Hibbett Sports Inc. (HIBB) reported second-quarter earnings of 21 cents per share, beating the Zacks Consensus Estimate of 19 cents.
Earnings also came in well ahead of the prior-year earnings of 14 cents. The company has reported 8 consecutive quarters of earnings increases.
Quarterly Discussion
Net sales in the quarter were $153.1 million, up 9.5% from $139.8 million last year. Quarterly sales also beat the Zacks Consensus Estimate of $151.0 million.
The high single-digit growth in sales was primarily driven by an increase of 5.9% in comparable store sales. This is the company's seventh consecutive quarterly growth in comparable store sales, due primarily to better performances in the active wear and footwear businesses.
Cost of goods sold, distribution center and store occupancy costs in the quarter increased 7.8% to $102.5 million from the prior-year period. Store operating, selling and administrative expenses were $38.0 million, up 8.7% compared with the prior-year quarter.
The company reported an operating income of $9.4 million, reflecting a year-over-year increase of 44.5%. Consequently, operating margin for the reported quarter improved 150 basis points to 6.1% from the prior-year quarter. Improvement in operating margin reflects the company's improved merchandise mix implementation, cleaner inventories, low promotional expenses and continuous benefits from investments in systems.
Other Financial Details
Cash and cash equivalents were $65.2 million, slightly down from $66.0 million at the end of the prior-year quarter. The company had no bank debt at the end of the reported quarter and has full accessibility under its $80.0 million unsecured credit facilities.
The company spent $9.4 million to buy back 240,405 shares in the quarter. The company still has almost $180.2 million of total authorization remaining for future stock repurchases under its $250.0 million share repurchase program.
Store Update
Hibbett opened 8 new stores and closed 5 underperforming stores during the second quarter, bringing the store base to 802 in 26 states. The company also expanded 5 high performing stores during the quarter.
Full Year Guidance
Management now expects a mid single-digit increase in comparable store sales for the current fiscal year, instead of low to mid single-digit increase forecasted earlier. Accordingly, management has increased its earnings guidance to between $1.90 and $2.00 a share from $1.80 to $1.95.
Hibbett intends to open 50 to 55 new stores and expand 15 high performing stores in the current fiscal year. The company also intends to close 10 to 15 underperforming stores to deliver increased operating margins.
Hibbett remains focused on mid-sized and smaller markets as well as a strategic mix of branded and localized merchandise. It is geared toward increasing operating results while creating shareholder value.
Hibbett, which competes with Food Locker Inc. (FL) and Wal-Mart Stores Inc. (WMT), currently, holds a Zacks #2 Rank, implying a short-term 'Buy' rating on the stock. In addition, the company retains a long-term 'Outperform' recommendation.
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