On Wednesday, Telsey Advisory Group maintained its Market Perform rating on Hibbett Sports (NASDAQ:HIBB) alongside a steady price target of $87.50. The firm's analysis of the company's first-quarter 2024 performance revealed a challenging period for the athletic apparel and footwear sector.
Hibbett Sports reported quarterly sales of $447 million and a comparable store sales decrease of 5.8%, which fell short of both Telsey's and FactSet's expectations. The shortfall was attributed to a tough year-over-year comparison, cautious consumer spending, and a lack of new offerings from Nike (NYSE:NKE), which represents a significant portion of Hibbett's sales.
Despite the lower sales, Hibbett Sports experienced a notable gross margin expansion to 35.8%, outperforming Telsey's estimate of 34.2% and FactSet's 34.3% forecast. This improvement was driven by a reduction in promotions, cleaner inventory levels, which were down 15% from the previous year, and decreased costs related to freight, logistics, and shrinkage. Still, these gains were partially offset by higher occupancy costs.
The company's selling, general and administrative (SG&A) expenses rose to 26.6% of sales, a substantial increase from the previous year. This was attributed to wage inflation, investments in new stores, technology advancements, higher incentive compensation, and the impact of lower sales on expense leverage. Approximately 60 basis points of the increased SG&A expenses were related to professional fees incurred from the pending acquisition by JD (NASDAQ:JD) Sports.
Hibbett Sports' operating margin consequently saw a contraction, dropping to 9.2% from the previous year. Although a lower tax rate provided some benefit to earnings per share (EPS), which came in at $2.67, this was offset by the aforementioned professional fees associated with the acquisition. The reported EPS slightly missed Telsey's projection but exceeded the FactSet consensus.
In other recent news, Hibbett, Inc. reported its Q1 financial results, revealing an earnings beat and a slight dip in sales. The company posted a Q1 EPS of $2.67, surpassing analyst estimates of $2.63.
Still, Q1 revenue fell short, coming in at $447.17 million, a 1.8% decline from the previous year, and missing consensus estimates of $454.56 million. In addition, Hibbett announced it is set to become a privately held subsidiary of JD Sports following an upcoming acquisition, pending regulatory and stockholder approval.
The company's comparable sales decreased by 5.8% YoY, with both physical and online sales experiencing a decline. Despite this, gross margin improved to 35.8% of net sales, up from last year's 33.7%, due to a less promotional environment. Hibbett's net income for the quarter was $32.5 million, a drop from last year's $35.9 million.
These are recent developments in the company's financial performance and strategic initiatives, which include a tighter inventory management strategy and a suspension of its Stock Repurchase Program and future dividend payments in anticipation of the merger. The company maintains a stable financial health with $28.7 million in cash and cash equivalents, and a modest debt level on its unsecured line of credit.
InvestingPro Insights
In light of Telsey Advisory Group's assessment of Hibbett Sports' first-quarter performance, there are several key insights from InvestingPro that could further inform investors about the company's financial health and market position.
With a Market Cap of approximately $1.03 billion and a Price to Earnings (P/E) Ratio of 10.33, Hibbett Sports is trading at a valuation that suggests investors are recognizing its earnings potential. The Adjusted P/E Ratio for the last twelve months as of Q4 2024 is slightly lower at 9.98, indicating a potentially more attractive valuation for investors considering the company's earnings over a longer period.
An important highlight from the InvestingPro Tips is that management has been aggressively buying back shares, which could signal confidence in the company's future and a commitment to increasing shareholder value. Moreover, while analysts have recently revised their earnings expectations downwards for the upcoming period, the company has demonstrated a high return over the last year, with a 142.97% one-year price total return as of the date provided.
Investors should also note that Hibbett Sports does not pay a dividend, which may influence the investment strategy for those seeking regular income. However, the company's strong return over the past five years and the fact that its liquid assets exceed short-term obligations could be encouraging signs for growth-focused investors.
For those interested in a deeper analysis, InvestingPro offers more tips on Hibbett Sports, which can be found at https://www.investing.com/pro/HIBB. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. This could provide valuable insights for investors looking to make informed decisions about their investments in Hibbett Sports.
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