Hibbett Sports Inc. saw net sales decrease 9.2 percent to $188 million for the 13-week period ended July 29, 2017, compared with $206.9 million for the 13-week period ended July 30, 2016. Comparable store sales decreased 11.7 percent in the 2017 Q2 period.
Gross margin was 28.9 percent of net sales in Q2, compared with 33 percent in Q2 2016. The decrease was mainly due to promotions and markdowns taken to liquidate excess and aged inventory and de-leverage of logistics and store occupancy expenses associated with lower comparable store sales.
Store operating, selling and administrative expenses were 28.5 percent of net sales for second quarter, compared with 25.9 percent of net sales for the year-ago period. Although these expenses were higher as a percentage of net sales, dollars were flat compared with the same period last year.
HIBB reported a $3.2 million net loss, or 15 cents per diluted share, for the 13-week second-quarter period, compared with net income of $6.5 million, or 29 cents per diluted share, for the prior-year period.
Jeff Rosenthal, president and chief executive officer, stated, “We experienced a very difficult retail environment in the quarter, with a significant decline in transactions and resulting pressure on gross margin. Expenses were well controlled, while maintaining proper staffing and customer service levels in our stores. Looking forward, we expect the external environment to remain challenging, although we are encouraged with the progress we are making on our internal initiatives, most notably our new e-commerce website. Our early e-commerce sales have exceeded expectations and user feedback has been very positive. We will continue our efforts to grow our online business aggressively in the future, while continuing to improve our stores to provide a great overall customer experience.”
For the quarter, Hibbett opened six new stores, expanded four high-performing stores and closed eight underperforming stores, bringing the store base to 1,080 in 35 states as of July 29, 2017.
Liquidity And Stock Repurchases
Hibbett ended the second quarter of fiscal 2018 with $52.8 million of available cash and cash equivalents on the consolidated balance sheet, no bank debt outstanding and full availability under its $80 million unsecured credit facilities.
During the second quarter, the company repurchased 282,609 shares of common stock for a total expenditure of $6.9 million. Approximately $229.3 million of the total authorization remained for future stock repurchases as of July 29, 2017.
Fiscal 2018 Outlook
Hibbett Sports Inc. is updating its guidance for fiscal 2018 based on the following assumptions:
- Continued soft sales for the remainder of the year due to a challenging retail environment;
- A growing contribution of e-commerce sales, especially during the holiday season;
- Gross margin pressure due to the promotional environment in our industry, the ramp-up of our e-commerce sales, and markdowns needed to reduce aged inventory; and
- Continued tight expense controls while maintaining adequate store staffing levels.
Based on these assumptions, the company is updating its guidance with the following changes:
- Earnings per diluted share in the range of $1.25 to $1.35, which compares with previous guidance of $2.35 to $2.55.
- Comparable store sales in the negative mid- to high-single-digit range, which compares with previous guidance in the range of negative 1 percent to positive 1 percent.
- A reduction in gross margin rate of 250 to 285 basis points, which compares with previous guidance of a reduction in gross margin rate of 55 to 75 basis points compared with fiscal 2017.
Photo courtesy Hibbett