Birmingham, Alabama-based Hibbett Sports Inc. (HIBB), a sporting goods retailer, recently posted its fourth-quarter 2011 results. Street analysts had nearly a week to ponder on the news.
In the paragraphs that follow, we cover the recent earnings announcement, subsequent analysts’ estimate revisions as well as the Zacks Rank and long-term recommendation for the stock.
Quarterly Review
On March 11, 2011, Hibbett reported fourth-quarter 2011 earnings of 44 cents per share, beating the Zacks Consensus Estimate by a penny. Earnings increased 10% from 40 cents per share reported in the prior-year quarter.
During the quarter, net sales grew 3.8% to $173.2 million from $166.8 million in the prior-year quarter but fell short of the Zacks Consensus Estimate of $175.0 million. The slow growth in sales was primarily due to a delay in income tax refunds and closing of stores for most of the days in January 2011 due to snowstorms. Comparable store sales inched up 1.2%.
Management Guidance for 2012
On the back of better-than-expected fiscal 2011 results, management now expects fiscal 2012 earnings in the range of $1.70 to $1.90 per share and an increase of mid single-digit in comparable store sales.
(Read our full coverage on this earnings report: Hibbett’s Profit Surge, Sales Upset)
Agreement of Analysts
Estimate revision trends for the upcoming first and second quarter of fiscal 2012 portrayed positive sentiments among most of the analysts covering the stock.
Over the last 7 days, 16 out of 19 analysts following the stock revisited their estimates, of which 14 upgraded and 2 downgraded their estimates for the first quarter of 2012. Moreover, for second-quarter 2012, 8 analysts revisited their estimates, of which 5 upgraded and 3 downgraded their estimates in the last seven days.
As well, 12 analysts revisited their estimates for fiscal 2012, of which 11 adjusted it in upward direction while only one analyst downgraded it in last 7 days. Similarly, for fiscal 2013, 8 analysts revisited their estimates, of which 6 analysts have upgraded and 2 have downgraded in the last 7 days.
Magnitude of Estimate Revisions
The magnitude of estimate revisions for Hibbett Sports depicts an optimistic analyst outlook for first and second quarters of 2012 and fiscal 2012 and 2013. Over the last 7 days, estimates for first and second quarters of fiscal 2012 have been increased by 4 and 1 cents, respectively. While for fiscals 2012 and 2013, estimates have been increased by 4 cents each.
Our Recommendation
Hibbett remains focused on mid-sized and smaller markets as well as a strategic mix of branded and localized merchandise. It is geared toward expanding operating results and creating shareholder value.The company typically caters to small counties with populations of 30,000 to 100,000 with a merchandise assortment that focuses on footwear, athletic equipment and apparel.
Hibbett sources a major portion of its merchandise from Nike Inc. (NKE) and distributes through a 220,000 square feet distribution center located in Alabama, which has the capacity to support over 1,200 stores. Moreover, the company offers an extensive selection of quality branded merchandise that emphasizes team sports designed to appeal to a wide range of customers within each individual market. This provides a significant upside potential to the company.
However, Hibbett’s business is seasonal in nature and typically generates stronger sales during the first and fourth quarters, which are characterized by the spring and holiday seasons. As a result, the company is exposed to significant risks provided the seasons fail to deliver expected operating performance.
Hibbett, which competes with Food Locker Inc. (FL) and Big 5 Sporting Goods Corporation (BGFV), currently, holds a Zacks #3 Rank, implying a short-term Hold rating on the stock. Besides, the company retains a long-term Outperform recommendation on the stock.
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