We have issued an updated research report on Hibbett Sports Inc. HIBB on Jun 1, 2015 following the company’s dismal performance in the first quarter of fiscal 2016.
After reporting three consecutive quarters of earnings beat, Hibbett succumbed to a negative earnings surprise in the first quarter. Quarterly earnings of $1.09 per share missed the Zacks Consensus Estimate by 4.4% but remained flat year over year. Top line of $269.8 million also fell short of the Zacks Consensus Estimate of $274.1 million. Results were affected by dismal comparable-store sales performance, particularly in February due to shift in the timing of tax refunds, inclement weather conditions and West Coast port unrest.
Moreover, this Zacks Rank #4 company is losing its market share to competitors that are entering its market with omni-channel business operations. Hibbett is currently in the early stage of developing an eCommerce platform, which we believe will take over one year to start functioning. Furthermore, the start-up costs related to this are likely to increase the company’s IT expenses, which will ultimately weigh on its bottom line.
We also remain apprehensive about Hibbett’s growth prospects due to the entry of its competitor and leading sporting goods store retailer, DICK’s Sporting Goods Inc. DKS, into smaller and mid-sized markets. This has not only increased competition for Hibbett, but also raised the likelihood of higher store occupancy costs and operating expenses. Further, the growth of its peers, such as Sport Chalet Inc. and The Sports Authority Inc. in the small store format could hurt Hibbett’s sales, affecting overall results.
However, the company’s debt-free balance sheet provides some cushion to the stock as it allows financial flexibility to take strategic endeavors such as expansion of store base without cannibalizing the existing ones.
Stocks That Warrant a Look
Better-ranked stocks in the same industry are Big 5 Sporting Goods Corp. BGFV, sporting a Zacks Rank #1 (Strong Buy), and Cabela’s Inc. CAB, holding a Zacks Rank #2 (Buy).
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