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Category: Stock Market and Hibbett Sports
Date: 20 September 2019 Stock Price: $20.16 We take a look at the 2nd quarter earnings release of their 2020 fiscal year of Hibbett Sports the athletics inspired fashion retailer selling major brands such as Nike, Adidas and Under Armour
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About Hibbett Sports
Hibbett, headquartered in Birmingham, Alabama, is a leading athletic-inspired fashion retailer with more than 1,100 stores under the Hibbett Sports and City Gear banners, primarily located in small and mid-sized communities. Founded in 1945, Hibbett has a rich history of convenient locations, personalized customer service and access to coveted footwear, apparel and equipment from top brands like Nike, Jordan, Adidas, and Under Armour. Consumers can browse styles, find new releases, shop looks and make purchases online or in their nearest stor
Overview of Hibbett Sports' latest earnings report
The numbers we are interested in (for the quarter):
- Sales: $252.440 million (up from $211.123 million from the same quarter of the previous year)
- Sales increased by 19.4% over the last 12 months
- Cost of goods sold: $176.067 million (up from $144.772 million for the same quarter of the previous year)
- Cost of goods sold increased by 21.62% over the last 12 months
- Net loss: -$8.778 million (increased from a loss of -$1.222 million loss for the same quarter of the previous year)
- Diluted loss per share: -$0.49 (increased from a loss of -$0.06 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 17.906 million (down from 18.823 million for the same quarter of the previous year)
- Cash and cash equivalents: $97.790 million
- Cash and cash equivalents per share: $5.46
- Cash and cash equivalents makes up 27.1% of Hibbett Sports' market capital
- Cash and cash equivalents makes up 12.6% of Hibbett Sports' total assets
- Inventories: $270.563 million
- Inventories makes up 34.8% of Hibbett Sports' total assets
- Stockholders equity: $339.945 million
- Stockholders equity per share: $18.98
- Hibbett Sports restaurants is trading at 1.06 times its stockholders equity per share
Hibbett Sports' management commentary on the results and earnings guidance
BIRMINGHAM, Ala.--(BUSINESS WIRE)--Aug. 23, 2019-- Hibbett Sports, Inc. (NASDAQ/GS: HIBB), an athletic-inspired fashion retailer, today provided financial results for its second quarter ended August 3, 2019, and business updates.
Jeff Rosenthal, President and Chief Executive Officer, stated, “I am pleased with the second quarter results. We believe our strategic initiatives are taking hold as we recorded our third consecutive quarter of positive comparable sales. Looking ahead, we expect a solid finish to the back-to-school season as well as momentum from strong product offerings in the back half of the year. We are encouraged by City Gear’s early performance as they enter the second half with a strong inventory position along with the planned migration to the Hibbett digital platform. Based on the strength of the first half and our confidence in the second half, we have updated our annual guidance. As we move forward, we will continue to drive the business with our strategic focus on leading with sneakers and connecting toe-to-head concepts with active apparel and accessories.”
Second Quarter Results
Net sales for the 13-week period ended August 3, 2019, increased 19.6% to $252.4 million, including $42.0 million for City Gear, compared with $211.1 million for the 13-week period ended August 4, 2018. Comparable store sales increased 0.3% and will not include sales from City Gear until the fourth quarter of Fiscal 2020. E-commerce sales represented 8.6% of total sales for the second quarter. The increase in net sales was primarily attributable to the addition of City Gear. Footwear sales continued to drive the business along with positive sales in activewear and accessories connecting to footwear products.
Gross margin was 30.3% of net sales for the 13-week period ended August 3, 2019, compared with 31.4% for the 13-week period ended August 4, 2018. The 110 basis point decrease was principally due to the closure of 37 stores, which included full inventory liquidation of 32 stores and limited markdown activity which helped drive our clean inventory position.
Store operating, selling and administrative expenses were 31.8% of net sales for the 13-week period ended August 3, 2019, compared with 29.4% of net sales for the 13-week period ended August 4, 2018. The increase as a percent of net sales included a one-time charge related to the previously announced transition of the Company’s Chief Executive Officer, City Gear acquisition costs of $7.6 million and $0.9 million related to the Company’s accelerated store closure plan. The acquisition costs included a charge of $7.1 million for an increase in the estimated valuation of two contingent payments based on an update to City Gear’s projected achievement of defined EBITDA thresholds. Excluding these costs, comparable store operating, selling and administrative expenses improved 170 basis points to 27.7% of net sales for the 13‑week period ended August 3, 2019.
Net loss for the 13-week period ended August 3, 2019, was $8.8 million, or $0.49 per share, compared with net loss of $1.2 million, or $0.06 per share, for the 13-week period ended August 4, 2018. Excluding non-recurring costs, non-GAAP net loss for the 13-week period ended August 3, 2019, was $2.4 million, or $0.13 per share, including $0.09 for the one-time executive compensation costs related to the CEO’s transition.
For the quarter, Hibbett opened two new stores, rebranded two Hibbett stores to City Gear stores and closed 40 underperforming stores, bringing the store base to 1,108 in 35 states as of August 3, 2019. Store closures included Hibbett stores closed for rebranding. In addition, three high-performing stores were expanded.
