Once again, the robust performance of footwear and apparel sales along with operational efficiencies facilitated Hibbett Sports Inc. (HIBB) to deliver better-than-expected results for the third quarter ended October 29, 2011.
Hibbett’s third-quarter earnings of 59 cents per share outshined the Zacks Consensus Estimate of 51 cents and jumped 34.1% from the prior-year quarter earnings of 44 cents.
The company remains focused on mid-sized and smaller markets as well as strategic mix of branded and localized merchandise. It is geared toward increasing operating results while creating shareholders’ value.
Getting to the Numbers
Net sales in the quarter jumped 10.6% year over year to $185.2 million, reflecting a 7% increase in comparable store sales. The quarterly sales also surpassed the Zacks Consensus Estimate of $180 million. The increase in comparable store sales also marks its eighth consecutive quarterly growth primarily driven by strong performance of apparel and footwear businesses.
Despite 8.3% increase in cost of goods sold, distribution center and store occupancy costs in the quarter, gross profit jumped 14.8% year over year to $67.8 million. Gross margin expanded 135 basis points to 36.6% during the quarter.
Healthy gross margin coupled with improved merchandise mix drove a 24.3% increase in operating income during the quarter. The company reported an operating income of $25 million, compared with $20.1 million in the same period last year. Consequently, operating margin for the reported quarter improved 148 basis points to 13.5% from the prior-year quarter.
Other Financial Details
Hibbett ended the quarter with cash and cash equivalents of $53 million with no bank debt. The company has full accessibility under its $80.0 million unsecured credit facilities.
The company spent $25.4 million to buyback 698,880 shares in the quarter. The company still has approximately $154.8 million of total authorization remaining for future stock repurchases under its $250.0 million share repurchase program.
Stores Update
During the quarter, Hibbett opened 16 new stores and closed 3 underperforming stores, bringing the store base to 815 in 26 states. The company also expanded 4 high performing stores during the quarter.
For the fourth quarter of the current fiscal, the company expects to open 19 to 21 stores, while it will close 1 to 3 underperforming stores.
Moreover, Hibbett remains on track to open 51 to 53 new stores and expand 16 high performing stores in the current fiscal. The company also intends to close 16 to 18 underperforming stores to deliver increased operating margins.
Guidance Upped
Buoyed by better-than-expected results, management raised its fiscal 2012 earnings forecast. The company now expects earnings in the range of $2.05 to $2.11, up from its earlier forecast of $1.90 to $2.00 per share. The current Zacks Consensus Estimate for fiscal 2012 stood near the upper end of the management forecast at $2.09.
Management stated that it expects a mid single-digit increase in comparable store sales in the current fiscal.
Hibbett, which competes with Foot Locker Inc. (FL) and Wal-Mart Stores Inc. (WMT), currently, holds a Zacks #1 Rank, implying a short-term 'Strong Buy' rating on the stock. Besides, the company retains a long-term 'Outperform' recommendation on the stock.
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