Updated Research Report on Hibbett - Analyst Blog

On Jun 19, 2014, we issued an updated research report on Hibbett Sports, Inc. HIBB after the company's impressive first-quarter fiscal 2015 results that reflected strong top and bottom line growth, followed by an upbeat guidance for fiscal 2015.

The sporting goods retailer's earnings of $1.09 per share witnessed a 9% rise from the year-ago comparable quarter's earnings of $1.00 per share primarily driven by robust top line growth, partially offset by higher cost of goods sold.

Net sales of the company increased 9.1% year over year to $261.9 million and came marginally ahead of the Zacks Consensus Estimate of $261 million. The upside was attributed to strong sales performance at the company's stores due to high demand for footwear and branded apparels.

We remain impressed with Hibbett's sustained focus on expansion of its store network and improvement of productivity, which are the key revenue drivers for the stock. Moreover, we believe the strategy of doubling the size of its distribution facility will aid in maintaining its growth momentum in mid-sized and smaller markets, which are the primary areas of focus for the company. The company's debt-free balance sheet also provides it with financial flexibility to drive future growth.

Hibbett is strongly focused on small towns and counties with population ranging from 25,000 to 75,000. It serves a niche market by strategically aligning its merchandise to regional/local sporting and community interests. We believe that operating in small markets provide a competitive advantage to Hibbett over larger rivals due to less intense competition and lower operating costs.

However, we remain slightly apprehensive about Hibbett's growth prospects as its competitor and leading sporting goods retailer, DICK'S Sporting Goods Inc. DKS, is entering the smaller and mid-sized markets. We believe that DICK'S Sporting's strategy will heighten competition and pose challenges to Hibbett's retail space acquisitions. This may increase Hibbett's store occupancy costs and operating expenses. Therefore, at present, Hibbett carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Some other stocks in the retail space worth considering include Five Below, Inc. FIVE and Office Depot, Inc. ODP. Both the stocks have a Zacks Rank #2 (Buy).

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