For the second year in a row, Hibbett is giving away a year’s worth of free sneakers to one winner in honor of Nike Air Max Day. And the sweepstakes comes at a time when the athletic-inspired fashion retailer may need assurance that it will remain in good standing with the Oregon footwear giant.
The Air Max Day promotion will run throughout March as an homage to Nike Air Max Day, which is celebrated on March 26 each year. The date commemorates the 35th anniversary of the Air Max 1 debut, which has since spawned various styles including the Air Max 90, Air Max 200, Air Max 270 and VaporMax.
To enter the sweepstakes, individuals sign up for the Hibbett/City Gear email list via a form on the company’s website, follow both retail banners on their Instagram handles (@HibbettSports and @CityGear), comment on an Air Max giveaway post and tag three friends. Applicants can enter through March 31.
The grand prize comes in the form of 12 $250 gift cards and is valued at $3,000. Hibbett will alert the winner via email by April 13.
“It has become an annual tradition for Hibbett to do something big to commemorate Air Max Day, in honor of the beloved iconic sneakers that continue to gain new fans across generations every year,” said Sarah Sharp-Wangaard, vice president of marketing, Hibbett. “Air Max Day is March 26 and we will celebrate the anniversary by giving away a year’s worth of sneakers to one lucky sneakerhead.”
The Air Max itself is a Nike staple from the brand’s legendary designer Tinker Hatfield, with the sneaker initially launching in 1987 and lending to countless silhouettes since. For this year’s Air Max Day, the Swoosh is debuting a new version of the classic Air Max 1, which includes a colorway including shades of white and off-white throughout the upper and sole unit, covered with an iridescent overlay that shifts colors depending on where light hits the sneaker.
In commemoration of Air Max Day, the shoe’s black tongue includes “3.26” labeled in gray.
Last month, Nike collaborated with luxury fashion and footwear brand Concepts to launch a version of the Air Max 1 called “Mellow.” The sneaker is designed to reference music festivals in the 1960s, including a paisley bandana print on the base of the upper that’s combined with overlays of washed denim, an olive green mudguard, and velvet panels as a nod to festival-goers’ outfits.
Hibbett’s tie-in with the Air Max is a positive sign for the premium footwear and athleisure retailer, which operates 1,000 stores under the Hibbett Sports and City Gear banners. Nike, like competitors including Under Armour, has pulled back on wholesale to focus on growing its direct-to-consumer business.
This has become problematic for retailers that were once reliant on these brands to generate sales. Foot Locker most recently saw its stock plummet 35 percent after guiding for a revenue decline of 4 percent to 6 percent in 2022, with Nike’s pullback being the main culprit for the revised outlook. While the footwear giant accounted for 75 percent of Foot Locker’s products in 2020, that number is estimated to drop to 60 percent this year, and under 55 percent by the fourth quarter.
Similarly, Hibbett’s dependence on Nike is noteworthy. A December research note from BofA Securities indicated that Nike accounts for 68 percent of total sales across Hibbett’s product mix.
And despite strong 15 percent sales growth in the third quarter, the Birmingham, Ala.-based retailer said its fourth quarter sales only ticked up 1.7 percent to $383.3 million, with comparable sales actually decreasing 1 percent. The comp sales decline came in well below Hibbett’s own guidance of positive high single-digit growth.
When pressed on the health of its relationships with major vendors in an earnings call, particularly “the one from Beaverton,” Hibbett execs said they were confident in their overall positioning. Execs on the call refused to acknowledge Nike by name, or single out any individual brand.
“[The vendors] clearly understand what we bring in a very highly differentiated environment,” said Jared Briskin, senior vice president and chief merchant at Hibbett, told Wall Street analysts. “With the focus on the underserved consumer, our increased investments in consumer experience are continuing to put us in a strong position with all of our strategic vendor partners.”
For now, the Air Max promotion gives Hibbett a surface-level vote of confidence from Nike and provides another venue to further the companies’ partnership.
Hibbett expects flat 2023 growth, plans at least 30 more stores
Hibbett continues to scale its brick-and-mortar business, expecting to open between 30 and 40 net new Hibbett Sports and City Gear stores in 2022.
