Athletic merchandise retailer Hibbett Sports (NASDAQ: HIBB)
stock has recovered back to pre-covid-19 levels seen in February 2020 before the pandemic sell-off collapsed the S&P 500 index (NYSEARCA: SPY)
benchmark index by (-34%) before starting its recovery in late March 2020. While isolation mandates have been lifted, the second wave of COVID-19 cases is causing hotspots to stall restarts and implement potential rollbacks pertaining to curb the further spread. Much anticipation for the start of fall and winter sports leagues has been the underlying force driving up Hibbett and peers. The Company recently reported same-store sales (SSS) recovery back to 70% of year-over-year (YoY) levels prompting a 24% price gap. Investors should consider unwinding positions into the rallies as the expectations bar gets set too high especially in light of the surging COVID-19 cases that may stifle or rollback restarts.
Q1 FY 2020 Earnings Release
On May 26, 2020, Hibbett released its first-quarter fiscal 2020 results for the quarter ending April 2020. The Company reported earnings of $0.31 per share versus $0.43 per share consensus analyst estimates, missing by (-$0.12) per share. Revenues beat analyst estimates coming in at $269.8 million versus $211.45 million, but still dropped (-21.4%) year-over-year (YoY). Comparable SSS dropped (-19.5%) YoY however online sales surged 110% YoY climbing to 22.3% of total revenues. The sharp drop comps were due to store closures stemming for government stay-at-home mandates implemented in March 2020. Malls and landlords proceeded to shutdown properties to adhere to local mandates. The Company started to reopen stores near the end of April 2020.
July 2020 Company Update
Hibbett provided an optimistic business operations update on July 20, 2020. The Company noted the recovery to over 70% of YoY Q2 revenues thanks to the pent-up demand from the shutdowns. It's brick and mortar stores SSS are expected to increase 60% which e-commerce sales are tracking at over 200% YoY. The Company noted that 25% of retail store sales and 40% of digital sales were attributed to new customers, indicating a growing market share. Hibbett also repaid the $50 million it borrowed from its revolver in March 2020, since the funds weren’t used or needed. Shares gapped over 20% the following morning on the unexpected optimism heading forward which also triggered gaps on its peers including Dick’s Sporting Goods (NYSE: DKS) and Foot Locker (NYSE: FL). Unfortunately, this also triggered a sell-the-news reaction.
Second Wave COVID-19 Uncertainties
While all stay-at-home mandates have been lifted across the U.S., the alarming rate of new cases is causing concerns relating to the stifling of restarts and the potential for rollbacks. The latest hotspots Florida, California, Alabama and Texas (FCAT) are being closely monitored. Hibbett relies heavily on professional sports leagues to commence their seasons to compel fans to purchase gear. Major League Baseball started its abbreviated season in mid-July but has already delaying games due to the spread of COVID-19 among players and coaches. This puts other sports events in danger especially with football season around the corner. The keyword here is contagion and protecting investments against the further cancellations of sports that can impact Hibbett. While the Company was able to offset brick and mortar sales drops by migrating new and existing customers to digital ordering, it still represents under 25% of total sales. A rollback of shopping centers and mall closures will negatively impact Hibbett SSS placing control in the hands of the landlords. Investors may want to consider using the uptrends to wind down positions to offset future uncertainties and a highly set performance bar moving forward.
HIBB Price Trajectories
Using the rifle charts on the monthly and weekly time frames provides a broader view of the landscape for HIBB stock. The weekly rifle chart formed a market structure low (MSL) buy above $11.34 and a daily MSL above $17.06. The monthly stochastic is attempting to cross up while holding the 15-period moving average (MA) at the $20.89 Fibonacci (fib) level. The weekly stochastic has made full oscillations from the 20-band mini pup to peak out at the 95-band. While this doesn’t necessarily mean the top is put it, the key concern is if the stochastic fall back under the 80-band stochastic. The weekly 5-period MA is still rising at $23.44 support. The July 20th, 2020, Company update gapped the stock up towards the $28.24 before the sell-the-news reaction pulled the stock back to the weekly 5-period MA. Investors looking to wind down positions should consider using bounces off that 5-period MA to trim upside trajectories at $25.24 fib, $27.43 stinky 2.50s zone, $28.24 fib and $29.84. If the weekly stochastic does break the 80-band, then $20.89 and $19.68 overlapping fibs are good liquidity support levels for stops.
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