Hibbett (HIBB) Raises Outlook As Q2 Earnings Top Estimates

Keeping its positive earnings streak alive for the fourth straight quarter, Hibbett Sports Inc. (NASDAQ:HIBB) posted impressive second-quarter fiscal 2017 results. Its earnings per share of 29 cents jumped 3.6% from both, the Zacks Consensus Estimate and the year-ago figure.

Net sales advanced 3.9% year over year to $206.9 million, while comparable-store sales (comps) inched up 0.8%. Sales mainly gained from the continued strength noted in the company’s footwear business, which in turn was fuelled by varied assortments, better allocation and strong stock levels. However, the company’s top line fell short of the Zacks Consensus Estimate of $210.1 million.

Hibbett’s gross profit rose 4.7% to $68.3 million, while gross margin expanded 30 basis points (bps) to 33%. The increase in margin was due to robust merchandise margins, which was backed by enhanced systems and efficient management of promotional activities.

However, operating income during fiscal second quarter declined 5.6% to $10.1 million, with the operating margin contracting 50 bps to 4.9%, mainly due to higher store operating, selling and administrative expenses. The escalated expenses stemmed from incremental costs associated with the company’s omnichannel initiatives, coupled with soft comps.

Other Financial Aspects

Hibbett ended the quarter with $45.9 million in cash and cash equivalents and no outstanding bank debt. Total shareholders’ investment, as of Jul 30, 2016, was $318.7 million.

During the fiscal second quarter, Hibbett spent $5.9 million as capital expenditure and repurchased 620,455 shares for $21.4 million. As of Jul 30, 2016, the company had nearly $271.2 million authorization available for repurchase under its $300 million program approved in Nov 2015.

Store Update

In the fiscal second quarter, Hibbett introduced 14 stores, expanded 1 high-performing store and shut down 8 underperforming ones. As a result, it ended the quarter with 1,059 stores across 33 states.

Outlook

Management remains optimistic given the company’s overall quarterly performance, and the progress of its strategic initiatives. These factors along with robust product assortments, makes the company confident about the back-to-school selling season.

Taking into account all these factors and a solid first half, this Zacks Rank #2 (Buy) company raised its earnings guidance for fiscal 2017. The company now envisions earnings in the range of $2.93–$3.02 per share, up from its previous guidance of $2.90–$3.04. Comps growth is still expected in the low single-digit range. Also, the company anticipates the merchandise margin rate for fiscal 2017 to range from flat to slightly positive, compared with a relatively flat projection made earlier.

Other Stocks to Consider

Other well-ranked stocks in the same industry include Barnes & Noble, Inc. (NYSE:BKS) , Big 5 Sporting Goods Corp. (NASDAQ:BGFV) and Five Below, Inc. (NASDAQ:FIVE) , each carrying the same Zacks Rank as Hibbett.

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