Weak guidance from Dick's Sporting Goods (DKS -10.1%), along with some negative comments from analysts following the print, have the entire sporting good sector on edge. The Dick's numbers were alarming enough to push UBS to a rapid-fire downgrade to Hold from Buy.
The general overriding concerns on the category are that consumer spending trends remain unsteady and online competition (Amazon and more) continues to hammer away at pricing.
Notable decliners include Hibbett Sports (HIBB -2.9%), Big 5 Sporting Goods (BGFV -0.4%), Acushnet Holdings (GOLF -0.6%), Cabela's (CAB -0.3%), Sportsman's Warehouse (SPWH -3.1%), Johnson Outdoors (JOUT -0.9%), Vista Outdoor (VSTO -1.2%), Under Armour (UAA -3.2%), Nike (NKE -1.7%), Columbia Sportswear (COLM -0.8%), Finish Line (FINL -2.9%) and Foot Locker (FL -1.8%).
Retail sales were up 4.5% compared to a year ago in April, led by strength in the nonstore retailers (Amazon) and building material & garden equipment categories (HD, LOW). A decent revision to the March number nearly washes out the consensus miss with the headline April tally.
Grocery store sales (KR, SVU, WFM, IMKTA, SFM, SFS, WMK, SFM) disappointed during the month, falling 0.4% month-over-month and only gaining 1.9% on a year-over-year comparison.
The category that includes sporting goods (CAB, GOLF, BGFV, DKS, HIBB) showed a 0.6% improvement from March, but was down 2.4% compared to last year. Bankrupcties are playing a factor in the industry.
Restaurant sales (MENU) kept pace with broad retail in April, a shift from recent trends.
Hibbett Sports (NASDAQ:HIBB) lowers its guidance due to the impact of using markdowns to clear older inventory.
The company expects Q1 comparable sales to fall 4% to 5%. The drop in sales leverage results in Hibbett setting Q1 EPS at $0.94 to $0.97 vs. $1.14 consensus and full-year EPS at $2.35 to $2.55 vs. $2.78 prior and $2.72 consensus.
"We experienced a slow start to the quarter with a double-digit decline in comparable store sales in February, most of which we believe was attributable to a delay in tax refunds. Comparable store sales improved significantly in March to the positive mid-single digit range, but did not offset the decline in February," says CEO Jeff Rosenthal.
"So far in April, we are very pleased with continued comparable store sales in the mid-single digit range, driven by strength in footwear and the successful rollout of our store-to-store/home initiative," he adds.
Border tax fears continue to seep away from the retail sector as more members of the GOP indicate that they support a more traditional style of tax reform. The recent failure of President Trump to get a healthcare bill passed also is indicative of how tricky it might be to see an adjusted border tax policy approved by Congress.
Couple with some recent favorable macroeconomic news, investors are showing some confidence in companies that make and sell clothes.
The group of apparel-focused stocks moving higher today include Destination XL Group (DXLG +8%), Dillard's (DDS +6.7%), Ascena Retail Group (ASNA +6.6%), Stage Stores (SSI +5.7%), J.C. Penney (JCP +7.3%), Hibbett Sports (HIBB +5.1%), Abercrombie & Fitch (ANF +4.3%), Express (EXPR +4%), Kohl's (KSS +3.8%), Land's End (LE +3.4%), Cherokee (CHKE +6.9%), Gap (GPS +4%), G-III Apparel (GIII +6.1%), Oxford Industries (OXM +1.8%), Crocs (CROX +3.5%), Fossil (FOSL +2.1%), Vera Bradely (VRA +2%), Sequential Brands Group (SQBG +2.2%) and Urban Outfitters (URBN +4.1%).
Retail sales edged higher in a month that many analysts think was influenced by a late dispersal of tax refund checks.
Categories showing some relative strength included furniture & home furnishing stores (+0.7% M/M and +4.9% Y/Y) and health & personal care stores (+0.7% M/M and +7.0% Y/Y). Those marks could be be considered positive for retailers such as Ulta Beauty (NASDAQ:ULTA). e.l.f. Beauty (NYSE:ELF), Williams-Sonoma (NYSE:WSM), Pier 1 Imports (NYSE:PIR), La-Z-Boy (NYSE:LZB), Walgreen Boots Alliance (NASDAQ:WBA) and others.
Department store sales (-1.1% M/M, -5.6% Y/Y) were weak once again, while the category that includes sporting goods (DKS, HIBB, SPWH, CAB) sales also fell back (-0.4% M/M, -3.6% Y/Y).
The Amazon (NASDAQ:AMZN)-dominated nonstore retailers category showed the strongest pace of sales in February (+1.2% M/M, +13.0% Y/Y).
Gross margin rate slipped 180 bps to 33% due to markdowns taken to reduce inventory, a negative effect of product mix due to higher footwear sales, and de-leverage of logistics and store occupancy expenses associated with lower comparable store sales.
Store operating, selling, and administrative expenses rate grew 140 bps to 23.8%.
Operating margin rate down 350 bps to 7.7%.
Store count +34 Y/Y to 1,078.
FY2018 Guidance: Comparable-store sales: Low-single digit range growth; Gross margin: relatively flat; Diluted EPS: $2.65 to $2.85; Capex: ~$25M to $30M; New stores: ~50 to 60.
The company says sales increased 0.5% Y/Y to $247M vs. $254M consensus. Comparable store sales were down 2.2% for the quarter.
EPS is seen falling in a range of $0.53 to $0.55 vs. $0.68 consensus.
"We were disappointed with sales in the fourth quarter. Weaker traffic during the holiday season and lower than expected sales in apparel and equipment led to a comparable store sales decline," says CEO Jeff Rosenthal.