Hibbett Reports Second Quarter Results

  • Comparable Sales Increase 0.3% in Second Quarter
  • Third Consecutive Quarter of Comparable Sales Growth
  • Updates Previous Guidance From Strong First Half Results

BIRMINGHAM, Ala.–(BUSINESS WIRE)–$HIBB–Hibbett Sports, Inc. (NASDAQ/GS: HIBB), an athletic-inspired fashion retailer, today provided financial results for its second quarter ended August 3, 2019, and business updates.

Jeff Rosenthal, President and Chief Executive Officer, stated, “I am pleased with the second quarter results. We believe our strategic initiatives are taking hold as we recorded our third consecutive quarter of positive comparable sales. Looking ahead, we expect a solid finish to the back-to-school season as well as momentum from strong product offerings in the back half of the year. We are encouraged by City Gear’s early performance as they enter the second half with a strong inventory position along with the planned migration to the Hibbett digital platform. Based on the strength of the first half and our confidence in the second half, we have updated our annual guidance. As we move forward, we will continue to drive the business with our strategic focus on leading with sneakers and connecting toe-to-head concepts with active apparel and accessories.”

Second Quarter Results

Net sales for the 13-week period ended August 3, 2019, increased 19.6% to $252.4 million, including $42.0 million for City Gear, compared with $211.1 million for the 13-week period ended August 4, 2018. Comparable store sales increased 0.3% and will not include sales from City Gear until the fourth quarter of Fiscal 2020. E-commerce sales represented 8.6% of total sales for the second quarter. The increase in net sales was primarily attributable to the addition of City Gear. Footwear sales continued to drive the business along with positive sales in activewear and accessories connecting to footwear products.

Gross margin was 30.3% of net sales for the 13-week period ended August 3, 2019, compared with 31.4% for the 13-week period ended August 4, 2018. The 110 basis point decrease was principally due to the closure of 37 stores, which included full inventory liquidation of 32 stores and limited markdown activity which helped drive our clean inventory position.

Store operating, selling and administrative expenses were 31.8% of net sales for the 13-week period ended August 3, 2019, compared with 29.4% of net sales for the 13-week period ended August 4, 2018. The increase as a percent of net sales included a one-time charge related to the previously announced transition of the Company’s Chief Executive Officer, City Gear acquisition costs of $7.6 million and $0.9 million related to the Company’s accelerated store closure plan. The acquisition costs included a charge of $7.1 million for an increase in the estimated valuation of two contingent payments based on an update to City Gear’s projected achievement of defined EBITDA thresholds. Excluding these costs, comparable store operating, selling and administrative expenses improved 170 basis points to 27.7% of net sales for the 13‑week period ended August 3, 2019.

Net loss for the 13-week period ended August 3, 2019, was $8.8 million, or $0.49 per share, compared with net loss of $1.2 million, or $0.06 per share, for the 13-week period ended August 4, 2018. Excluding non-recurring costs, non-GAAP net loss for the 13-week period ended August 3, 2019, was $2.4 million, or $0.13 per share, including $0.09 for the one-time executive compensation costs related to the CEO’s transition.

For the quarter, Hibbett opened two new stores, rebranded two Hibbett stores to City Gear stores and closed 40 underperforming stores, bringing the store base to 1,108 in 35 states as of August 3, 2019. Store closures included Hibbett stores closed for rebranding. In addition, three high-performing stores were expanded.

Strategic Realignment – Accelerated Store Closure Plan

As the retail environment continues to evolve, the Company is focused on improving the productivity of the store base while continuing to grow its omni-channel business to serve customers where and when they want to shop. As previously reported, the Company is proceeding with the closing of approximately 95 Hibbett stores in Fiscal 2020, which is expected to result in non-recurring impairment and store closure charges in the range of $0.10 to $0.15 per diluted share in Fiscal 2020.

Fiscal Year to Date Results

Net sales for the 26-week period ended August 3, 2019, increased 22.6% to $595.7 million compared with $485.8 million for the 26-week period ended August 4, 2018. Comparable store sales increased 3.06%.

