Hibbett Sports Inc. reported adjusted earnings of $50.0 million, or $2.95 per share, well above Wall Street’s consensus estimate of $1.15. Comparable sales catapulted 79.2 percent.

In an update on July 20, Hibbett projected that second-quarter same-store sales would increase in excess of 70 percent.

Mike Longo, president and CEO, stated, “Our business continued to generate significant momentum in a challenging business environment. Our resilient business model and dedicated team members delivered on our commitment of superior customer service with a compelling merchandise assortment. Our nearly 80 percent comparable sales results were driven by multiple factors, including pent-up consumer demand, temporary and permanent competitor store closures and government stimulus money. We believe that these circumstances yielded increased traffic to our stores and website and provided new customers the opportunity to experience our trademark service. As a result, we were able to deliver these exceptional results.”

Longo continued, “We believe our partnerships with our vendors have never been stronger. Our strategic focus on providing services to the underserved consumer is now more valued than ever by our partners.”

Finally, Longo added, “I am extremely proud of the Hibbett team and the strong results they were able to deliver. With the strength of our team and the changes to the competitive landscape, we are optimistic about our ability to continue to capitalize on existing and prospective opportunities in the second half of this fiscal year. We continue to take the necessary steps to safeguard our customers and team members while providing a positive return for our shareholders. The Hibbett and City Gear brands are well-positioned with our customers, and we are hopeful the momentum we have built is sustainable.”

Second Quarter Results
Net sales for the 13-week period ended August 1, 2020, increased 74.9 percent to $441.6 million compared with $252.4 million for the 13-week period ended August 3, 2019. Comparable sales increased by 79.2 percent. Brick & mortar comparable sales increased by 65.2 percent. E-commerce sales grew by 212.2 percent and represented 15.7 percent of total net sales for the second quarter compared to 8.6 percent in the prior-year second quarter. Hibbett said it believes the increase in overall sales was positively impacted by pent-up consumer demand, temporary and permanent store closures by our competitors and stimulus money which increased traffic to its stores and website.

Gross margin was 37.0 percent of net sales for the 13-week period ended August 1, 2020, compared with 30.3 percent of net sales for the 13-week period ended August 3, 2019. The approximate 670 basis point increase was driven by higher sell-through, a reduction in inventory valuation reserves 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. Excluding adjustments to its inventory valuation reserves in the current quarter, non-GAAP gross margin was 36.7 percent compared to a non-GAAP gross margin of 30.3 percent in the prior year.

Store operating, selling and administrative (SG&A) expenses were 22.6 percent of net sales for the 13-week period ended August 1, 2020, compared with 31.8 percent of net sales for the 13-week period ended August 3, 2019. This decrease was the result of leverage gained from strong sales performance. Excluding certain COVID-19 and City Gear acquisition and integration expenses, comparable SG&A expenses on a non-GAAP basis decreased approximately 920 basis points to 19.3 percent of net sales for the 13-week period ended August 1, 2020, from 28.5 percent of net sales for the 13-week period ended August 3, 2019. This decrease was also due to leverage from the significant sales increase.

Net income for the 13-week period ended August 1, 2020, was $40.4 million, or $2.38 per diluted share, compared with a net loss of $8.8 million, or $0.49 per share for the 13-week period ended August 3, 2019. On an adjusted basis, net income for the 13-week period ended August 1, 2020, was $50.0 million, or $2.95 per diluted share, compared with an adjusted net loss for the 13-week period ended August 3, 2019, of $2.4 million, or $0.13 per share.

For the quarter, Hibbett opened three stores, rebranded four Hibbett stores to City Gear stores and closed eight stores, bringing the store base to 1,077 in 35 states as of August 1, 2020. Store closures primarily included underperforming stores.

Hibbett ended the second quarter of Fiscal 2021 with $217.8 million of available cash and cash equivalents on the unaudited condensed consolidated balance sheet. As of August 1, 2020, Hibbett had no debt outstanding and full availability under its $75.0 million secured credit facility.

Inventory at the end of the second quarter of Fiscal 2021 was $182.0 million, a 32.7 percent decrease compared to the prior year second quarter. The strong brick & mortar and e-commerce demand during the quarter was the main driver of the inventory reduction.

