Hibbett (HIBB) Q3 Earnings Surpass Estimates, Ups Outlook - Analyst Blog

Hibbett Sports, Inc. (HIBB) continued with its positive earnings surprise streak for the second consecutive quarter in fiscal 2015. After beating the Zacks Consensus Estimate by 3.2% in the second quarter, this sporting goods retailer surpassed it again by 8.1% in the third quarter. The company posted earnings of 67 cents a share that outdid the Zacks Consensus Estimate of 62 cents and also came a penny ahead of the prior-year quarter figure. Higher net sales supported the bottom line. As a result, management raised its fiscal year earnings outlook.

Net sales of this Zacks Rank #3 (Hold) stock grew 5% year over year to $218.3 million but fell short of the Zacks Consensus Estimate of $222 million. Comparable-store sales inched up 0.6% compared with 4.8% in the year-ago period. Management stated that after soft comparable-store sales in October, the sales trend began to portray an improvement in November. The company remains optimistic about the final quarter, given favorable weather conditions and product launches.

Hibbett's gross profit increased 3.5% to $79.2 million, while gross margin contracted 50 basis points (bps) to 36.3%. The contraction in margin was due to higher markdowns to get rid of the sluggish inventory and increase in store occupancy as a percentage of net sales. Operating income during the quarter fell 2.3% to $26.8 million, whereas operating margin shriveled 90 bps to 12.3%.

Other Financial Aspects

Hibbett ended the quarter with a strong balance sheet comprising $71.5 million in cash and cash equivalents, no outstanding bank debt and full availability under its $80 million credit facility.

During the quarter, Hibbett bought back 371,589 shares for $16.7 million. As of Nov 1, 2014, Hibbett had nearly $179.7 million remaining under its share repurchase program.

Store Update

During the reported quarter, Hibbett increased its store count to 969 in 31 states by opening 26 stores and expanding 2 high-performing stores, while it shut down 7 underperforming stores. Square footage grew 6.5% to about 5.6 million square feet as of Nov 1, 2014.

Fiscal 2015 Guidance

Management now foresees fiscal 2015 earnings between $2.72 and $2.77 per share, up from its previous forecast of $2.63 to $2.73. The current Zacks Consensus Estimate for fiscal-year 2015 is $2.71, and could witness an uptrend in the coming days.

However, Hibbett continues to expect comparable-store sales growth in the low single-digit range. The company also remains on track to open 75 to 80 stores during the current fiscal year.

Other Stocks to Consider

Better-ranked stocks in the retail sector include Skechers USA Inc. (SKX), Nike, Inc. (NKE), both sporting a Zacks Rank #1 (Strong Buy) and Deckers Outdoor Corp. (DECK), carrying a Zacks Rank #2 (Buy).