Check Out This All-Star Retailer

Guess who just had a slam-dunk, home-run kind of quarter. It's a sporting-goods retailer you may never have seen or even heard of: Hibbett Sports (Nasdaq: HIBB  ) .

Competitors Dick's Sporting Goods (NYSE: DKS  ) and Cabela's (NYSE: CAB  ) may have brighter lights and bigger stores. Even Wal-Mart (NYSE: WMT  ) is a big player in the sporting-goods market, with a huge marketing budget and plenty of buying power. But Hibbett Sports has all the right moves.

In case you're just making the acquaintance of this company, Hibbett Sports is essentially the Dress Barn of sporting-goods stores. The small-cap retailer, headquartered in Birmingham, Ala. -- far, far away from major financial centers -- operates some 800 stores in small towns and rural areas across the Southeast and Midwest. Think Ardmore, Okla., and Flowood, Miss.

Sounds like a sleepy business in sleepy towns, doesn't it? But the reality is different. In these smaller markets, Hibbett enjoys cheap rents and limited competition and is able to forge close community ties. And those ties can be lucrative: Hibbett enjoys a strong business in supplying uniforms and equipment to local sports teams.

It's good to be the only game in town
This strategy is working so well, in fact, that Hibbett has enjoyed 10 consecutive quarters of same-store-sales growth. That's consistent with the same-store-sales growth that Dick's has seen but blows Cabela's out of the water. It's all the more impressive when you consider that Hibbett's growth was achieved during the Great Recession, in some of the hardest-hit areas.

In this year's first quarter, for instance, Hibbett reported same-store-sales growth of 11%, driven by increased store traffic as well as rising prices. Overall sales for the quarter rose 14% to $233 million. The good news doesn't stop there. Already anticipating a Q2 bump between the Olympics, jersey sales, and Under Armour's back-to-school programs, management raised guidance for the year to a range of $2.50 to $2.65 a year.

New stores and buybacks: reflected in the stock price
Hibbett's management isn't dwelling on its small-town glory days; the company is expanding. During the Q1 conference call on May 18, CEO Jeff Rosenthal said he has his eye on 400 additional markets in Hibbett's existing 26-state area and that he believes the company could easily grow its base to more than 1,300 stores. Slightly later in the call, he went so far as to say Hibbett "could easily double the chain we have today."

The story gets more interesting when you consider CFO Gary Smith's remarks during the call. Smith described Hibbett's stock as "undervalued" and detailed the company's recent buyback history, including 300,000 shares repurchased in Q1 to the tune of $17 million. Further repurchases are likely even as the company uses some of its cash hoard -- it has $100 million in cash and no debt -- to achieve operational efficiencies and move its corporate offices. This could make for a winning formula for current shareholders.

No matter the relative obscurity of Hibbett's small markets, Mr. Market is already well aware of the company's all-star prospects. The stock has been on a tear in 2012, rising 24%. In the past five years, it's up more than 100%.

The takeway? If you want this all-star on your team, you're going to have to pay up. Better yet, put the stock on your Watchlist and wait for a broader market pullback before you buy.

Catherine Baab-Muguira has no position in any of the companies mentioned here. The Motley Fool owns shares of Dick's Sporting Goods and Under Armour. Motley Fool newsletter services have recommended buying shares of Cabela's and Under Armour, as well as creating a diagonal call position in Wal-Mart Stores. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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