Hibbett Inc. reported flat earnings in the third quarter ended October 30 as sales grew 15.2 percent against challenging comparisons in the year-ago period. Same-store sales in the third quarter climbed 13.0 percent against a 37.4 percent jump a year ago. Hibbett again raised its full-year guidance as results topped Wall Street’s targets.

Earnings came in at $1.68, ahead of Wall Street’s consensus estimate of $1.62. Sales of $381.7 million topped Wall Street’s consensus target of $360.0 million.

Mike Longo, President and CEO, stated, “Our business continued to experience positive momentum during the third quarter. Our focused strategy of providing a compelling assortment of highly coveted merchandise coupled with superior customer service and a best-in-class omnichannel platform led to increased traffic, a higher average ticket, and a greater number of items purchased per transaction. The revenue growth and strong profitability we have generated over the past two years provides us with a solid base to continue expanding our reach and will contribute to achieving our long-term goals.”

Longo continued, “Despite ongoing challenges in the supply chain, our inventory position improved significantly during the third quarter. We are very well-positioned for the holiday selling season and our vendor partners continue to recognize and appreciate our differentiated business model and our ability to provide an outstanding customer experience in underserved communities.”

Finally, Longo concluded, “The dedication and passion from team members throughout the company connect us to the communities we serve and is a critical element in navigating the dynamic retail environment we operate in. We remain focused on execution and continue to believe investments in our employees, stores, the online experience, distribution capabilities, and our vendor relationships position the Hibbett and City Gear brands to thrive in this ever-changing competitive landscape.”

Third Quarter Results
Net sales for the 13-week period ended October 30, 2021, increased 15.2 percent to $381.7 million compared with $331.4 million for the 13-week period ended October 31, 2020, and reflected a two-year increase of 38.6 percent compared to the $275.5 million for the 13-week period ended November 2, 2019. Compared to the 13-week period ended October 31, 2020, comparable sales increased 13.0 percent, as brick and mortar comparable sales increased 11.6 percent and e-commerce sales increased 22.3 percent. E-commerce represented 14.0 percent of total net sales for the 13-week period ended October 30, 2021, compared to 13.2 percent in the 13-week period ended October 31, 2020. On a two-year basis, comparable sales increased 37.4 percent versus the 13-week period ended November 2, 2019. Brick and mortar comparable sales increased 31.6 percent and e-commerce sales grew 84.2 percent over this two-year period. As a reminder, Hibbett believes sales in the 13-week period ended October 31, 2020, were positively impacted by market disruption, improved new customer retention, continued strength in omnichannel adoption, the availability of in-demand products abd stimulus payments. This year, Hibbett said it believes it increased market share, improved customer engagement, and availability of in-demand products were the primary drivers of sales growth.

Gross margin was 36.3 percent of net sales for the 13-week period ended October 30, 2021, compared with 38.3 percent of net sales for the 13-week period ended October 31, 2020. The approximate 200 basis point decline was primarily driven by increased freight and transportation costs, which more than offset leverage from store occupancy expenses. Excluding adjustments to its non-cash inventory valuation reserves in the prior-year quarter, the gross margin of 36.3 percent for the 13-week period ended October 30, 2021 is comparable to the adjusted gross margin of 38.1 percent for the 13-week period ended October 31, 2020.

Store operating, selling and administrative (“SG&A”) expenses were 25.2 percent of net sales for the 13-week period ended October 30, 2021, compared with 26.1 percent of net sales for the 13-week period ended October 31, 2020. This decrease was primarily the result of leverage gained from the strong sales increase and improved labor management. Excluding certain City Gear acquisition and integration expenses that occurred last year, SG&A expenses of 25.2 percent of net sales for the 13-week period ended October 30, 2021, decreased by approximately 80 basis points from adjusted SG&A expenses of 26.0 percent of net sales for the 13-week period ended October 31, 2020.

Net income for the 13-week period ended October 30, 2021, was $25.2 million, or $1.68 per diluted share, compared with net income of $25.3 million, or $1.47 per diluted share, for the 13-week period ended October 31, 2020. As there were no adjustments in the third quarter of the current year, net income for the 13-week period ended October 30, 2021, was $25.2 million, or $1.68 per share, compared to adjusted net income for the 13-week period ended October 31, 2020, of $24.9 million, or $1.45 per diluted share.

For the 13-week period ended October 30, 2021, Hibbett opened seven new stores and closed one underperforming store, bringing the store base to 1,086 in 35 states.

Hibbett ended the third quarter of Fiscal 2022 with $29.7 million of available cash and cash equivalents on its unaudited condensed consolidated balance sheet. As of October 30, 2021, Hibbett had no debt outstanding and full availability under its $100.0 million secured credit facility.

Inventory at the end of the third quarter of Fiscal 2022 was $258.8 million, a 22.8 percent increase compared to the prior year’s third quarter.

Capital expenditures during the 13-week period ended October 30, 2021, were $23.1 million compared to $8.3 million in the 13-week period ended October 31, 2020. Current year capital expenditures were predominantly related to store initiatives including new store openings, relocations, expansions, remodels, and infrastructure upgrades.

During the 13-week period ended October 30, 2021, the company repurchased 1.4 million shares of common stock under the Stock Repurchase Program (“Program”) for a total expenditure of $117.8 million. The company also paid a quarterly dividend equal to $0.25 per outstanding common share that resulted in a cash outlay of $3.7 million.

