Hibbett Sports Has Become A 'Show Me Stock,' Canaccord Says In Downgrade

Hibbett Sports HIBB received a sell-side downgrade Monday after posting disappointing second-quarter earnings last week.

The Analyst 

Canaccord Genuity analyst Camilo Lyon downgraded Hibbett Sports from Buy to Hold and lowered the price target from $31 to $21.

The Thesis

After a disappointing Q2 and reduced 2019 guidance, Hibbett Sports has become a "show me stock" and is unlikely to demonstrate multiple expansion until it proves it can generate consistent results, Lyon said in the Monday downgrade note. 

Hibbett shares plummeted nearly 30 percent after the print and are now down 3 percent year-to-date.

Higher SG&A growth in the quarter was due to higher advertising, omni-channel and health care costs in the quarter and is likely to weigh on second-half EPS as well, the analyst said. 

Hibbett's Q2 comps were up 4.1 percent.

“While we acknowledge the progress the company is making in terms of product mix in branded apparel and footwear, the deterioration in accessories, team sports and licensed businesses coupled with the higher SG&A expense profile is creating a more subdued earnings profile with less upside potential,” Lyon said. 

Hibbett's bullish points include strength in apparel and footwear; adding more than 860,000 members to its loyalty program this year; the expectation of SH&A growth to moderate in fiscal 2020 and the launch of additional omni-channel capabilities, according to Canaccord. 

Bearish points include a wide Q2 comp miss; accessories; licensed and team sports that weakened further; health care expense pressures; and lowered full-year comp and EPS guidance, Lyon said. 

Price Action

Hibbett Sports shares were down 4.38 percent at $19.62 at the close Monday. 

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