Hibbett (HIBB) Stock Up As Q1 Earnings Beat, View Intact

Hibbett Sports Inc. (NASDAQ:HIBB) posted first-quarter fiscal 2017 earnings per share of $1.22, surpassing the Zacks Consensus Estimate of $1.20 and increasing 12% from $1.09 reported in the prior-year quarter. In response, the stock of this athletic specialty retailer closed at up nearly 7% on Friday.

Net sales climbed 4.6% year over year to $282.1 million, while comparable-store sales (comps) rose 1.1%. Sales gained from a low single-digit improvement in its apparel business and positive results in footwear. Growth in apparel indicated that the company’s merchandising initiatives are gaining traction. However, the company’s top line fell short of the Zacks Consensus Estimate of $285.4 million.

Hibbett’s gross profit rose 5.3% to $105 million, while gross margin expanded 20 basis points (bps) to 37.2%. The increase in margin was due to stringent management of markdowns and promotions, as well as the bringing down of inventories so as to match sales levels.

Further, operating income during fiscal first quarter increased 1.1% to $44.3 million. However, operating margin contracted 50 bps to 15.7%.

Other Financial Aspects

Hibbett ended the quarter with $73.4 million in cash and cash equivalents and no outstanding borrowings on its revolving credit facilities. Total shareholders’ investment, as of Apr 30, 2016, was $332.4 million.

During the fiscal first quarter, Hibbett repurchased 237,000 shares for $8.3 million. As of Apr 30, 2016, the company had nearly $292 million authorization available for repurchase under its $300 million program approved in Nov 2015.

Store Update

In fiscal first quarter, Hibbett introduced 17 stores, expanded one high-performing store and shut down 8 underperforming stores. As a result, it ended the quarter with 1,053 stores across 33 states.

Outlook

Looking ahead, the company expects to gain from its small market strategy as it continues to strengthen its presence across the country. The company targets to expand in the markets where it is needed and which offer increased potential for future growth.

Additionally, the company is piloting its new store system, which will enable it to view the actual in-store inventory across all its stores and accordingly convert more sales. The company believes this is the beginning of its digital strategy which will integrate its stores and digital presence with its customers.

Fiscal 2017 Guidance

Following a robust fiscal first quarter, this Zacks Rank #3 (Hold) company reiterated its guidance for fiscal 2017. The company now envisions earnings in the range of $2.90–$3.04 per share and comps growth in the low single-digit range. Also, the company expects the product gross margin rate for fiscal 2017 to remain flat with the fiscal 2016 level.

Stocks to Consider

Some better-ranked stocks in the same industry are Marinemax Inc. (NYSE:HZO) , with a Zacks Rank #1 (Strong Buy) as well as Cabela’s Inc. (NYSE:CAB) and ULTA Salon, Cosmetics & Fragrance Inc. (NASDAQ:ULTA) , each carrying a Zacks Rank #2 (Buy).