Hibbett Sports Inc. reported operating earnings slid 16 percent in the first quarter as comps dipped 0.3 percent and both margins and the chain’s expense rate eroded. Hibbett said results exceeded the company’s internal plan and gross margin improvement was seen in April.
The retailer maintained its guidance for the year.
First Quarter Results
Net sales for the 13-week period ended May 5, 2018, decreased 0.4 percent to $274.7 million compared with $275.7 million for the 13-week period ended April 29, 2017. Comparable store sales decreased 0.3 percent. E-commerce sales represented 7.0 percent of total sales for the first quarter.
Gross margin was 35.2 percent of net sales for the 13-week period ended May 5, 2018, compared with 35.6 percent for the 13-week period ended April 29, 2017. The decline was mainly due to increased sales of clearance merchandise and freight associated with e-commerce sales. At the end of the first quarter of Fiscal 2019, aged inventory levels were significantly improved compared with the same period last year.
Store operating, selling and administrative expenses were 22.5 percent of net sales for the 13-week period ended May 5, 2018, compared with 21.2 percent of net sales for the 13-week period ended April 29, 2017. The increase was mainly due to reinvestment of tax reform savings to benefit the company’s team members, additional marketing initiatives to drive e-commerce sales and investments made to launch the new mobile app.
Operating income declined 16.1 percent to $28.6 million from $34.2 million.
Net earnings benefited from a reduction in the provision for income taxes to $7.1 million from $13.2 million in the same period a year ago.
Net income for the 13-week period ended May 5, 2018, was $21.5 million compared with net income of $20.9 million for the 13-week period ended April 29, 2017. Earnings per diluted share were $1.12 for the 13-week period ended May 5, 2018, compared with earnings per diluted share of 97 cents for the 13-week period ended April 29, 2017. Results were short of Wall Street’s consensus estimate of $1.15.
Jeff Rosenthal, president and chief executive officer, stated, “Overall we were pleased with our results, as we exceeded our internal plan and experienced gross margin improvement in April. Branded apparel was especially strong during the quarter with comparable store sales in the high single-digit range, while footwear and cleats were positive as well. E-commerce sales continued to perform above expectations and represented approximately 7 percent of total sales for the quarter. We are also very encouraged with the early results of our new mobile app and believe this will be a great tool for our highly mobile customer. Additionally, we continue to make good progress on our Buy Online, Pick up in Store and Reserve in Store capabilities, and plan to launch this functionality ahead of the holiday season. As we start the second quarter, we believe we are well-positioned with fresh assortments and easier comparisons as we prepare for the back-to-school season.”
For the quarter, Hibbett opened seven new stores, expanded four high-performing stores and closed 18 underperforming stores, bringing the store base to 1,068 in 35 states as of May 5, 2018.
Liquidity and Stock Repurchases
Hibbett ended the first quarter of Fiscal 2019 with $115.8 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 first quarter, the company repurchased 40,299 shares of common stock for a total expenditure of $0.9 million. Approximately $203.6 million remained authorized for future stock repurchases as of May 5, 2018.
Fiscal 2019 Outlook
The company is maintaining its guidance for Fiscal 2019, with earnings per diluted share in the range of $1.65 to $1.95.