Hibbett Sports significantly hiked its full-year guidance after reporting sales and earnings in the first quarter ended May 1 came in well ahead of Wall Street’s estimates.

Mike Longo, president and CEO, commented, “Our Fiscal 2022 is off to an excellent start as our business continues to build on the strong momentum we experienced last year. Record quarterly sales and earnings were a result of our continued commitment to offering a compelling assortment of merchandise combined with our trademark superior customer service and a best-in-class omnichannel platform. New customer retention, improved store-level engagement, government stimulus and access to coveted brand name products contributed to our comparable sales growth of 87.3 percent during the quarter and drove additional transactions and a higher average ticket across our store base and online platform.”

Longo continued, “The robust demand we experienced during our first quarter in addition to the ongoing constraints in the supply chain limited our opportunity to build our inventory position during the quarter. However, we believe our ability to consistently deliver in-demand footwear, apparel, and accessories to underserved communities has strengthened our vendor partnerships, increased our loyalty program membership, and continues to attract new customers.”

Finally, Longo added, “The impressive results we have experienced since the beginning of the COVID-19 pandemic reflect our team members’ diligence and dedication toward providing an exceptional customer experience by executing our toe-to-head merchandising strategy successfully. We will continue to make investments in our store base and in technology across our omnichannel platform to further enhance our customer experience as well as improve internal business processes.”

First Quarter Results
Net sales for the 13-week period ended May 1, 2021, increased 87.8 percent to $506.9 million compared with $269.8 million for the 13-week period ended May 2, 2020. Comparable sales increased 87.3 percent. Brick and mortar comparable sales increased 113.5 percent. E-commerce sales grew by 1.0 percent and represented 11.7 percent of total net sales for the first quarter compared to 22.3 percent in the prior year’s first quarter. As a reminder, its stores were open to the public for approximately 60 percent of the available days in the prior year’s first quarter which drove a significant amount of business to the online channel. Also, product launches shifted exclusively to online during much of that time period. This year, the product launch business migrated more heavily back toward stores which impacted e-commerce comparable sales. Although e-commerce revenue was relatively flat compared to last year’s first quarter, online revenues have grown by over 105 percent compared to the first quarter of Fiscal 2020. Hibbett said it believes its record quarterly sales growth was driven by new customer acquisition and retention, prior year market disruption, government stimulus, the availability of in-demand products and improved store-level engagement which, collectively, helped increase traffic and revenue per transaction in the quarter.

Gross margin was 41.4 percent of net sales for the 13-week period ended May 1, 2021, compared with 27.5 percent of net sales for the 13-week period ended May 2, 2020. The approximate 1,390 basis point increase was driven by higher sell-through, a low promotional environment, a mix shift away from e-commerce sales which carry a lower margin due to incremental fulfillment costs, leverage of store occupancy expenses, and a decline in non-cash lower cost or net realizable value (“inventory valuation”) reserve charges. In the prior year, incremental inventory valuation charges were recorded as a result of uncertainty brought about by the pandemic. Excluding adjustments to its non-cash inventory valuation reserves last year, the current year’s gross margin of 41.4 percent is comparable to the non-GAAP gross margin of 29.4 percent in the prior year.

Store operating, selling and administrative (“SG&A”) expenses were 18.1 percent of net sales for the 13-week period ended May 1, 2021, compared with 33.1 percent of net sales for the 13-week period ended May 2, 2020. This decrease was the result of leverage gained from the strong sales performance as well as having minimal costs in the current year associated with City Gear acquisition and integration activities and cycling the pandemic-induced impairment and valuation charges recorded in the first quarter of the prior year. Excluding certain City Gear acquisition and integration expenses and pandemic related impairment and valuation costs that occurred last year, current year SG&A expenses of 18.1 percent of net sales decreased approximately 580 basis points, from adjusted SG&A expenses of 23.9 percent of net sales for the 13-week period ended May 2, 2020. This decrease was also primarily due to leverage from the significant sales increase.

Net income for the 13-week period ended May 1, 2021, was $84.8 million, or $5.00 per diluted share, compared with a net loss of $15.3 million, or $0.92 per share, for the 13-week period ended May 2, 2020. As there were no adjustments in the first quarter of the current year, net income for the 13-week period ended May 1, 2021, was $84.8 million, or $5.00 per diluted share, compared to adjusted net income for the 13-week period ended May 2, 2020, of $5.2 million, or $0.31 per diluted share.

