Here's Why Investors Should Add Hibbett to Their Portfolio

Hibbett Sports, Inc. HIBB appears to be a promising bet at the moment, riding on strong earnings growth, backed by omni-channel capabilities, loyalty program and store-rationalization efforts along with a positive fiscal view. Notably, the Zacks Rank #1 (Strong Buy) company has gained 70.5% in the past three months, outperforming the industry and the Retail-Wholesale sector’s growth of 4.7% and 4.4%, respectively.

The estimate revision trend for the current fiscal year indicates that the momentum is likely to continue. In the past seven days, the Zacks Consensus Estimate for the company’s earnings per share has moved up by 9.9% to $2.45. This along with a long-term earnings growth rate of 12.2% and a VGM Score of A makes Hibbett well-positioned to attain new highs.

Factors Narrating Hibbett’s Growth Story

Hibbett is progressing well with its omni-channel efforts and expansion of loyalty program.  In the third quarter of fiscal 2020, the company integrated City Gear’s online business into Hibbett’s digital portal. Additionally, it revamped its website and apps, added flexible payment options for customers, and launched same-day delivery in many markets. In the fiscal third quarter, its digital sales accounted for 10.5% of the total sales and digital comps improved 52%, driven by these actions.

Moreover, the company enhanced the omni-channel experience for customers, with six ways to shop. These include physical shopping at stores, traditional e-commerce with home delivery, buy online and pick-up in store, reserve online and pick-up in store, same-day delivery, and using the app process to win the right to purchase coveted launch shoes. Currently, it is on track to launch the buy online ship to store capability by the first half of the next year. 

These apart, Hibbett remains focused on expanding its loyalty program to increase customer base. In this regard, loyalty enrollments have increased 68% in a year.

Further, the company witnessed the fourth consecutive quarter of positive comparable store sales (comps) in third-quarter fiscal 2020, wherein the overall comps increased 10.7%. Strong performance in brick-and-mortar and e-commerce businesses primarily aided comps. Also, gains from a delayed back-to-school period, innovative launches and early demand for fall apparel led to the upside. Footwear rose in the mid-teens, recording the ninth successive quarter of positive comps. The company witnessed double-digit growth in men's, women's and kids’ footwear, driven by robust launch calendar as well as strength in the non-launch business.

Q3 Results & FY20 View

The company boasts a robust earnings trend, which continued in third-quarter fiscal 2020. In the quarter, the top and bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year. Results were driven by solid contributions from the City Gear business as well as strong in-store and online sales. Encouragingly, management raised its guidance for the fiscal year.

The company now anticipates comps growth of 4-6% compared with 1-2% rise mentioned earlier. Excluding non-recurring costs, it envisions adjusted earnings of $2.30-$2.50 per share, up from $2.15-$2.25 mentioned earlier. Notably, the company earned $1.77 in fiscal 2019. 

It expects adjusted gross margin between a 10-bps decline and a 10-bps increase compared with a 40-50 bps decline mentioned earlier. Furthermore, it anticipates SG&A expenses to decline 60-80 bps on an adjusted basis compared with a decline of 40-60 bps mentioned earlier.

Wrapping Up

All said, we are optimistic that Hibbett’s growth plans will sustain the stellar show.

Looking for Other Solid Retail Picks? Check These

Target Corp. TGT has a long-term earnings growth of 7.6%. It currently flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

DICK’S Sporting Goods DKS has a long-term earnings growth of 6% and a Zacks Rank #2 (Buy). 

The Michaels Companies MIK has a long-term earnings growth of 5.4% and a Zacks Rank #2.

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