Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

3 Takeaways From Hibbett Sports' Q3 Earnings

By Pearl Wang - Nov 30, 2020 at 10:10AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

While some retailers are struggling, Hibbett Sports had a strong quarter boosted by its strong omnichannel position and in-demand products.

On Nov. 20, Hibbett Sports ( HIBB 6.53% ) reported third-quarter adjusted earnings per share of $1.45 on revenue of $331.4 million, above consensus estimates of $0.45 on $286.4 million. Results were much better than expected, driven by strong omnichannel performance, new customer retention, and well-executed merchandising that provided in-demand products.

While some retailers are managing a slow recovery from COVID-19-related store closures and restrictions earlier this year, Hibbett Sports has benefitted from being in a retail sweet spot related to its sporting goods and athletic gear merchandise. Consumers for much of 2020 have been spending more on sporting goods and athletic casual wear as entertainment and travel options have been limited.

Can the company continue to benefit? Does it have a plan for after COVID-19 effects recede? Here are three takeaways from that latest earnings report that provide a more detailed look at how Hibbett plans to keep its growth going.

Runner lacing up shoes

Image source: Getty Images.

1. Both digital and brick-and-mortar sales were strong

Total comparable store sales increased by 21.2% in the third quarter, vs. an increase of 10.7% in the same period a year ago. While e-commerce revenue expanded by an impressive 50.7%, brick-and-mortar revenue also increased by 17.5% during the quarter. This growth was driven by strong omnichannel capabilities, new customer retention, and "availability of in-demand footwear, apparel, and accessories."

Hibbett saw a big increase in omnichannel activity, which is a boost for overall revenue because customers who shop both in-store and online spend more than other customers. The company is attracting new customers with its best-in-class omnichannel platform.

The retailer believes its loyalty program and targeted marketing are helping to boost its omnichannel revenue. "From an online perspective, we are seeing large increases in traffic as a result of gathering customer information, so all of our files, whether it's email, text, push, etc., we can market to those customers easily. We have a best-in-class omnichannel offering, which also drives traffic and sales. And lastly, our online experience is better than it ever has been," said SVP of Digital Commerce William Quinn.

2. New-customer retention is important to growth

The retailer saw several factors that brought new customers: the shift of spending away from entertainment and travel into solitary outdoor and active products, increased spending from fiscal stimulus dollars, and a shift toward e-commerce.

"We believe that many of the new consumers we [attracted] last quarter and continue to attract will continue to shop with us in the future. In total, we believe that these changes in the competitive landscape and changes in the consumer behavior will result in approximately $20 million to $40 million in incremental sales opportunity that really has only just begun," said CEO Michael Longo on the third-quarter earnings call.

Hibbett has implemented steps to retain its new customers, including a loyalty program and in-store improvements. The company is currently investing in store remodels and refreshes to improve the shopping experience. 

3. Merchandising has been effective

Hibbett's merchandising efforts led to increased sales, as apparel and footwear saw nice gains in the quarter. The apparel segment was boosted by strong sales in fashion apparel, athletic branded apparel, licensed products, and accessories for men, children, and women. Footwear sales saw percentage increases in the "low 20s," helped by performance, lifestyle, basketball, sandals, and boots. The women's footwear segment was particularly strong, outperforming men's and children's.

Beyond the ongoing growth in the athleisure sector in the U.S., Hibbett's also benefiting from the shifts toward more casual and comfortable clothing. More people are working remotely and spending more time at home, leading to more dollars spent on lifestyle and athletic wear. SVP Jared Briskin noted on the third-quarter earnings call, "Our fashion brand performance was exceptional as our focus on denim and fleece in our fall assortment were strong performers."

The sportswear specialist has remodeled a number of its stores to further encourage purchases. The company plans to have 25 of its City Gear stores and 54 Hibbett stores renovated to its new prototype by the end of the fiscal year. There will also be a refresh of some stores in the fourth quarter, which will consist of an updated look, including new sneaker walls and new tables. The refreshes will be much less costly compared to the remodels.

"We are seeing exceptional results from this prototype thus far as our ability to highlight and sell toe-to-head looks has been elevated. Increased focal points, improved graphics, numerous mannequins and elevated sneaker walls are the highlights of this premium new store design," Briskin explained.

Investor takeaway

The consumer discretionary company had a strong third quarter, with a nice recovery in revenue from the second quarter (when there were store closures and disruptions due to COVID-19). Hibbett is also positioned in a sector that's benefited from shifts in consumer behavior and preferences toward wellness and socially distanced athletic activities. Even though there may be some volatility for Hibbett in the near term due to higher COVID-19 cases, the company's strong omnichannel and merchandising capabilities will help support its growth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Hibbett Sports, Inc. Stock Quote
Hibbett Sports, Inc.
$73.59 (6.53%) $4.51

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/07/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.