EPS of $5.00 nearly doubled Wall Street’s consensus estimate of $2.77. Revenue for the quarter came in at $506.9 million versus the consensus estimate of $412.92 million.

For the quarter, Hibbett opened six new stores and closed two underperforming stores, bringing the store base to 1,071 in 35 states as of May 1, 2021.

Hibbett ended the first quarter of Fiscal 2022 with $270.9 million of available cash and cash equivalents on its unaudited condensed consolidated balance sheet. As of May 1, 2021, we had no debt outstanding and full availability under its $75.0 million secured credit facility.

Inventory at the end of the first quarter of Fiscal 2022 was $182.4 million, a 24.6 percent decrease compared to the prior year’s first quarter. Strong brick and mortar demand and ongoing supply chain constraints during the quarter were the main drivers of the inventory reduction.

Capital expenditures during the first quarter of Fiscal 2022 were $7.0 million compared to $4.1 million in the first quarter of Fiscal 2021. Current year capital expenditures were predominantly related to store development activities including new store openings, relocations, expansions, and remodels.

During the first quarter, the company repurchased 582,403 shares of common stock for a total expenditure of $40.2 million, including 41,120 shares acquired from holders of restricted stock unit awards to satisfy tax withholding requirements of $2.8 million.

Fiscal 2022 Outlook
Given the strong performance in the first quarter, Hibbett is updating its financial guidance for Fiscal 2022, which ends January 29, 2022. Due to uncertainty in the business environment, potential legislation that could negatively impact its business, changes in consumer spending habits and ongoing supply chain disruptions, forecasting future results remains difficult and we are therefore providing limited forward guidance regarding its updated outlook for Fiscal 2022.

Hibbett projected financial results for Fiscal 2022 are influenced by many factors, several of which are discussed below:

  • Hibbett said it attracted new customers to its store locations and to Hibbett’s omnichannel platform in Fiscal 2021 due to pent-up demand, market disruption and government stimulus payments. Many of these new customers made repeat purchases. We expect to continue to attract and retain new customers during Fiscal 2022.
  • Accelerating consumer adoption of e-commerce, which Hibbett believes is likely a permanent change, will continue to benefit its omnichannel business.
  • Hibbett’s strong vendor relationships allow us to meet customer demand for athletic-inspired fashion footwear, apparel and accessories both in-store and online.
  • Other initiatives, including net low double-digit unit store growth per brand, an improved in-store experience resulting from its store refresh program, increased speed to market via supply chain enhancements and an improved focus on its sales culture.
  • Specific items not factored into its outlook include further government stimulus payments, unannounced and/or unexpected market disruption, changes to the Federal minimum wage or significant wage inflation, increases in corporate tax rates, and shifts in consumer spending habits.

Based on the considerations above and Hibbett’s  results in the first quarter, Hibbett forecasted the following GAAP results for Fiscal 2022:

  • Comparable sales versus the prior year are expected to be in a range from positive high-single digits to positive low-double digits, up from previous guidance of negative low-single digits to positive low-single digits. Previously, Hibbett forecast comparable sales ranging from negative low-single digits to positive low-single digits;
  • Gross margin is expected to be lower over the next three quarters in relation to the first quarter of Fiscal 2022 but is expected to be favorable to both GAAP and adjusted Fiscal 2021 gross margin on a full-year basis versus previous guidance projecting an unfavorable performance to the prior year. Previously, Hibbett forecast gross margin would decline of approximately 130 to 170 basis points;
  • SG&A is expected to increase as a percent of sales over the next three quarters in comparison to the first quarter of Fiscal 2022 but is still anticipated to decline as a percent of sales in comparison to both GAAP and adjusted SG&A in Fiscal 2021 on a full-year basis. Previously, Hibbett forecast SG&A decline as a percent of sales ranging from 5 to 45 basis points;
  • Diluted earnings per share in the range of $8.50 to $9.00, assuming an effective tax rate of approximately 25.0 percent and a weighted average diluted share count of approximately 16.9 million. Previously, Hibbett’s forecast diluted earnings per share in the range of $5.00 to $5.50.

Photo courtesy Hibbett