Hibbett Sports Benefits from Small Market Focus

 

The retailer posted a mid-teens sales increase for the quarter, but net income failed to keep pace as margins were hurt by those very same increased gas costs in the form of rising freight charges. Still, comps increased in each month of the second quarter with early results in August suggesting a strong start to third quarter ahead.

May was up mid-single-digits; June was up high-single-digits; July comps were positive low-single-digits partly because of the shifting of the July 4th holiday into fiscal June, but also because the stimulus checks slowed or stopped. In addition, later school start dates and delayed tax free weekends pushed some sales into August. August month-to-date sales on a comp store basis are positive mid-single-digits and August is the most important month in the third quarter for Hibbett. It is approximately 40% of the business for the quarter.

Second quarter comps at non-urban stores outperformed urban, but urban comped positive for the first time in a while, driven by increased footwear sales. Urban stores were up low-single-digits, while non-urban were up mid-single-digits. Mall stores were once again outperformed by strip center stores.

Unit sales increased in the 2% to 3% range with steady increases in average selling prices, especially in footwear as rising costs from overseas manufacturing flow through to retail. ASPs are expected to increase for the remainder of the year.

Branded apparel was up mid-single-digits with men’s, women’s and kids all up. Men’s lifestyle, which is mostly urban, remained challenging. However performance apparel from Nike and Under Armour remained very strong. The License business was up low-single-digits with MLB headwear and MMA apparel were called out as key growth drivers. The accessory business was up double-digits, driven by Nike, Under Armour and Oakley.

Footwear was up mid-single-digits. Men’s and kids are driving the business. Women’s and cleats have been a little bit more challenging. Key drivers for Footwear were Nike Shox, Air Force One’s and Jordans, Asics, and Under Armour cross training shoes. As at Foot Locker, Hibbett saw strength in high-end marquee product, which helped to drive an improvement in average selling prices.

Equipment was down mid-single-digits. However, boxing and MMA product were identified as most likely to supply Equipment growth for the remainder of the year.

For the quarter, Hibbett opened 14 new stores and closed 1 store, bringing the store base to 712 in 23 states as of Aug. 2, 2008. On July 26, the company reached a milestone with the opening of its 700th store in Bessemer, AL. For fiscal 2009, the company plans to open 80 to 90 new stores and close 10 to 12 stores.

The company increased its earnings outlook for the fiscal year to a range of 93 cents to $1.03 per diluted share, based on comparable store sales ranging from flat to up 2% for the second half of fiscal 2009.