Hibbett Sports Inc. reported earnings in the first quarter slumped 25.1 percent as same-store sales decreased 4.9 percent. Earnings landed at the high end of guidance provided on April 27.

First Quarter Results
Net sales for the 13-week period ended April 29, 2017, decreased 2.3 percent to $275.7 million compared with $282.1 million for the 13-week period ended April 30, 2016. Comparable-store sales decreased 4.9 percent.

Gross profit was 35.6 percent of net sales for the 13-week period ended April 29, 2017, compared with 37.2 percent for the 13-week period ended April 30, 2016. The decrease was mainly due to 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 21.2 percent of net sales for the 13-week period ended April 29, 2017, compared with 19.9 percent of net sales for the 13-week period ended April 30, 2016. The increase was mainly due to de-leverage associated with lower comparable-store sales and continued investments in the company’s omni-channel initiative.

Net income for the 13-week period ended April 29, 2017, was $20.9 million compared with $27.9 million for the 13-week period ended April 30, 2016. Earnings per diluted share was 97 cents for the 13-week period ended April 29, 2017, compared with $1.22 for the 13-week period ended April 30, 2016.

On April 26, Hibbett Sports reported earnings would come in the range of 94 cents to 97 cents due to softer sales trends to start the year. Analysts’ estimates at the time was $1.15 on average. Comps were expected to fall between 4 to 5 percent. For the full year, Hibbett reduced its EPS guidance to a range of $2.35 to $2.55, down from $2.65 to $2.85 previously. The full-year guidance assumed additional markdown pressure going forward to liquidate aged inventory.

Jeff Rosenthal, president and chief executive officer, stated, “After a double-digit decline in comparable store sales in February, trends improved in March and April with comparable store sales in the positive low to mid-single-digit range. However, the sales shortfall in February was not fully offset, which led to a 4.9 percent decline in comparable store sales for the quarter. Footwear continued to perform well with comparable store sales in the positive low single-digit range, but apparel and equipment posted negative comparable store sales. Gross margin was also negatively affected due to markdowns taken to manage inventory, although this enabled us to reduce inventory to levels below last year. Given the softer sales environment, we were able to keep tight controls on expenses, which helped overall profitability.

“During the quarter, we implemented our store-to-home capability in all stores, and we are encouraged by the early results,” Rosenthal continued. “We expect to see increased benefits from this initiative going forward, as it gives our stores a great tool to improve sales and to enhance the customer experience. Additionally, we are excited about the continued progress on our e-commerce initiative and remain on track to launch this capability in the third quarter.”

For the quarter, Hibbett opened 13 new stores, expanded four high performing stores and closed nine underperforming stores, bringing the store base to 1,082 in 35 states as of April 29, 2017.

Liquidity and Stock Repurchases
Hibbett ended the first quarter of fiscal 2018 with $75.9 million of available cash and cash equivalents on the consolidated balance sheet, no bank debt outstanding and full availability under its $80.0 million unsecured credit facilities.

During the first quarter, the company repurchased 748,134 shares of common stock for a total expenditure of $22.3 million. Approximately $236.2 million of the total authorization remained for future stock repurchases as of April 29, 2017.

Fiscal 2018 Outlook
The company is updating its guidance for fiscal 2018 with the following changes:

  • Earnings per diluted share in the range of $2.35 to $2.55 (as reported in the recent business update), which compares with previous guidance of $2.65 to $2.85. The company earned $2.72 in the full year.
  • Comparable-store sales in the range of negative 1 percent to positive 1 percent, which compares with previous guidance of an increase in the low single-digit range.
  • A reduction in gross margin rate of 55-75 basis points, which compares with previous guidance of a relatively flat gross margin rate compared with fiscal 2017.

Photo courtesy Hibbett Sports