Hibbett Downgraded to Strong Sell - Analyst Blog

Zacks Investment Research downgraded Hibbett Sports Inc. HIBB to a Zacks Rank #5 (Strong Sell) on March 20, 2014.

Why the Downgrade?

Hibbett Sports has witnessed sharp downward estimate revisions after reporting dismal fourth-quarter 2014 results due to the difficult comparisons from the prior-year quarter given the additional week in the prior year. Shares of this sporting goods retailer have been on a downtrend since the beginning of 2014 and given its not-so-convincing forecast for fiscal 2015, it has more downside left.

On March 14, Hibbett reported fourth-quarter earnings per share of 64 cents, down 12.3% from the year-ago quarter earnings of 73 cents and short of the Zacks Consensus Estimate of 69 cents.

Net sales increased year over year by a marginal 0.2% to $217.8 million, while it came below the Zacks Consensus Estimate of $222 million. The downside was attributed to soft sales performance in January due to the impact of extremely chilly weather that forced store closures and weak sales from the college football championship game this year, offset by favorable holiday sales. Comparable-store sales (comps) for the quarter increased 1.7% on a comparable 13-week basis.

Moreover, the company's fiscal 2015 forecast pointed to higher costs for the year that is expected to impact margins. The company anticipates flat to slightly positive gross margin in the upcoming fiscal year. SG&A expense as a percentage of sales is expected to expand based on higher health care costs and marketing and IT costs. Earnings per share guidance are expected to range from $2.78–$2.96, with a projected comps growth in the low-to-mid single digit range.

The Zacks Consensus Estimate for 2015 decreased 4.3% to $2.92 per share over the last 7 days. For 2016 as well, most of the estimates were revised downward over the same time frame with the Zacks Consensus Estimate declining 2.6% to $3.35 per share.

Other Stocks to Consider

Not all stocks in the retail sector are performing as disappointingly as Hibbett. Other stocks worth considering include Barnes & Noble Inc. BKS and Iconix Brand Group Inc. ICON, both of which hold a Zacks Rank #1 (Strong Buy), and Skechers USA Inc. SKX, which carries a Zacks Rank #2 (Buy).