Hibbett (HIBB) Stock Continues To Decline: Here's Why

Sporting goods company, Hibbett Sports Inc. (NASDAQ:HIBB) seems to be losing sheen due to back-to-back dismal sales performances. The company’s surprise history reveals that it has lagged the sales estimates in eight out of the last nine quarters. This probably has weighed tremendously on the company’s stock performance.

Evidently, shares of Hibbett have declined 39.5% year to date, while the Zacks categorized Retail – Miscellaneous industry has dipped 3.4%. Apart from the dismal sales trend, the year–over-year decline in first-quarter fiscal 2018 earnings and a tepid outlook for fiscal 2018 also led to the recent fall in share price.

Further, this Zacks Rank #4 (Sell) company’s estimates have declined in the last 30 days. The Zacks Consensus Estimate for fiscal 2018 fell by 5 cents to $2.41 per share while estimate for fiscal 2019 declined by 11 cents to $2.57 per share. Further, the current Zacks Consensus Estimate of 16 cents per share for second-quarter fiscal 2018 reflects 46.4% decline from the prior-year quarter.

More on the Slump

In first-quarter fiscal 2018, both the top line and bottom line declined year over year, with sales falling short of the Zacks Consensus Estimate. Further, comps were a letdown, marred by sluggish traffic and softness across apparel and equipment categories. While trends improved in March and April, the dent in February was too big to be neutralized. Following the dismal quarter, management cut its comps and gross margin view for fiscal 2018, alongside reiterating its recently downgraded earnings view.

The company now expects comps growth to range from negative 1% to increase 1%, and it expects gross margin to contract 55–75 bps. Finally, management envisions earnings to range from $2.35–$2.55 per share, down from its initial forecast of $2.65–$2.85 per share.

Unfortunately, this slump comes at a time when the sporting goods retail industry is gaining from competitive rationalization due to the recent liquidation of Sports Authority and Sports Chalet. While rivals DICK’S Sporting Goods Inc. (NYSE:DKS) and Big 5 Sporting Goods Inc. (NASDAQ:BGFV) are benefiting from increased sales owing to the closing of these competitor stores, we observe that Hibbett’s top-line does not largely reflect these gains.

Coming back to Hibbett, its consumer driven business remains prone to unstable economic conditions. Further, the company is exposed to seasonal risks as the seasonal nature of the company’s business generally attracts stronger sales in the spring and holiday seasons.

Is There a Ray of Hope?

However, we laud the company’s strategic growth initiatives, which are expected to boost the top line from fiscal 2018 onward. Among the various initiatives, the company implemented store-to-home capability in first-quarter fiscal 2018, which was very well-received. The company also introduced a fresh loyalty program in the quarter, to improve customers’ loyalty towards its brand.

Moreover, Hibbett is on track to launch eCommerce site in the third quarter, highlighting its omni-channel efforts. Additionally, its healthy financial status remains noteworthy.

Bottom Line

While the company’s growth initiatives are definitely inspiring, we would like to see more pronounced growth in its top line before we become optimistic on this sporting goods retailer.

Meanwhile, investors may consider a better-ranked stock in the same industry, Build-A-Bear Workshop Inc. (NYSE:BBW) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Build-A-Bear Workshop has a long-term EPS growth rate of 22.5%. Further, the company has to its credit a spectacular earnings surprise history with an average beat of 67.5% recorded in the trailing four quarters.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>