Gross margin was 32.7% of net sales for the 26-week period ended August 3, 2019, compared with 33.6% for the 26-week period ended August 4, 2018. Excluding non-recurring expenses related to the $1.0 million amortization of an inventory step-up value, non-GAAP gross margin was 32.9% for the 26-week period ended August 3, 2019.

Store operating, selling and administrative expenses were 25.9% of net sales for the 26-week period ended August 3, 2019, compared with 25.5% of net sales for the 26-week period ended August 4, 2018. SG&A expenses included a one-time charge related to the previously announced transition of the Company’s Chief Executive Officer, $8.3 million in City Gear acquisition costs, and $1.8 million related to the Company’s accelerated store closure plan. Excluding these costs, store operating, selling and administrative expenses were 23.9% of net sales for the 26-week period ended August 3, 2019.

Net income for the 26-week period ended August 3, 2019, was $19.1 million, or $1.05 per diluted share, compared with $20.3 million, or $1.06 per diluted share, for the 26-week period ended August 4, 2018. Excluding non-recurring costs, non-GAAP net income for the 26-week period ended August 3, 2019, was $27.3 million, or $1.50 per diluted share, including $0.09 for the one-time executive compensation costs related to the CEO’s transition.

Balance Sheet and Stock Repurchases

Hibbett ended the second quarter of Fiscal 2020 with $97.8 million of available cash and cash equivalents on the consolidated balance sheet. As of August 3, 2019, Hibbett had $17.0 million in debt outstanding and $83.0 million available under its credit facilities.

During the second quarter, the Company repurchased 429,964 shares of common stock for a total expenditure of $8.9 million. Approximately $174.2 million remained authorized for future stock repurchases through January 29, 2022.

Fiscal 2020 Outlook

The Company updated its full-year guidance for Fiscal 2020:

Updated Previous
Comparable store sales 1.0% – 2.0% +0.5% – +2.0%
Net store closings (80) – (85) (80) – (85)
Earnings per diluted share $1.35 – $1.50 $1.70 – $1.85
Expected impact of non-recurring items (non-GAAP) ($0.75) – ($0.80) ($0.25) – ($0.35)
Earnings per diluted share excluding non-recurring items (non-GAAP) $2.15 – $2.25 $2.00 – $2.15
Gross margin (30)bps – (40)bps (25)bps – (35)bps
Gross margin excluding non-recurring items (non-GAAP) (40)bps – (50)bps (35)bps – (45)bps
SG&A expense rate change 50bps – 70bps 10bps – 15bps
SG&A expense rate change excluding non-recurring items (non-GAAP) (40)bps – (60)bps Flat – (10)bps
Depreciation (10)bps – (20)bps (10)bps
Tax rate

25.5%

25.0%

Capital expenditures $18M – $20M $18M – $22M
Share repurchase $25M – $30M $10M – $15M

Investor Conference Call and Simulcast

Hibbett Sports, Inc. will conduct a conference call at 10:00 a.m. ET on Friday, August 23, 2019, to discuss second quarter Fiscal 2020 results. The number to call for the live interactive teleconference is (212) 231‑2915. A replay of the conference call will be available until August 30, 2019, by dialing (402) 977-9140 and entering the passcode, 21926463.

The Company will also provide an online Web simulcast and rebroadcast of its second quarter Fiscal 2020 conference call. The live broadcast of Hibbett’s quarterly conference call will be available online at www.hibbett.com under Investor Relations on August 23, 2019, beginning at 10:00 a.m. ET. The online replay will follow shortly after the call and be available for replay for 30 days.

Hibbett, headquartered in Birmingham, Alabama, is a leading athletic-inspired fashion retailer with approximately 1,100 stores under the Hibbett Sports and City Gear banners, primarily located in small and mid-sized communities. Founded in 1945, Hibbett has a rich history of convenient locations, personalized customer service and access to coveted footwear, apparel and equipment from top brands like Nike, Jordan, Adidas, and Under Armour. Consumers can browse styles, find new releases, shop looks and make purchases online or in their nearest store by visiting www.hibbett.com or www.citygear.com. Follow us @hibbettsports and @citygear.

