Shares of Hibbett Sports (NASDAQ:HIBB) tumbled 21.2% last month, according to data from S&P Global Market Intelligence, as the sporting-goods chain continues to struggle with falling sales and mounting losses.
After falling 12% in April and 11% in May following ill-received first-quarter results, Hibbett's downturn accelerated when it reported another poor showing in the second quarter. The stock plummeted more than 30% in a single day in July after Hibbett shocked investors by preannouncing a 10% decline in Q2 comparable-store sales, brought about by "very challenging sales trends."
Hibbett's slump extended into August, as its stock was once again hit upon the release of its second-quarter results on Aug. 18. Comparable-store sales declined an even worse-than-expected 11.7%. Net sales -- which benefited somewhat from Hibbett's questionable decision to open 21 new stores during the past year despite its poor comps -- fell 9.2% to $188 million. In turn, the company generated a net loss of $3.2 million for the quarter, or $0.15 per share. Worse still, Hibbett slashed its fiscal 2018 full-year earnings guidance to $1.25 to $1.35, down sharply from its prior forecast of $2.35 to $2.55, as management expects "continued soft sales for the remainder of the year."
After these vicious declines, Hibbett's stock has lost two-thirds of its value in 2017. Unfortunately for shareholders, there's little evidence that it can rebound in the years ahead. Consumer shopping habits are shifting online, and it will be difficult for a primarily brick-and-mortar retailer like Hibbett to compete with e-commerce titan Amazon.com and other more tech savvy competitors in this arena. Hibbett did recently launch a new website, but it's likely to be too little, too late.
The sporting-goods chain's shares are currently trading at less than 10 times earnings, if Hibbett can hit the midpoint of its EPS guidance -- although that's a big "if" considering how badly it missed its own estimates in the second quarter. Yet even at this valuation, Hibbett's current stock price does not adequately reflect the existential risk to its business model that e-commerce represents. Thus, as I warned back in April, investors may be best served by staying well clear of Hibbett's stock.