A Game-Changing Quarter For Hibbett Sports

Hibbett Sports Hits A Homerun

Hibbett Sports NASDAQ: HIBB is a post-pandemic play on retail with a lot going for it. Not only is the company supported by COVID-inspired social distancing and outdoor activities, but it is also supported by the reopening as well. The reopening has two Tailwinds; on the one hand, simply reopening the stores is attracting foot traffic while on the other hand, the restart of team sports activities is driving business as well. One of the company’s many attributes is its ability to manage inventory. The very fact that it had inventory to sell was a big reason why sales surged so much in the fiscal first quarter. 

Hibbett Sports Revenue Growth Accelerates

Hibbett Sports had such a great first quarter it's hard to know where to start. The salient point is the company reported $506.86 million in net revenue which is up 87.8% from last year and set a company record.  The revenue not only set a record but it beat the consensus by nearly 3000 basis points as well. Revenue strength was driven by both e-commerce and in-store sales. E-commerce sales grew a small 1% over the past year but maintained gains set in the first quarter of fiscal 2021. Brick-and-mortar comparable sales increased 113.5% driven by new customer acquisition, retention, the prior year's market disruption, and the availability of products.

Moving down the report, the details get even better. The company was able to leverage its gross margin to the tune of 1390 basis points. This is due to higher cell through no promotions and a slight shift away from e-commerce which has a lower margin. To be fair, the gross margin gains were offset by an increase in SG&A costs but not enough to cut into profitability. On the bottom line, the GAAP EPS of $5 beat the consensus by $2.56 and far outpaces the revenue gain.

Looking forward, the company is expecting the full year 2022 comp-store sales to be in the range of high single digits to low double digits. This assumes the possibility of 0% to negative YOY Revenue growth In the coming quarters and we are not surprised. The comp for the next quarter will be tough to beat, as will those in the back half of the year especially if the reopening tailwind begins to subside. Even so, this is good news for the stock and we think it will help drive share prices higher because sequential year-over-year growth should continue into 2023 and Beyond. 

“The robust demand we experienced during our first quarter in addition to the ongoing constraints in the supply chain limited our opportunity to build our inventory position during the quarter. However, we believe our ability to consistently deliver in-demand footwear, apparel, and accessories to underserved communities has strengthened our vendor partnerships, increased our loyalty program membership, and continues to attract new customers,” said CEO Mike Longo.

Hibbett Sports Increases Its Buyback Plan

We like our stocks to have a dividend but that doesn't mean they all need to have one. In the case of companies like Hibbett, the buyback plan is often enough. The company bought back about 2% of its shares during the last quarter and has plenty of money left in the buyback program. Company execs increased the buyback program by $500 million this quarter leaving $800 million unspent. That's worth nearly 60% of the float at current share prices. If there is anything that can get the price of a stock moving it is something like this.

The Technical Outlook: Hibbett Sports Has Reached A Peak

Shares of Hibbett Sports surged in pre-market trading and opened with a small gap up. Since then the price action has been decidedly bearish and driven the price back below the previous day's close. At this time it looks like profit-takers are in control and may drive the stock lower. If so, we would look for support in the range Of $80. That level is consistent with the 30-day moving average and should hold up price action in the near term. If not, the price action may fall back to $70. In either case, we would expect to see a bottom begin to form and for the stock to begin moving higher again later in the year. Whatever happens, we expect to see sell-offs met by buyers simply due to the buyback program, and for this stock to set a new all-time high by the end of the year.