Hibbett (HIBB): Will Growth Plans Help Counter Competition?

It’s time you take a look at Hibbett Sports, Inc. (NASDAQ:HIBB) , as the company recently delivered strong first-quarter fiscal 2017 results. Also, the company boasts a solid earnings history, while it has been gaining from store expansion and inventory management strategies as well as a healthy financial status. Year to date, the company’s shares have jumped 15.4%.

The fiscal first quarter marked Hibbett’s third straight quarter of an earnings beat, with the bottom line gaining from solid sales, improved margins and lower costs, along with continued gains from its merchandise initiatives. With this, the company has delivered an average positive earnings surprise of 2.96% in the trailing four quarters.

Further, the top line was driven by an improvement in the apparel business and an encouraging performance in the footwear business. The company reiterated its fiscal 2017 guidance, anticipating continued growth in comparable sales as well as better margins driven by its store and inventory management initiatives. We believe Hibbett’s impressive surprise history, along with its fiscal 2017 guidance, is an indication of its solid growth potential.

Hibbett also boasted a debt-free balance sheet with no outstanding borrowings on its revolving credit facilities, as of Apr 30, 2016. This provides the company with the financial flexibility to drive growth. The company’s ability to generate a strong operating cash flow allows it to execute long-term strategies such as store expansion, enhancing product and brand offerings, returning value to shareholders, and building operational infrastructure.

Moving to its growth strategies, Hibbett’s store expansion program seems to be on track. Going ahead, the company expects to gain from its small market strategy as it continues to strengthen its presence across the country. It targets expansion in markets where there is demand and which offer bright prospects.

Additionally, the company’s new store system, which will enable it to view the actual in-store inventory across all its stores, is likely to translate into incremental sales. The company believes this is the beginning of its digital strategy, through which it will integrate its stores and digital presence with its customers.

While these factors bode well, Hibbett seems to be losing its market share to competitors that are entering its market with omni-channel business operations. Also, seasonality of the company’s business exposes it to significant risks, if the peak seasons fail to deliver.

Nonetheless, with strategic efforts underway and robust growth prospects, we’d prefer to wait and see if Hibbett can keep up its momentum.

Zacks Rank & Key Picks

Hibbett currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include Cabela's Incorporated (NYSE:CAB) , Marinemax Inc. (NYSE:HZO) and ULTA Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) , each carrying a Zacks Rank #2 (Buy).

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