Profits at Hibbett Sports Inc. catapulted 168 percent in the fourth quarter ended January 30 as same-store sales ran up 21.9 percent.
Mike Longo, president and chief executive officer, stated, “The strong momentum that we experienced in our business in the second and third quarter continued in the fourth quarter. Our ongoing ability to deliver a compelling assortment of merchandise through superior customer service and a best-in-class omnichannel platform generated outstanding fourth-quarter performance in both sales and profitability and provided a strong conclusion to a record-setting Fiscal 2021. The resilience of our team members, our customers and our business model contributed to transaction growth and a higher average ticket both in-store and online during the fourth quarter.”
Longo continued, “Our vendor partners recognize the value of the connections we make with the customers that shop with Hibbett and City Gear. We believe that the relationships with our vendor partners will likely continue to strengthen as we become even more engaged with the athletically-inspired consumer in the communities we serve.”
Finally, Longo added, “Following a record year, we believe the Hibbett and City Gear brands are positioned very well in the industry and the momentum we have created in Fiscal 2021 is sustainable. We will remain focused on providing attractive and differentiated customer experiences in stores and online.”
Fourth Quarter Result
Net sales for the 13-week period ended January 30, 2021, increased 20.4 percent to $376.8 million compared with $313.0 million for the 13-week period ended February 1, 2020. Comparable sales increased 21.9 percent. On February 10, Hibbett issued an update to guidance that showed comparable sales increased 21.9 percent, above the previous guidance of an increase in the high-single-digits to low-double-digits.
Brick & mortar comparable sales increased 17.7 percent. E-commerce comparable sales grew by 44.8 percent and represented 17.1 percent of total net sales for the fourth quarter compared to 14.2 percent in the prior-year fourth quarter. Hibbett said it believes the increase in overall sales was positively impacted by continued strength in omnichannel adoption, improved new customer retention, availability of in-demand footwear, apparel and accessories, and incremental stimulus payments which collectively helped increase the revenue per transaction in the quarter.
Gross margin was 37.1 percent of net sales for the 13-week period ended January 30, 2021, compared with 31.5 percent of net sales for the 13-week period ended February 1, 2020. The approximate 560 basis point increase was driven by higher sell-through, a low promotional environment, and leverage of store occupancy expenses. These impacts were slightly offset by a higher mix of e-commerce sales, which carries a lower margin due to incremental shipping costs. Hibbett’s gross margin of 37.1 percent compared to a non-GAAP gross margin of 31.3 percent in the prior year.
Store operating, selling and administrative (SG&A) expenses were 26.8 percent of net sales for the 13-week period ended January 30, 2021, which was consistent with the 26.8 percent of net sales for the 13-week period ended February 1, 2020. In terms of dollar spend, employee compensation, advertising, variable expenses associated with higher sales volume, and asset impairments due to accelerating the closure of underperforming stores were the main drivers of the increase. City Gear acquisition and integration expenses were significantly lower in the current year quarter than in the same period last year. Excluding these acquisition and integration costs, comparable SG&A expenses on a non-GAAP basis increased approximately 140 basis points to 26.7 percent of net sales for the 13-week period ended January 30, 2021, from 25.3 percent of net sales for the 13-week period ended February 1, 2020. This increase was primarily driven by asset impairments, higher advertising costs and expenses associated with increased e-commerce activity.
Net income for the 13-week period ended January 30, 2021, was $23.9 million, or $1.39 per diluted share, compared with net income of $6.0 million, or $0.34 per diluted share, for the 13-week period ended February 1, 2020. On an adjusted basis, net income for the 13-week period ended January 30, 2021, was $24.1 million, or $1.40 per diluted share, compared with adjusted net income for the 13-week period ended February 1, 2020, of $9.0 million, or $0.51 per diluted share.
Earnings were at the high end of updated guidance provided on February 10. At that time, Hibbett said fourth-quarter GAAP and adjusted diluted EPS were expected in the range of $1.30 to $1.40 versus the previously targeted range of $1.00 to $1.10.
During the fourth quarter, it opened 10 new stores, rebranded four Hibbett stores to City Gear stores and closed 21 stores, bringing the store base to 1,067 in 35 states as of January 30, 2021. Store closures were composed of underperforming stores and rebrands.
Hibbett ended the fourth quarter of Fiscal 2021 with $209.3 million of available cash and cash equivalents on its unaudited condensed consolidated balance sheet. As of January 30, 2021, we had no debt outstanding and full availability under its $75.0 million secured credit facility.
