Hibbett Analyst: Athletic Goods Retailer Has Different Approach, High Growth Potential

Hibbett, Inc.'s HIBB differentiated approach to athletic retail and growth potential are turning Telsey Advisory Group bullish on the retail stock. 

The Hibbett Analyst: Cristina Fernández initiated coverage of Hibbett with an Outperform rating and $110 price target. 

The Hibbett Takeaways: Hibbett has benefited from strong athletic apparel and footwear demand during the pandemic, and further growth is ahead, Fernández said in a Thursday note.

The company’s operating margins doubled in 2020 to 10% and are forecast to expand to 13.5% in 2021, the analyst said. By 2025, revenue is expected to reach $2 billion, with a 13.5% operating margin, she said. 

Hibbett has a “unique geographic footprint” relative to its peers in that its stores are primarily situated in small rural areas, giving it near-exclusive access to these markets, Fernández said. 

Additionally, the company is expected to accelerate store openings over the next several years, the analyst said. 

Hibbett also emphasizes a complete head-to-toe look, she said, adding that this complete outfit emphasis gives Hibbett a more balanced sales mix between footwear (64% of sales) and apparel (27% of sales), differentiating it from primary competitors Foot Locker FL and Finish Line, which derive 85-90% of sales from footwear. 

The company offers an attractive valuation given its growth potential, said Fernández.

It trades at a 10.3x P/E multiple over the next 12 months, a discount to its historical multiples but a premium to its peer group, the analyst said. 

Telsey's $110 price target was calculated by applying a 12x P/E multiple on projected 2022 EPS of $9.17. 

HIBB Price Action: Hibbett shares lost 0.33% Thursday, closing at $92.79. 

Photo: a Hibbett Sports store. Photo by Thomson200 via Wikimedia.