Apparel sales in the retailer’s fourth quarter were up in the mid-teens, while team sports category sales increased in the low-twenties. Footwear saw a mid-single digit decline.
Total net sales for the full upcoming year, which Hibbett reports as fiscal 2023, are expected to be relatively flat compared to its fiscal 2022 results. This outlook implies that comparable sales are expected to be in the negative low-single digits for the full year. Brick-and-mortar comp sales are expected to be in the negative low-single digit range while e-commerce revenue is anticipated to be in the positive mid-single-digit range.
It is anticipated that comparable sales will be in the negative low-teen range in the first half of the year with an expectation of positive high-single digit comp sales in the second half of the year.
Diluted earnings per share are anticipated to be in the range of $9.75 to $10.50, while operating profit is expected to be in the low double digits as a percent of sales.
Capital expenditures are anticipated in the range of $60 to $70 million dollars with a focus on new store growth, remodels and additional technology and infrastructure investments.
Inventory at the end of the fourth quarter was $221.2 million, a 9.5 percent increase compared to the prior year fourth quarter, but Hibbett said the ongoing supply chain constraints have not allowed the retailer to get inventory back to ideal levels.
“We’re confident in our order book, but timing of deliveries remains incredibly fluid,” said Briskin in the earnings call. Based on current estimations, we do expect inventory levels to continue to improve throughout the first half of the year, reaching levels closer to optimum level in the back half of the year.”
Gross margin was 35.1 percent of net sales for the quarter, an approximate 200 basis point decline compared with 37.1 percent of net sales. The dip was primarily due to higher freight costs, shifting launch schedules, additional promotional activity and reducing debt via store occupancy costs.
The retailer ended the fourth quarter with $17.1 million of available cash and cash equivalents, and has no debt outstanding and full availability under its $100 million unsecured credit facility.
Net Sales: Net sales for the fourth quarter increased 1.7 percent to $383.3 million compared with $376.8 million in the year-ago period, and reflected a two-year increase of 22.5 percent over $313 million. After a strong sales trend leading up to the Christmas holiday, traffic and transactions declined in the back half of the quarter.
The company attributed supply chain disruption, most notably in the footwear category, coupled with consumer concern over inflation and an increase in Covid-19 cases driven by the Omicron variant as significant contributors to the sales shortfall.
Comparable sales dipped 1 percent, with brick-and-mortar comparable sales decreasing 1.6 percent and e-commerce comparable sales increasing 1.8 percent. E-commerce sales represented 17.1 percent of total net sales, marking the same percentage of sales as from the period ended Jan. 30, 2021.
For the full year, net sales increased 19.1 percent to $1.69 billion compared with $1.42 billion in 2020, and increased 42.8 percent over two years from $1.18 billion in 2019.
Comparable sales increased 17.4 percent, with brick-and-mortar comparable sales up 21.4 percent and nominally offset by a decline in e-commerce sales of 1.6 percent. E-commerce sales represented 13.8 percent of total sales in 2021, compared to 16.7 digital penetration in the year prior.
Net Earnings: Hibbett generated net income of $17.7 million, or $1.25 per diluted share, compared to $23.9 million, or $1.39 per diluted share for the 13-weeks ended Jan. 30, 2021.
Operating income came in at $23.1 million during the fourth quarter, compared to the $31 million brought in during the prior-year quarter.
Net income across 2021 was $174.3 million, or $11.19 per diluted share, compared to $74.3 million, or $4.36 per diluted share prior to adjustments related to COVID-19 and the acquisition of City Gear.
Operating income was $228.2 million throughout the full year, more than doubling the $98.4 million profit in 2021.
CEO’s Take: Hibbett president and CEO Mike Longo pointed out the “undifferentiated retailers” that lost the ability to buy and distribute product in the wake of the pullout by Nike and others.
“We have that in our guidance, let’s say it that way,” Longo said. “We have a lot of confidence that it is a tailwind to the business, and it will help us offset the headwinds that we’re going to see primarily in Q1 from last year’s stimulus. Therefore, our guidance going forward took all of that into account.”