Hibbett Sports (HIBB 17.69, -0.27, -1.50%), a retailer of athletic footwear,
apparel, and equipment, opened lower after the company reported disappointing
Q3 (Oct) results this morning. Retailers in general are having a tough time adapting
to online competition, but sporting goods stores are particularly susceptible,
as their merchandise tends to be well-suited for online purchases, particularly
from a customer’s perspective; merchandise selections may not be highly differentiated
between retailers and thus can be easily
price-checked and compared against competitors’ deals via the Internet.
This was the second rough quarter in a row for HIBB. The stock sold off in late August after running to 52-week highs on a large EPS miss for Q2 (Jul) and guide-downs for the full year. The size of the OctQ miss was not as large as the one prior, so investors can take a little solace in that. However, it was, as one would expect, not good to report back-to-back weak results like this.
Non-GAAP EPS came in at $0.14, which was slightly below market expectations, while revenue fell 8.8% year/year to $216.9 mln, which was generally in-line with analysts’ targets. The company lowered full year EPS guidance slightly to $1.55-1.65 from $1.57-1.75.
Same-store sales are always critical for retailers, as this metric filters out the impact of newly-added stores. In so doing, comparable sales may indicate changes in the underlying health of a business more clearly than total sales can; consequently, the figure is a closely watched metric. HIBB posted an OctQ comps figure of +0.1%, which was down from JulQ comps of +4.1%. Full year comp guidance was increased slightly to flat to +1% vs prior guidance of -1% to +1%.
On the positive side, e-commerce sales for HIBB increased 62.2% year/year and represented 8.8% of total sales for the quarter, up from 8.0% in JulQ. Like most sporting goods retailers, HIBB has been beefing up its online capabilities and is having some success. HIBB says that its e-commerce business continues to exceed expectations, and the company expects continued traction as it benefits from enhancements to its mobile app and its new Buy Online, Pick up in Store and Reserve Online capabilities.
Overall, HIBB continues to see good momentum in its branded apparel business, which helped offset softness in its licensed, equipment, and accessories businesses in the quarter. Footwear comps were relatively flat, although HIBB sees potential upside in Q4 (Jan) as the depth of its premium products continues to improve.
In sum, while performance this quarter was not as bad as the JulQ EPS miss, investors were hoping for better results in OctQ, perhaps most critically from comp sales performance. The bright spot from the JulQ report was its +4.1% comp result, so this quarter's basically flat result (+0.1%) was a bit disappointing.
Looking ahead, sporting goods retailers are likely to continue facing tough competition from online retailers, and not solely from traditional peers. Big box retailers like Wal-Mart and Target have aggressively expanded online capabilities and have rolled out delivery options. It's more difficult for specialty retailers like sporting goods stores to do that as Wal-Mart and Target focus on everyday items while sporting good purchases tend to be more intermittent. It'll be interesting to see how they adapt. The holiday season is expected to be quite promotional, but hopefully HIBB will perform well.
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