About Non-GAAP Financial Measures

This press release includes certain non-GAAP financial measures, including adjusted net income (loss), earnings (loss) per share, gross margin and SG&A expenses as a percentage of net sales. Management believes that non-GAAP net income (loss), earnings (loss) per share, gross margin and SG&A expenses as a percentage of net sales, which exclude the effects of non-recurring expenses related to the acquisition of City Gear and our accelerated store closure plan, are useful measures for providing more accurate comparisons of our current financial results to historical operations, forward looking guidance and the financial results of peer companies. The non-recurring costs related to the acquisition of City Gear include amortization of inventory step-up value and professional service fees and expenses consisting primarily of investment banking, legal and accounting fees and expenses. In future periods, such acquisition-related costs may include one or more of the following categories of expenses: (i) transition and integration costs, (ii) professional service fees and expenses and (iii) acquisition-related adjustments. Future non-recurring costs related to the accelerated store closure plan may include: (i) lease and equipment impairment costs, (ii) third party liquidation fees, (iii) store exit costs, and (iv) residual lease costs.

While our management uses these non-GAAP financial measures as a tool to enhance their ability to assess certain aspects of our financial performance, our management does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial statements. Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial statements, allows for greater transparency in the review of our financial and operational performance. It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies.

For a reconciliation of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP, please see the sections titled “GAAP to Non-GAAP Reconciliation” that accompany this press release.

A WARNING ABOUT FORWARD LOOKING STATEMENTS: Certain matters discussed in this press release are “forward looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Forward looking statements address future events, developments or results and typically use words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “forecast,” “guidance,” “outlook,” “estimate,” “continue,” “will,” “may,” “could,” “possible,” “potential” or other similar words, phrases or expressions. For example, our forward-looking statements include statements regarding the expected strength of the back-to-school season and momentum from product offerings in the second half of Fiscal 2020, continuation of our strategic focus and plans for growth, the integration of and non-recurring costs relating to our acquisition of City Gear, net store closings and associated impairment and store closure charges related to our accelerated store closure plan, the productivity of our store base, earnings per diluted share, comparable store sales, the impact of non-recurring costs and expenses, gross margin, SG&A expense, depreciation expense, tax rate, capital expenditures and our stock repurchase program. Such statements are subject to risks and uncertainties that could cause actual results to differ materially, including economic conditions, industry trends, merchandise trends, vendor relationships, customer demand, and competition. For a discussion of these factors, as well as others which could affect our business, you should carefully review our Annual Report and other reports filed from time to time with the Securities and Exchange Commission, including the “Risk Factors,” “Business” and “MD&A” sections in our Annual Report on Form 10-K filed on April 18, 2019, and in our Quarterly Report on Form 10-Q filed on July 19, 2019. In light of these risks and uncertainties, the future events, developments or results described by our forward-looking statements in this document could be materially and adversely different from those we discuss or imply. We are not obligated to release publicly any revisions to any forward-looking statements contained in this press release to reflect events or circumstances occurring after the date of this report and you should not expect us to do so.

HIBBETT SPORTS, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
 
13-Week Period Ended 26-Week Period Ended
August 3, 2019 August 4, 2018 August 3, 2019 August 4, 2018
% of
Sales
% of
Sales
% of
Sales
% of
Sales
Net sales

$

252,440

 

$

211,123

 

$

595,735

 

$

485,830

 

Cost of goods sold

 

176,067

 

69.7

%

 

144,772

 

68.6

%

 

400,759

 

67.3

%

 

322,706

 

66.4

%

Gross margin

 

76,373

 

30.3

 

66,351

 

31.4

 

194,976

 

32.7

 

163,124

 

33.6

Store operating, selling and administrative expenses

 

80,334

 

31.8

 

61,965

 

29.4

 

154,373

 

25.9

 

123,869

 

25.5

Depreciation and amortization

 

7,680

 

3.0

 

6,271

 

3.0

 

14,903

 

2.5

 

12,519

 

2.6

Operating (loss) income

 

(11,641

)

-4.6

 

(1,885

)

-0.9

 

25,700

 

4.3

 

26,736

 

