Hibbett Sports said it expects same-store sales to catapult in excess of 70 percent in the second quarter ended August 1, boosted by pent-up demand, stimulus checks and temporary and permanent store closures from competitors.
Mike Longo, president and chief executive officer, stated, “I’m pleased to announce that Hibbett Sports’ sales results at this point in the quarter have been exceptional. Our resilient business model and dedicated team members are delivering on our commitment to superior customer service with a compelling merchandise assortment. We believe our sales have been positively impacted by multiple factors, including pent-up consumer demand, temporary and permanent store closures by our competitors, and stimulus money. These circumstances yielded increased traffic to our stores and website and the opportunity for new customers to experience our trademark service. We expect that we will be able to retain many of these customers in the future.”
Longo continued, “I am extremely proud of the Hibbett team. As a reminder, when COVID-19 struck, we decided to remain open where local authorities and our landlords deemed it prudent. We operated all stores with a focus on the health and safety of our team members and customers and continue to run our stores in a responsible manner. Throughout this challenging period, our strategic vendors have supported our business and made it possible to deliver the highest quality selection of brands to our consumers. We have a strong business model, talented team members and a resilient customer base. Our ability to react, adapt and execute successfully in a challenging business environment further reinforces the opportunities ahead of us.”
A Challenging Business Environment
Hibbett said the business environment has been, and continues to be, difficult on both a personal and professional level. Many have been affected by both COVID-19 and the renewed focus on important social issues. Hibbett said it is taking action to be part of the solution in its neighborhoods. The commitment includes:
- Continuing to be proactive in protecting the health and safety of its employees and customers and all locations are required to follow prescribed safety guidelines. For more information, go here.
- Hibbett recognizes the challenges facing society related to important social issues and is dedicated to making a difference in its communities through its Sole Schools program, an initiative that commits significant resources to improve the lives of future generations through multi-pronged youth outreach. This multi-million-dollar program supports selected high schools in communities where Hibbett’s stores are located. The company will provide more information on this program at its second-quarter conference call on August 28, 2020.
Performing At A High Level
Throughout the second quarter to date, the company has been able to navigate the rapidly changing retail landscape by leveraging omnichannel and distribution capabilities, gaining access to in-demand products, taking decisive action to maintain its supply chain, and demonstrating the ability to reopen stores that are fully staffed.
Second-quarter expectations and highlights include:
- Total comparable store sales for the quarter are forecasted to increase in excess of 70 percent versus the prior year. The brick & mortar comparable store sales are expected to increase approximately 60 percent while digital comparable sales are forecasted to increase approximately 200 percent;
- In spite of the challenging business environment, the store operations team has been able to reopen nearly all stores to the public;
- Hibbett said it expects that over 25 percent of its brick & mortar sales would be comprised of new customers and estimated that approximately 40 percent of its digital sales would also be attributed to new customers;
- The merchandise team has been working closely with its strategic vendors to manage inventory and make additional purchases to support the increased business. Even with the increased purchasing and improved velocity of the supply chain, inventory is currently forecasted at quarter-end to be well below prior-year levels; and
- The $50.0 million that was borrowed in the first quarter under the company’s credit facilities has been repaid. This amount was originally borrowed in March 2020 as a precautionary measure to provide increased liquidity and financial flexibility due to uncertainty in global markets driven by COVID-19. At no point did the company use any of these excess funds.
Other second-quarter considerations:
- Additional expenses are being incurred to provide employees and customers with a safe environment to work and shop;
- Strong sales performance, in combination with a challenging business environment, is anticipated to result in increased costs for employee compensation and annual incentive programs; and
- The improved financial outlook is expected to result in a significant increase in the second year earnout liability related to the City Gear purchase.
For the first half of the year, total comparable-store sales are forecasted to increase approximately 20 percent versus the prior year including an approximate 7 percent increase in brick & mortar comparable sales and an estimated 140 percent comparable sales growth in digital.
Fundamental Changes In The Marketplace
Hibbett said it believes its forecasted increase in overall sales for the second quarter and the first half of Fiscal 2021 is the result of a combination of factors including:
- Pent-up demand from deferred spending in March and April which Hibbett believes is more than likely complete;
- Stimulus payments from government programs that Hibbett believes will more than likely be complete by the end of the quarter;
- Temporary closures of competitors, which Hibbett believes is mostly complete as most competitors have reopened the stores they intended to temporarily close;
- Permanent closures of competitors that Hibbett believes is now beginning to take effect as these competitors’ liquidation sales conclude; and
- Accelerating consumer adoption of e-commerce that Hibbett believes is likely a permanent change that will benefit the omnichannel business.
The company believes these marketplace changes will provide favorable conditions likely to increase sales in the future.
Resilient Business Model
Hibbett said it believes that the Hibbett business model provides certain built-in advantages in this environment, including:
- the best-in-class omnichannel platform that delivers the product to the customer whenever and wherever they want it;
- nearly 1,100 points of distribution in neighborhoods in mid-tier population centers with only 20 percent of its stores located in enclosed malls; and
- as a small box retailer with fewer people concentrated in the stores at any given time.
Fiscal 2021 Outlook
Due to the uncertain impact on its business from COVID-19, the expiration of enhanced unemployment benefits, uncertainty surrounding the back-to-school season and the possibility of additional government stimulus measures, the company is not providing a full-year outlook at this time.
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