Inventory at the end of the fourth quarter of Fiscal 2021 was $202.0 million, a 29.9 percent decrease compared to the prior-year fourth quarter. Strong brick and mortar and e-commerce demand during the quarter in addition to ongoing constraints in the supply chain were the main drivers of the inventory reduction.
Fiscal Year Result
Net sales for the 52-week period ended January 30, 2021, increased 19.9 percent to $1.42 billion compared with $1.18 billion for the 52-week period ended February 1, 2020. Comparable sales increased 22.2 percent. Brick & mortar comparable sales were up 13.3 percent, and e-commerce comparable sales increased 89.3 percent, representing 16.7 percent of total sales on a full-year basis compared to 10.4 percent of total sales in the comparable period last year.
Gross margin was 35.5 percent of net sales for the 52-week period ended January 30, 2021, compared with 32.4 percent for the 52-week period ended February 1, 2020. Excluding City Gear acquisition and integration costs incurred in both years, inventory reserve adjustments in the current year and strategic store alignment costs incurred in the prior year, adjusted gross margin was 35.8 percent of net sales for the 52-week period ended January 30, 2021, compared with 32.4 percent of net sales for the 52-week period ended February 1, 2020.
SG&A expenses, including goodwill impairment, were 26.5 percent of net sales for the 52-week period ended January 30, 2021, compared with 26.9 percent of net sales for the 52-week period ended February 1, 2020. Leverage generated from increased sales revenue was the primary driver of the modest decline. On a non-GAAP basis, comparable SG&A expenses were 23.7 percent of net sales for the 52-week period ended January 30, 2021, compared with 25.2 percent of net sales for the 52-week period ended February 1, 2020.
Net income for the 52-week period ended January 30, 2021, was $74.3 million, or $4.36 per diluted share, compared to $27.3 million, or $1.52 per diluted share, for the 52-week period ended February 1, 2020. On an adjusted basis, net income for the 52-week period ended January 30, 2021, was $104.3 million, or $6.12 per diluted share, compared to $41.9 million, or $2.33 per diluted share, for the 52-week period ended February 1, 2020.
During Fiscal 2021, Hibbett opened 16 new stores, rebranded 12 Hibbett stores to City Gear stores and closed 42 stores. Store closures were composed of underperforming stores and rebrands.
Fiscal 2022 Outlook
Although it is difficult to forecast future results due to the challenges posed by the ongoing COVID-19 pandemic and uncertainty regarding the business environment, further stimulus payments and potential labor and tax legislation, Hibbett is providing limited forward guidance regarding Hibbett’s outlook for Fiscal 2022, which ends January 29, 2022.
Hibbett said its projected financial results for Fiscal 2022 are influenced by many factors, several of which are noted below:
- Hibbett believes it has 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. Hibbett said it expects 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 Hibbett’s omnichannel business.
- Hibbett’s strong vendor relationships allow it to meet customer demand for fashion-inspired athletic footwear, apparel and accessories both in-store and online.
- Other initiatives, including net low double-digit store growth per brand, an improved in-store experience resulting from Hibbett’s 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, increases in corporate tax rates, and shifts in consumer spending habits.
Based on the considerations above, Hibbett forecast the following GAAP results for Fiscal 2022 in comparison to Fiscal 2021:
- Comparable sales ranging from negative low-single-digits to positive low-single-digits;
- Gross margin decline of approximately 130-to-170 basis points;
- SG&A declined as a percent of sales ranging from 5-to-45 basis points; and
- Diluted earnings per share in the range of $5.00 to $5.50, assuming an effective tax rate of approximately 25.0 percent and a weighted average diluted share count of approximately 17.0 million.
Additionally, non-GAAP results for Fiscal 2022 are not expected to materially differ from its GAAP results.
During Fiscal 2022, Hibbett plans to invest $45.0 million to $50.0 million of capital on attractive organic growth opportunities that Hibbett believes will lead to higher sales and on various infrastructure projects that will enhance its distribution and back-office efficiency. Hibbett believes that these growth opportunities will enhance the consumer experience in stores and online and modernize its technology and processes. In addition to its capital expenditure plans, Hibbett intends to opportunistically allocate capital to share repurchases and currently has approximately $136.3 million remaining under its share repurchase authorization.
Photo courtesy Hibbett Sports