5.5

Interest expense, net

 

(73

)

 

(167

)

 

(29

)

 

(111

)

(Loss) income before provision for income taxes

 

(11,568

)

-4.6

 

(1,718

)

-0.8

 

25,729

 

4.3

 

26,847

 

5.5

(Benefit) provision for income taxes

 

(2,790

)

-1.1

 

(496

)

-0.2

 

6,650

 

1.1

 

6,560

 

1.4

Net (loss) income

$

(8,778

)

-3.5

%

$

(1,222

)

-0.6

%

$

19,079

 

3.2

%

$

20,287

 

4.2

%

 
Basic (loss) earnings per share

$

(0.49

)

$

(0.06

)

$

1.05

 

$

1.07

 

Diluted (loss) earnings per share

$

(0.49

)

$

(0.06

)

$

1.05

 

$

1.06

 

 
Weighted average shares outstanding:
Basic

 

17,906

 

 

18,823

 

 

18,107

 

 

18,896

 

Diluted

 

17,906

 

 

18,823

 

 

18,220

 

 

19,079

 

 
HIBBETT SPORTS, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
   
 

August 3,

2019

 

February 2,

2019

Assets  
Cash and cash equivalents  

$

97,790

$

61,756

Inventories, net  

 

270,563

 

280,287

Other current assets  

 

21,302

 

25,813

Total current assets  

 

389,655

 

367,856

Property and equipment, net  

 

103,864

 

115,394

Operating right-of-use assets  

 

218,443

 

Finance right-of-use assets, net  

 

1,691

 

Goodwill  

 

19,661

 

23,133

Tradename intangible  

 

32,400

 

32,400

Other noncurrent assets  

 

10,914

 

7,282

Total assets  

$

776,628

$

546,065

   
Liabilities and Stockholders’ Investment  
Accounts payable  

$

124,859

$

107,315

Operating lease liabilities  

 

64,249

 

Credit facilities  

 

17,000

 

35,000

Finance/capital lease obligations  

 

896

 

1,017

Accrued expenses  

 

32,720

 

29,941

Total current liabilities  

 

239,724

 

173,273

Long-term operating lease liabilities  

 

184,927

 

Long-term finance/capital lease  

 

1,149

 

1,994

Other noncurrent liabilities  

 

10,883

 

34,749

Stockholders’ investment  

 

339,945

 

336,049

Total liabilities and stockholders’ investment  

$

776,628

$

546,065

   
HIBBETT SPORTS, INC. AND SUBSIDIARIES
Supplemental Information
(Unaudited)
   

13-Week Period Ended

 

26-Week Period Ended

August 3,
2019
August 4,
2018
  August 3,
2019
August 4,
2018
Sales Information  
Net sales increase

 

19.6

%

 

12.3

%

 

 

22.6

%

 

4.8

%

Comparable sales increase

 

0.3

%

 

4.1

%

 

 

3.1

%

 

1.7

%

   
Store Count Information  
Beginning of period

 

1,144

 

 

1,068

 

 

 

1,163

 

 

1,079

 

New stores opened

 

4

 

 

6

 

 

 

9

 

 

13

 

Stores closed

 

(40

)

 

(15

)

 

 

(64

)

 

(33

)

End of period

 

1,108

 

 

1,059

 

 

 

1,108

 

 

1,059

 

   
Stores expanded or relocated

 

4

 

 

3

 

 

 

6

 

 

8

 

Estimated square footage at end of period (in thousands)

 

6,239

 

 

6,048

 

 
   
Balance Sheet Information  
Average inventory per store

$

244,190

 

$

234,311

 

 
   
Share Repurchase Information  
Shares

 

429,964

 

 

336,302

 

 

 

689,396

 

 

376,601

 

Cost (in thousands)

$

8,945

 

$

7,978

 

 

$

14,300

 

$

8,848

 

   
HIBBETT SPORTS, INC. AND SUBSIDIARIES
GAAP to Non-GAAP Reconciliation
(Dollars in thousands, except per share amounts)
(Unaudited)
 
