.

Store operating, selling and administrative expenses were 25.5 percent of net sales for the 26-week period ended August 4, 2018, compared with 24.1 percent of net sales for the 26-week period ended July 29, 2017.

Net income for the 26-week period ended August 4, 2018, was $20.3 million compared with $17.7 million for the 26-week period ended July 29, 2017. Earnings per diluted share was $1.06 for the 26-week period ended August 4, 2018, compared with $0.84 for the 26-week period ended July 29, 2017.

Liquidity and Stock Repurchases

Hibbett ended the second quarter of Fiscal 2019 with $119.6 million of available cash and cash equivalents on the consolidated balance sheet, no bank debt outstanding and full availability under its $60.0 million unsecured credit facilities.

During the second quarter, the company repurchased 336,302 shares of common stock for a total expenditure of $8.0 million. Approximately $195.7 million of the total authorization remained for future stock repurchases as of August 4, 2018.

Fiscal 2019 Outlook

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

  • Earnings per diluted share in the range of $1.57 to $1.75, which compares with previous guidance of $1.65 to $1.95.
  • Comparable sales in the range of -1.0 percent to 1.0 percent, which compares with previous guidance in the range of -1.0 percent to 2.0 percent.
  • SG&A expense increase of 7.0 percent to 9.0 percent, which compares with previous guidance in the range of 6.0 percent to 8.0 percent.
  • Capital expenditures of approximately $18.0 million to $22.0 million, which compares with previous guidance in the range of $20.0 million to $25.0 million.

Photo  courtesy of Hibbett Sports