Sports gear retailer, Hibbett Sports Inc. (HIBB) plans to shift its Birmingham-based wholesaling and logistics facility to Alabaster, Alabama. As a first move toward this goal, the company has purchased 60 acres construction site next to the Shelby airport. The company plans to begin construction at the site in fall 2012, while it expects full-fledged operations at the facility latest by fall 2014.
The completion of the new distribution center is expected to double the size of Hibbett’s presently operating center in Birmingham. The new facility will be spread across a 360,000 square feet area, while the Birmingham center currently encloses only 180,000 square feet of space. Additionally, the new center will have the potential to be further expanded up to 500,000 square feet.
This plan of expanding the capacity of its wholesaling and logistics facility fully supports Hibbett’s ongoing store expansion program. The company expects this large distribution facility to enable it to grow its store count to over 2,000 stores. We note that the company’s present Birmingham facility has helped it to expand from 67 stores to about 835 stores through the end of the first quarter of 2012. Further, the new facility will aid the company’s continued growth in mid-sized and smaller markets, which is the company’s primary focus.
Hibbett's core strategy is to expand its foothold in small towns and counties with population sizes of 25,000 to 75,000, positioning it well to benefit from its strategic mix of branded as well as localized merchandise that suit the community’s interest. We believe this gives the company a competitive edge over larger rivals, such as Dick's Sporting Goods Inc. (DKS) and Big 5 Sporting Goods Corporation (BGFV).
In addition, Hibbett has a healthy balance sheet with no debt. This offers Hibbett the financial flexibility to open new stores and identify new market or location for future expansion.
Currently, Hibbett holds a Zacks #2 Rank, implying a short-term 'Buy' rating on the stock. We retain our long-term 'Outperform' recommendation on the stock.
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