Fiscal Year-to-Date Results
Net sales for the 26-week period ended August 1, 2020, increased 19.4 percent to $711.4 million compared with $595.7 million for the 26-week period ended August 3, 2019. Comparable sales increased by 22.2 percent. Brick & mortar comparable sales were up 8.9 percent and e-commerce sales increased 150.9 percent, representing 18.2 percent of total sales in the current year compared to 8.4 percent of total sales in the comparable period last year.

Gross margin was 33.4 percent of net sales for the 26-week period ended August 1, 2020, compared with 32.7 percent for the 26‑week period ended August 3, 2019. Excluding year-to-date inventory reserve adjustments in the current year and City Gear acquisition costs incurred in the first half of the prior year, gross margin was 33.9 percent of net sales for the 26‑week period ended August 1, 2020, compared with 32.9 percent of net sales for the 26-week period ended August 3, 2019.

SG&A expenses were 26.6 percent of net sales for the 26-week period ended August 1, 2020, compared with 25.9 percent of net sales for the 26-week period ended August 3, 2019. A large portion of this increase resulted from impacts related to the COVID-19 pandemic. This included first-quarter expenses for non-cash intangible asset impairments triggered by a significant decrease in the market valuation of the Company and payroll costs to support team members at closed stores. On a non-GAAP basis, comparable SG&A expenses were 21.0 percent of net sales for the 26-week period ended August 1, 2020, compared with 24.2 percent of net sales for the 26-week period ended August 3, 2019.

Net income for the 26-week period ended August 1, 2020, was $25.1 million, or $1.50 per diluted share, compared to $19.1 million, or $1.05 per diluted share, for the 26-week period ended August 3, 2019. On an adjusted basis, net income for the 26-week period ended August 1, 2020, was $55.3 million, or $3.30 per diluted share, compared to $27.3 million, or $1.50 per diluted share, for the 26-week period ended August 3, 2019.

Fiscal 2021 Outlook
Due to the ongoing uncertainty from COVID-19, the recent expiration of enhanced unemployment benefits, the timing and length of the back-to-school season and the potential for additional government stimulus measures, Hibbett said it is providing limited guidance for the second half of Fiscal 2021.

Hibbett said it expects financial results for the second half of Fiscal 2021 are influenced by several factors:

  • Hibbett said it believes the increase in traffic into its stores in the second quarter was driven by pent-up demand, temporary closures of competitors and government stimulus payments. A significant portion of this traffic was the result of new customers. Hibbett said it expects to retain many of these customers which will drive sales growth.
  • Permanent closures of competitors, which Hibbett believes is now beginning to take effect, will also drive sales volume and traffic increases as these competitors’ liquidation sales conclude.
  • Accelerating consumer adoption of e-commerce, which Hibbett believes is likely a permanent change, will continue to benefit its omnichannel business.
  • Hibbett said its strong vendor relationships allow us to meet customer demand for fashion inspired athletic footwear, apparel and accessories both in-store and online.

Based on the considerations above, we forecast the following GAAP results for the second half of Fiscal 2021 in comparison to the second half of Fiscal 2020:

  • Comparable sales increases in the mid-single-digits;
  • Gross margin improvement of approximately 50 to 70 basis points;
  • SG&A leverage of approximately 70 to 90 basis points;
  • Diluted earnings per share in the range of $0.85 to $1.00, assuming an effective tax rate of approximately 26.0 percent and a diluted share count of approximately 16.9 million; and
  • Additionally, non-GAAP adjustments in the second half of Fiscal 2021 are not expected to be material.

Sole School Initiative
The Sole School initiative has been launched and over 80 high schools will be involved. The program includes product and monetary donations and is closely linked to high school athletics. Given the current COVID-19 environment, Hibbett said it is partnering with the selected schools to develop a virtual engagement plan that will protect the safety of the communities. A pilot program will begin in the third quarter of Fiscal 2021 with a full rollout expected by the second quarter of Fiscal 2022 that will align with the spring sports season.

Photo courtesy Hibbett Sports