13-Week Period Ended August 3, 2019
Non-Recurring Costs
GAAP Basis
(As Reported)
Acquisition
Costs (1)
Strategic
Realignment
Costs (2)
Non-GAAP Basis
August 3, 2019
% of
Sales
Net sales

$

252,440

 

$

$

$

252,440

 

Cost of goods sold

 

176,067

 

 

 

 

176,067

 

69.7

%

Gross margin

 

76,373

 

 

 

 

76,373

 

30.3

Store operating, selling and administrative expenses

 

80,334

 

 

7,553

 

892

 

71,889

 

28.5

Depreciation and amortization

 

7,680

 

 

 

 

7,680

 

3

Operating (loss) income

 

(11,641

)

 

7,553

 

892

 

(3,196

)

-1.3

Interest expense, net

 

(73

)

 

 

 

(73

)

Loss before provision for income taxes

 

(11,568

)

 

7,553

 

892

 

(3,123

)

-1.2

(Benefit) provision for income taxes

 

(2,790

)

 

1,822

 

215

 

(753

)

-0.3

Net (loss) income

$

(8,778

)

$

5,731

$

677

$

(2,370

)

-0.9

%

 
Basic (loss) earnings per share

$

(0.49

)

$

0.32

$

0.04

$

(0.13

)

Diluted (loss) earnings per share

$

(0.49

)

$

0.32

$

0.04

$

(0.13

)

 
Weighted average shares outstanding:
Basic

 

17,906

 

 

17,906

 

17,906

 

17,906

 

Diluted

 

17,906

 

 

17,906

 

17,906

 

17,906

 

 
 
1) Non-recurring acquisition costs represent costs incurred during the 13-week period ended August 3, 2019, related to the acquisition of City Gear, LLC and consists primarily of contingent earnout valuation update and legal, accounting and professional fees.
2) Non-recurring strategic realignment costs represent costs incurred during the 13-week period ended August 3, 2019, related to our accelerated store closure plan and consists of professional fees, loss on fixed assets and operating leases and impairment costs.
 
HIBBETT SPORTS, INC. AND SUBSIDIARIES
GAAP to Non-GAAP Reconciliation
(Dollars in thousands, except per share amounts)
(Unaudited)
 
26-Week Period Ended August 3, 2019
Non-Recurring Costs
GAAP Basis
(As Reported)
Acquisition
Costs (1)
Strategic
Realignment
Costs (2)
Non-GAAP Basis
August 3, 2019
% of
Sales
Net sales

$

595,735

$

$

$

595,735

Cost of goods sold

 

400,759

 

956

 

 

399,803

67.1

%

Gross margin

 

194,976

 

956

 

 

195,932

32.9

Store operating, selling and administrative expenses

 

154,373

 

8,287

 

1,846

 

144,240

24.2

Depreciation and amortization

 

14,903

 

 

 

14,903

2.5

Operating income

 

25,700

 

9,243

 

1,846

 

36,789

6.2

Interest expense, net

 

(29)

 

 

 

(29)

Income before provision for income taxes

 

25,729

 

9,243

 

1,846

 

36,818

6.2

Provision for income taxes

 

6,650

 

2,389

 

477

 

9,516

1.6

Net income

$

19,079

$

6,854

$

1,369

$

27,302

4.6

%

 
Basic earnings per share

$

1.05

$

0.38

$

0.08

$

1.51

Diluted earnings per share

$

1.05

$

0.38

$

0.08

$

1.50

 
Weighted average shares outstanding:
Basic

 

18,107

 

18,107

 

18,107

 

18,107

Diluted

 

18,220

 

18,220

 

18,220

 

18,220

 
 
1) Non-recurring acquisition costs represent costs incurred during the 26-week period ended August 3, 2019, related to the acquisition of City Gear, LLC and consists primarily of contingent earnout valuation update, amortization of inventory fair-market value step-up and legal, accounting and professional fees.
2) Non-recurring strategic realignment costs represent costs incurred during the 26-week period ended August 3, 2019, related to our accelerated store closure plan and consists of professional fees, loss on fixed assets and operating leases and impairment costs.

 

Contacts

Christine E. Skold

Interim Chief Financial Officer

(205) 942-4292

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