Hibbett Sports Says Some Interesting Things: Can They Catch Up in Ecommerce?

In its conference call and 10Q filing for its May 4th quarter, Hibbett said some interesting things about what it’s doing.  Let’s take a brief look at Hibbett and its numbers then talk about how Hibbett is trying to adjust to the changing retail world after its very late start.

Hibbett describes itself as “…a leading athletic-inspired fashion retailer primarily located in small and mid-sized communities across the country.”  As of May 4, it had 1,144 stores in 35 states, “…composed of 985 Hibbett Sports stores, 141 City Gear stores and 18 Sports Additions athletic shoe stores.”

Hibbett acquired City Gear on November 5, 2018 for $88 million.  “Our Hibbett Sports stores…are located primarily in strip centers which are usually near a major chain retailer such as Wal-Mart. Our City Gear stores are located primarily in strip centers. Of our store base, 78% are located in strip centers, which includes freestanding stores and 22% are in enclosed mall locations as of May 4, 2019.”

“Our primary strategy is to provide underserved markets a broad assortment of quality brand name footwear, apparel, accessories and athletic equipment at competitive prices in conveniently located full-service stores and online.”

Now, I confess to not quite knowing what an underserved market is in the days of the internet when you’re selling the same brands as everybody else.  And, as I wrote before, Hibbett was late- almost unbelievably late- in developing an online presence.

Sales for the quarter rose 25.5% from $274.7 to $343.3 million.  Comparative store sales, including ecommerce but not City Gear, rose 5.1% from last year’s quarter.  Ecommerce represented 8.3% of total revenue up from 7% in last year’s quarter.  Not too shabby given their really, really, really late start.

City Gear provided revenue of $59.4 million during the quarter.  That’s all but $9.2 million of the quarter over quarter gain.  Without City Gear revenue rose just 3.3%.

Gross margin fell from 35.2% to 34.5%.  The decline was the result of higher freight expense for ecommerce as well as expenses associated with the City Gear acquisition and was offset to some extent by leveraging expenses over higher sales.

Store operating expenses fell from 22.5% to 21.6% as a percent of revenues.  The improvement was due to leveraging costs over higher sales and to a compensation reduction of $1.3 million due to employee departures.

Pretax income rose from $28.5 to $37.3 million.

Enough about the financial statements.  Take a look at this chart from the 10Q.

 

 

 

 

 

62.3% of revenues was from footwear in this year’s quarter.  Last year it was 58.0%.  Footwear, then, is critical to Hibbett, and the conference call contained a couple of related comments about the footwear business and how they are trying to connect it to other products.

Senior Vice President and Chief Merchant Jared Briskin notes, “Apparel with strong connectivity to our footwear business performed exceptionally well…”  He went on to note that, “Focus on sneaker connectivity within our bag and sock business drove significant improvement.”

And then he says, “Our focus on improving and scaling our sneaker business while connecting our apparel and accessory business is working and presenting a differentiated experience in our markets.”

Then, in case you hadn’t for some reason gotten the point yet, he states, in response to a question, “So on the apparel side, our focus is continuing to connect our apparel business to the sneaker business and ensuring from a trend perspective that we have the right hookups to sell the outfit. We’re certainly looking at that in our accessory business as well where we’re seeing a nice change in the business.”

They aren’t any more specific than that, but I’m intrigued.  Is selling an outfit based on the shoes a thing?  If they can really tie incremental sales into shoes, where they seem to be focused, I can imagine it as an advantage.  But how exactly?  More details would be good.

Next, they’ve got a plan to close 95 underperforming stores this fiscal year and have already closed 25 of them.  I see that as a positive.  Any retailer with this many stores who’s been this late to the ecommerce party almost has to have a bunch of stores that need closing and sooner rather than later makes sense.  Depending on there leases it may be costly, but I like that they are getting on with it.

So far, they’ve opened three new stores and rebranded two Hibbett stores to City Gear in addition to the closings.  Feels like they have a plan and I will watch with interest as we see how they integrate City Gear.  “…our e-commerce penetration there is very low and we have plans and timelines to quickly advance this business,” says CEO Jeffry Rosenthal.

They also note that their very clean inventory is improving margins on clearance items.  I love inventory leading to higher margins even if you miss a few sales.

There’s the discussion, common among almost all retailers at this point, about omni-channel initiatives, their loyalty program, testing a new store concept for Hibbett (no details provided) and “…how to get things to customers faster in more efficient ways…”

Hibbett has a solid balance sheet, has seen the omnichannel light, and is moving aggressively to catch up.  They are way behind but perhaps closing the gap.  We’ll see.