Hibbett Sports Stock Set Up To Score On The Rebound

Another Wave Of Growth For Hibbett Sports

Sporting goods names like Hibbett Sports, Inc (NASDAQ:HIBB) have been on fire for the last year. The wave of stay-at-home, play-at-home sentiment and socially distanced activity was a game-changer for more names than one. Now, with the pandemic closer to its end than its beginning the question is will these trends be sticky? Will people stick with these new outdoor activities? We think they will, at least for the most part, but there is something else to consider as well. The pandemic drove a shift to socially-distanced activity, what will the reopening do? We think the reopening is going to drive high demand for all those sporting activities that aren’t socially distanced and that will drive the second wave of game-changing growth for these stocks.

A Mixed Quarter For Hibbett Sports, Inc

Hibbett Sports, Inc had a great quarter that may seem mixed but only in comparison to the analyst’s estimates. The $376.83 million in revenue is 42 basis points shy of the consensus but an acceleration from the fiscal 3rd quarter and up 20.4% YOY. The revenue strength was driven by both brick&mortar and eCommerce sales which gained 17.7% and 44.86% respectively on a comp basis. In both cases, sales were driven by an increase in tickets and ticket averages that is expected to hold steady. Not only has the company increased its sales but it has also increased its market penetration and taken market share from other operators. Notably, the company’s eCommerce sales came in at 17.7% of the net which is up 300 basis points from last year.

Moving down the report, the company saw a marked 560 basis point improvement in the margins. Margins were aided by higher-sell-through (inventory is down more than 20% YOY), a low to no promotional environment, and leveraging costs due to volume. This improvement led to GAAP and adjusted EPS above consensus but only barely. The $1.39 in GAAP and $1.40 in adjusted earnings both beat by $0.03 and this is all with fewer stores. The company has been opening new stores, rebranding old stores, and closing non-performers with a net effect of -7 locations this quarter.

The guidance for 2021 is a bit mixed too. The company is expecting comps to be flattish in a range of negative low-single-digits to positive low-single-digits and EPS in the range of $5.00 to $5.50. The EPS is expecting a modest decline from the 2020 period but there is a mitigating factor in the 2nd quarter results. The 2nd quarter EPS of $2.95 came on nearly $450 million in revenue, by far the company’s largest take on record and all because of the pandemic and stimulus money. To put it into perspective, the 2Q results are more than double the 3rd and 4th quarter results each and both would be record-setting if not for the 2nd quarter.

Hibbett Is A Value, But There’s A Catch

Hibbett Sports, Inc is a value compared to the broader market although its closest peers are all trading in line with Hibbett’s 11X earnings. The thing that makes Hibbett less attractive is that it doesn’t pay a dividend and competitors like Footlocker and Weyco Group do.

Technically speaking, shares of Hibbett Sports, Inc look ready to spring higher and retest the all-time high. The all-time high is near $70 and could be reached within the next few weeks. The catch is that resistance appears to be present at the short-term moving average. If it is able to keep the stock price from moving higher we might see this one stage a deeper correction. In that scenario, a move to restest $55 is likely, a move below $55 to the $50 range is possible.