Strategic Realignment – Accelerated Store Closure Plan
As the retail environment continues to evolve, the Company is focused on improving the productivity of the store base while continuing to grow its omni-channel business to serve customers where and when they want to shop. As previously reported, the Company is proceeding with the closing of approximately 95 Hibbett stores in Fiscal 2020, which is expected to result in non-recurring impairment and store closure charges in the range of $0.10 to $0.15 per diluted share in Fiscal 2020.
The image below shows the updated fiscal outlook for 2020 for Hibbett's.
Jeff Rosenthal, President and Chief Executive Officer, stated, “I am pleased with the second quarter results. We believe our strategic initiatives are taking hold as we recorded our third consecutive quarter of positive comparable sales. Looking ahead, we expect a solid finish to the back-to-school season as well as momentum from strong product offerings in the back half of the year. We are encouraged by City Gear’s early performance as they enter the second half with a strong inventory position along with the planned migration to the Hibbett digital platform. Based on the strength of the first half and our confidence in the second half, we have updated our annual guidance. As we move forward, we will continue to drive the business with our strategic focus on leading with sneakers and connecting toe-to-head concepts with active apparel and accessories.”
Second Quarter Results
Net sales for the 13-week period ended August 3, 2019, increased 19.6% to $252.4 million, including $42.0 million for City Gear, compared with $211.1 million for the 13-week period ended August 4, 2018. Comparable store sales increased 0.3% and will not include sales from City Gear until the fourth quarter of Fiscal 2020. E-commerce sales represented 8.6% of total sales for the second quarter. The increase in net sales was primarily attributable to the addition of City Gear. Footwear sales continued to drive the business along with positive sales in activewear and accessories connecting to footwear products.
Gross margin was 30.3% of net sales for the 13-week period ended August 3, 2019, compared with 31.4% for the 13-week period ended August 4, 2018. The 110 basis point decrease was principally due to the closure of 37 stores, which included full inventory liquidation of 32 stores and limited markdown activity which helped drive our clean inventory position.
Store operating, selling and administrative expenses were 31.8% of net sales for the 13-week period ended August 3, 2019, compared with 29.4% of net sales for the 13-week period ended August 4, 2018. The increase as a percent of net sales included a one-time charge related to the previously announced transition of the Company’s Chief Executive Officer, City Gear acquisition costs of $7.6 million and $0.9 million related to the Company’s accelerated store closure plan. The acquisition costs included a charge of $7.1 million for an increase in the estimated valuation of two contingent payments based on an update to City Gear’s projected achievement of defined EBITDA thresholds. Excluding these costs, comparable store operating, selling and administrative expenses improved 170 basis points to 27.7% of net sales for the 13‑week period ended August 3, 2019.
Net loss for the 13-week period ended August 3, 2019, was $8.8 million, or $0.49 per share, compared with net loss of $1.2 million, or $0.06 per share, for the 13-week period ended August 4, 2018. Excluding non-recurring costs, non-GAAP net loss for the 13-week period ended August 3, 2019, was $2.4 million, or $0.13 per share, including $0.09 for the one-time executive compensation costs related to the CEO’s transition.
For the quarter, Hibbett opened two new stores, rebranded two Hibbett stores to City Gear stores and closed 40 underperforming stores, bringing the store base to 1,108 in 35 states as of August 3, 2019. Store closures included Hibbett stores closed for rebranding. In addition, three high-performing stores were expanded.
Strategic Realignment – Accelerated Store Closure Plan
As the retail environment continues to evolve, the Company is focused on improving the productivity of the store base while continuing to grow its omni-channel business to serve customers where and when they want to shop. As previously reported, the Company is proceeding with the closing of approximately 95 Hibbett stores in Fiscal 2020, which is expected to result in non-recurring impairment and store closure charges in the range of $0.10 to $0.15 per diluted share in Fiscal 2020.
The image below shows the updated fiscal outlook for 2020 for Hibbett's.
Hibbett Sports (NASDAQ:HIBB) stock price history
The image below, obtained from Google, shows the stock price history of Hibbett Sports' (NASDAQ: HIBB) over the last 5 years. And it has not been a very good time for Hibbett stockholders. 5 years ago the stock of Hibbett was trading around $42.80 and its currently trading at $20.16. That's a strong decline of -52.8% over the last 5 years. The stock is at least trading at closer to its 52 week high than it is to its 52 week low, which to us is a clear indication that the short term momentum and sentiment towards Hibbett Sports is at least positive.
Hibbett Sports (NASDAQ: HIBB) latest stock valuation
So based on the earnings report of Hibbett Sports (NASDAQ:HIBB) and the latest earnings guidance provided what do we value Hibbett Sports (HIBB) stock at? It is very hard to value loss making companies and our standard fall back valuation method in the absence of positive earnings and/or cash flows we use stockholder equity per share as a base for valuation as this is the amount each stockholder will get if the group sold all assets, paid off all liabilities and distribute what is left to shareholders.
Based on this the group our target (full value) price for Hibbett Sports at $18.98 a stock. We therefore believe the stock of Hibbett Sports is overvalued
We usually suggest long term fundamental and value investors look to enter the stock at least 10% below our target price, which in this case is $18.98 Therefore we believe the a good entry point into the stock is below $17.08
Based on this the group our target (full value) price for Hibbett Sports at $18.98 a stock. We therefore believe the stock of Hibbett Sports is overvalued
We usually suggest long term fundamental and value investors look to enter the stock at least 10% below our target price, which in this case is $18.98 Therefore we believe the a good entry point into the stock is below $17.08