Two days after Dick’s Sporting Goods turned in a banner quarter, Hibbett Sports is following on with more of the same, showing that the athletic sector’s top players are coming out of their Covid-19 slumps in a big way. Hibbett saw net sales for the second quarter increase 74.9 percent to $441.6 million, with e-commerce sales skyrocketing 212.2 percent. Comparable store sales increased 79.2 percent, on the high end of the company’s “excess of 70 percent” estimate reported last month.
In a Nutshell: The sizable online sales bump is fitting not just because of the shifting shopping trends from Covid-19. The sporting goods retailer is an extreme late bloomer in the digital world, launching its e-commerce website just three years ago in July 2017.
Even after essentially tripling its e-commerce sales, the online channel still represented just 15.7 percent of Hibbett’s total net sales in the second quarter, suggesting the company has a long runway for growth. For comparison, e-commerce penetration now stands at approximately 30 percent of sales at Dick’s.
The company operates under two brands, Hibbett and City Gear, which it acquired in late 2018 to bring its combined store total to more than 1,000. The store base has 1,077 locations as of Aug. 1, with Hibbett opening three stores, rebranding four stores to City Gear and closing eight stores in the quarter.
Hibbett ended the second quarter with $217.8 million of available cash, has no debt outstanding and full availability under its $75 million secured credit facility.
Inventory at the end of the quarter was $182 million, a 32.7 percent decrease compared to the prior-year second quarter. The strong brick-and-mortar and e-commerce demand during the quarter was the main driver of the inventory reduction.
Gross margin was 37 percent of net sales for the period, compared with 30.3 percent of net sales last year. The approximate 670 basis point increase was driven by higher sell through, a reduction in inventory valuation reserves and leverage of store occupancy expenses. These impacts were slightly offset by a higher mix of e-commerce sales, which carries a lower margin due to incremental shipping costs.
Due to the ongoing uncertainty from the coronavirus pandemic, the recent expiration of enhanced unemployment benefits, the timing and length of the back-to-school season and the potential for additional government stimulus measures, the company is providing limited guidance for the second half of the year.
The athletic wear and footwear retailer expects a comparable sales increases in the mid-single digits for the second half, alongside diluted earnings per share in the range of 85 cents to $1.00. Additionally, the company expects gross margin improvement of approximately 50 to 70 basis points.
Hibbett also said it has launched its Sole School initiative in more than 80 high schools, in which the retailer will donate money and products to local high school athletics programs starting in the third quarter. Given the current coronavirus crisis, the company is partnering with the selected schools to develop a virtual engagement plan that will protect the safety of the communities. A full rollout of the program is expected by the second quarter of next year to align with the spring sports season.
Net Sales: Net sales for the second quarter increased 74.9 percent to $441.6 million compared with $252.4 million for the year-ago period. Comparable sales increased 79.2 percent, with brick-and-mortar comparable sales jumping 65.2 percent.
E-commerce sales grew by 212.2 percent and represented 15.7 percent of total net sales for the second quarter, compared to 8.6 percent of total sales in the prior year second quarter.
The second-quarter numbers are a strong rebound from the first quarter, when total sales dipped 21.4 percent to $269.8 million. The company believes the increase in overall sales was positively impacted by pent-up consumer demand, temporary and permanent store closures by its competitors, and stimulus money that funneled traffic to its stores and website.
Net sales for the first half jumped 19.4 percent to $711.4 million compared with $595.7 million in the year-ago period, while comparable sales increased 22.2 percent.
Net earnings: Net income for the 13-week period was $40.4 million, or $2.38 per diluted share, a notable turnaround from last year’s second quarter which saw a net loss of $8.8 million, or $0.49 per share.
On an adjusted basis, net income for quarter was $50.0 million, or $2.95 per diluted share, compared with adjusted net loss for the year-ago period of $2.4 million, or $0.13 per share.
Net income for the first half totaled $25.1 million, or $1.50 per diluted share, compared to $19.1 million, or $1.05 per diluted share, in the first half last year. On an adjusted basis, net income was $55.3 million, or $3.30 per diluted share, compared to $27.3 million, or $1.50 per diluted share in the year-ago period.
CEO’s Take: Mike Longo, president and CEO of Hibbett Sports, highlighted that the company’s vendor partnerships have “never been stronger” in spite of the pandemic. Longo noted that more than ever, the partners are valuing Hibbett’s continued focus on providing services to the underserved customer.
“Our business continued to generate significant momentum in a challenging business environment. Our resilient business model and dedicated team members delivered on our commitment of superior customer service with a compelling merchandise assortment,” Longo said. “Our nearly 80 percent comparable sales results were driven by multiple factors, including pent-up consumer demand, temporary and permanent competitor store closures and government stimulus money. We believe that these circumstances yielded increased traffic to our stores and website and provided new customers the opportunity to experience our trademark service. As a result, we were able to deliver these exceptional results.”