Fiscal Year-to-Date Results
Net sales for the 39-week period ended October 30, 2021, increased 25.4 percent to $1.31 billion compared with $1.04 billion for the 39-week period ended October 31, 2020, and increased 50.1 percent over two years from $871.2 million in the 39-week period ended November 2, 2019. Comparable sales increased 24.1 percent versus the 39-week period ended October 31, 2020. Brick and mortar comparable sales were up 29.6 percent and were nominally offset by a decline in e-commerce sales of 2.9 percent. E-commerce sales represented 12.8 percent of total sales in the 39-week period ended October 30, 2021, compared to 16.6 percent of total sales in the 39-week period ended October 31, 2020. Over two years, comparable sales increased 51.9 percent versus the 39-week period ended November 2, 2019. Brick and mortar comparable sales increased 45.4 percent and e-commerce sales grew 111.8 percent over this two-year period.

Gross margin was 39.1 percent of net sales for the 39-week period ended October 30, 2021, compared with 35.0 percent for the 39-week period ended October 31, 2020. Excluding adjustments to its non-cash inventory valuation reserves in the 39-week period ended October 31, 2020, the current year gross margin of 39.1 percent is comparable to the adjusted gross margin of 35.3 percent in the prior year.

SG&A expenses, including goodwill impairment in the prior year, were 21.5 percent of net sales for the 39-week period ended October 30, 2021, compared with 26.4 percent of net sales for the 39-week period ended October 31, 2020. Excluding certain City Gear acquisition and integration expenses and pandemic related impairment and valuation costs that occurred in the 39-week period ended October 31, 2020, current year SG&A expenses of 21.5 percent of net sales reflected an improvement of approximately 110 basis points from adjusted SG&A expenses of 22.6 percent of net sales for the 39-week period ended October 31, 2020.

Net income for the 39-week period ended October 30, 2021, was $156.7 million, or $9.74 per diluted share, compared to $50.3 million, or $2.98 per diluted share, for the 39-week period ended October 31, 2020. As there were no adjustments to the net income in the current year, net income for the 39-week period ended October 30, 2021, was $156.7 million, or $9.74 per diluted share, compared to adjusted net income of $80.2 million, or $4.74 per diluted share for the 39-week period ended October 31, 2020.

Capital expenditures during the 39-week period ended October 30, 2021, were $43.9 million compared to $20.8 million in the 39-week period ended October 31, 2020. The majority of the current year increase is related to store initiatives including new store openings, relocations, expansions, remodels, and infrastructure upgrades.

During the 39-week period ended October 30, 2021, the Company repurchased 3.0 million shares of common stock for a total expenditure of $241.5 million, including 45,245 shares acquired from holders of restricted stock unit awards to satisfy tax withholding requirements of $3.2 million.

Fiscal 2022 Outlook
Given the strong performance Hibbett has experienced year-to-date, Hibbett said it is updating its financial guidance for the fourth quarter of Fiscal 2022, which ends January 29, 2022. Continued uncertainty in the business environment related to changes in consumer spending habits and ongoing supply chain disruptions makes forecasting future results challenging, however, we are providing limited forward guidance regarding the remainder of its current fiscal year.

Hibbett’s projected financial results for the fourth quarter of Fiscal 2022 are influenced by many factors, several of which are discussed below:

  • Hibbett attracted new customers to its store locations and to its 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 expects to continue to attract and retain new customers in the future.
  • Accelerating consumer adoption of e-commerce, which Hibbett believes is likely a permanent change, will continue to benefit its omnichannel business.
  • Hibbett’s strong vendor relationships allow it to meet customer demand for athletic-inspired fashion footwear, apparel and accessories both in-store and online.
  • Other initiatives, including net low double-digit unit store growth per brand, an improved in-store experience resulting from its store refresh program, increased speed to market via supply chain enhancements and an improved focus on its sales culture.

Specific items not factored into Hibbett’s outlook include further government stimulus payments, unannounced and/or unexpected market disruption, shifts in consumer spending habits, significant wage inflation, and other governmental actions that may impact the Federal minimum wage or corporate tax rates.

Based on the considerations above and its results year-to-date, Hibbett forecast the following GAAP results for the fourth quarter of Fiscal 2022:

  • Comparable sales versus the prior year are expected to be in the positive high single-digits, which is an upward revision from our previous guidance and implies full-year comp sales percentage growth in the positive high teens.
  • Gross margin is expected to be lower in the fourth quarter of Fiscal 2022 in relation to the fourth quarter of Fiscal 2021 but is expected to be favorable to both GAAP and adjusted Fiscal 2021 gross margin on a full-year basis, which is consistent with previous guidance.
  • SG&A is expected to decline as a percent of sales in the fourth quarter of Fiscal 2022 in comparison to the fourth quarter of Fiscal 2021 and is also anticipated to decline as a percent of sales in comparison to both GAAP and adjusted SG&A in Fiscal 2021 on a full-year basis, which is consistent with previous guidance.
  • Diluted earnings per share in the range of $1.85 to $2.05 implies full-year earnings per share in the range of $11.70 – $11.90, which is an upward revision from its previous guidance.
  • On a full-year basis, Hibbett expects an effective tax rate of approximately 24.0 percent and a weighted average diluted share count of approximately 15.7 million.

Non-GAAP results for the fourth quarter of Fiscal 2022 are not expected to materially differ from GAAP results.

During the third quarter of Fiscal 2022, Hibbett said it continued to evaluate attractive investment opportunities for deploying its capital. For the full year of Fiscal 2022, Hibbett reiterates its plan to invest approximately $70.0 million of capital on attractive organic growth opportunities that we believe will lead to higher sales in addition to various infrastructure projects that will enhance its distribution and back-office efficiency in future periods. Hibbett believes that these growth opportunities will enhance the consumer experience both in stores and online and modernize its technology and processes. In addition to its capital expenditure plans, Hibbett said it intends to opportunistically allocate capital to share repurchases and remain dedicated to returning capital to stockholders in the form of a regular quarterly dividend of $0.25 per share.

Photo courtesy Hibbett Sports