Update: Hibbett Sports Earnings

| About: Hibbett Sports, (HIBB)

Summary

The company beat 2Q consensus on both the top and bottom lines.

We still have a bullish thesis on the company despite the competitive nature of the industry.

We noted that this quarter could be weak given the tough sporting goods retail environment.

Hibbett Sports (NASDAQ:HIBB) managed to post 2Q earnings that were $0.32 a share (besting $0.31 consensus) and revenues were $194 million (beating $187 million consensus). Sales were up 4.1% y/y and square footage up 6.4% y/y. However, higher expenses cut into earnings. Store operating, selling and admin expenses were 24% of sales - versus 23.4% in 2Q 2013. Gross margin was also down to 33.2% last quarter, while 2Q 2013 was 34.3%. Shares are down 8% since earnings.

It's worth noting that the company's double digit profit margin is more than double the likes of Dick's Sporting Goods and Cabela's. Shares are down 10% since we first covered the company back in May. As we noted, there's still value in the company's business model, stating,

Over 75% of its stores are in small towns, isolated from larger markets and larger competitors. Hibbett's store base, at over 900 stores, is about 60% larger than that of Dick's. However, given the geographical markets that it targets, Hibbett runs less of a risk of saturation. Hibbett's has already identified another 500 markets in the 31 states it operates that would be ideal for Hibbett stores. It plans to open another net 65 stores this year, and management wants to have over 1,300 stores by the end of fiscal 2019.

The company now expects full year 2015 EPS to be between $2.63 and $2.73. That's well in line with consensus estimates. It now trades at a forward P/E of 15.3x, putting its PEG ratio at 1.25 - still below Dick's Sporting Goods and Cabela's.

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