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Why Did Hibbett Gain 3% Despite Q1 Earnings Miss?

Story Highlights

Hibbett rose on upbeat EPS guidance despite disappointing earnings in Fiscal Q1 2023. The sales figures were in line with expectations.

Hibbett Sports (NASDAQ: HIBB) is an athletic-inspired fashion retailer of sporting goods and related products. The company is seeking to be competitive through digital transformation and a dynamic business model.

Recently, the company posted lower-than-expected earnings for the first quarter of Fiscal 2023. Meanwhile, the company provided an upbeat outlook.  

Following the update, shares of the company closed almost 3% higher on Friday. 

Results in Detail 

Hibbett reported earnings of $2.89 per share, lower than earnings of $5 per share reported in the prior-year period, and missed analysts’ expectations of $3.05.  

Net sales of $424.1 million were almost in line with the Street’s estimates but decreased 16.3% from the year-ago period. 

The company’s comparable sales slumped 18.9%, while brick and mortar comparable sales plunged 22%. Meanwhile, E-commerce comparable sales jumped 4.1%. According to the company, lower discretionary income impacted customer spending habits. 

Additionally, the gross margin was 37%, down from 41.4% reported in the prior-year quarter. Deleverage of store occupancy and higher costs acted as headwinds. 

As of April 30, 2022, inventory was $314.9 million, up 72.6% year-over-year. 

Capital Deployment 

During the first quarter, Hibbett repurchased 491,218 shares of common stock at a total cost of $22.4 million. The company also paid cash common stock dividends worth $3.3 million to shareholders. 

Outlook 

Hibbett CEO Mike Longo commented on the present business and economic situation, saying, “Looking ahead, we remain on track to achieve the Fiscal 2023 guidance we outlined last quarter. Driving these results is our best-in-class omni-channel business model and our superior in-store customer service, which combined with a compelling merchandise assortment, differentiates Hibbett in the marketplace and keeps us top of mind for our increasingly loyal customer base.”  

For Fiscal 2023, the company projects total net sales to be relatively flat on a year-over-year basis on comparable sales in the negative low-single-digits. Brick and mortar comparable sales are anticipated in the negative low-single-digit range, while e-commerce revenue is expected in the positive mid-single-digit range. 

The company expects to open 30 to 40 new stores throughout the year. 

Earnings per share are predicted to land between $9.75 and $10.50, above the consensus estimate of $9.64. 

Wall Street’s Take 

Following the results, Robert W. Baird analyst Justin Kleber maintained a Buy rating but reduced the price target to $70 (33.33% upside potential) from $75.  

The analyst stated that “shares hold value appeal for patient investors,” based on management’s predictions of robust growth.

Consensus among analysts is a Strong Buy based on 4 unanimous Buys. The average Hibbett price target of $72 implies 37.14% upside potential to current levels. However, shares have decreased 39.5% over the past year. 

Hedge Funds  

TipRanks’ Hedge Fund Trading Activity tool shows that confidence in Hibbett is currently Very Positive, as the cumulative change in holdings across all 5 hedge funds that were active in the last quarter was an increase of 93,200 shares. 

Ending words 

The stock seems attractive at current price levels, based on the company’s strategic expansion goal of opening new outlets in underserved areas and its excellent business model.

Additionally, despite macroeconomic challenges, positive hedge funds signal and high analyst ratings indicate an optimistic stance.

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