Hibbett Sports Uncertainly Remains High

Hibbett Sports, Inc. HIBB reported its 1Q results with the comp and EPS in line with expectations.

Brean Capital’s Eric Tracy maintained a Sell rating on the company, with a price target of $30.

Limited Visibility

Although management maintained its FY16 comp +LSD and EPS guidance for FY16, Tracey continued to believe that visibility into sustained comp growth is limited, which not only reflects near term drag, but also persisting headings due to “structural constraints.”

“While majority of investment cadence should sustain into FY18, we note that 1) once implemented, ecomm will be dilutive until scaled, and 2) continued new store openings expose HIBB to fixed cost de-leverage as consumer continues to migrate online,” the analyst mentioned.

Tracy said that these two factors together implied that the FY18 consensus EPS estimate could prove to be aggressive.

1Q Results

Hibbett Sports reported its EPS for the quarter at $1.22, largely in-line with the consensus and the estimate, with worse than anticipated comp growth and higher than expected SG&A deleverage were more than offset by the better than anticipated gross margin.

Gross margin was driven by better inventory and promotion management, which led to lower markdowns, as well as additional contribution from occupancy leverage.

Tracy pointed out that “while apparel was one of HIBB's better performing categories in 1Q, we believe this category is among the most exposed to TSA liquidation headwinds, even as mgmt appears convinced that impact will be largely immaterial.”