Hibbett Sports (NASDAQ: HIBB) is a company headquartered in Birmingham, Alabama. It is the leading sportswear retailer in the U.S. with nearly 1100 Hibbett Sports and City Gear specialty stores., located in 35 states across the country.
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About company
Hibbett has a rich history of customer service spanning over 75 years thanks to the convenient location, excellent personalized customer service and shoe access, clothes and accessories from leading brands, like Nike, Jordan and Adidas.
In Russia, the company's shares are traded on the St. Petersburg Stock Exchange with 25 October 2019 under the ticker HIBB. Despite a short-term decline, stocks are predominantly bullish in the long term.
history of the company. The company was founded in 1945. Then Rufus Hibbett, PE teacher at a secondary school in Florence, Alabama, founded Dixie Supply Company, specialized in sporting goods retail, marine and aviation equipment. In 1952, two of his sons joined the business., after which the company name changed to Hibbett & Sons. The company's strategy has since changed to sales of team sports products.. In the mid-1960s, the company changed its name to Hibbett Sporting Goods..
In 1980, the Anderson family bought the company, invested in professional management and continued to expand the company's store base at a moderate pace. The unique operating strategy was to, to target local markets with populations from 30 000 to 250 000 human.
By the early 1990s, Hibbett's flagship stores were Hibbett Sports' flagship stores.. 5000 square feet, located in large shopping centers. The company adapted the development concept to the size, demographics and competitive conditions in their small markets.
The company founded Sports Additions stores, occupied small retail space of 1500 square feet. About 90% goods consisted of sports shoes, and the rest consisted of headwear and a small assortment of sportswear. These stores offered a wider and more fashionable range of sports shoes., than Hibbett Sports flagship stores. At the same time, Sports Additions stores were located in the same shopping centers, like Hibbett Sports stores.
In 1994, the company already had 41 Hibbett Sports store and 8 Sports Additions stores, sales were $40.12 million per year. At the same time, competition from large sporting goods retailers has increased., including those who used the format of supermarkets. Hibbett has also decided to take the path of adapting to the supermarket format with a full line of quality sporting goods for both individual, as well as for team sports.
In 1995 the company was managed by new investor Saunders Karp & Co. opened its first supermarket 25 000 square feet called Sports & Co. in Huntsville, Alabama. The supermarket favorably differed from its competitors by the presence of golf courses and basketball hoops. Periodically, performances by famous athletes were held in the supermarket.
Количество магазинов по состоянию на конец 1996 года составляло уже 67, а продажи — 67,1 млн долларов США в год. Среди продаваемых брендов на тот момент уже были Adidas, Asics, Champion, Converse, Columbia, Dodger, Easton, Everlast, Line, Louisville Slugger, K-Swiss, Mizuno, Nike, Pro Line, Reebok.
In 1997, the number of stores had already reached 77. A record number of outlets were opened - 22 for the year. Nike products were the main driver of the increase in purchases. At the end of 1998, the number of stores was already 120, geographical coverage included 14 southeastern US states, expanding into Oklahoma and Arkansas in 1998. In 1999, the number of stores grew to 135, covering 16 states.
The 2000s and 10s also saw steady growth in the number of stores and sales revenue.. In 2017, the company switched to the practice of electronic sales.
Composition of the group of companies. The group's main subsidiaries are Hibbett Sports, Hibbett Team Sales, Sports Additions, Sports & Co. All of these companies are retailers of sportswear., shoes and accessories. Probably, this is not a complete list, since the company itself does not disclose information about its full composition, what can be considered its weakness, because such secrecy is unlikely to please investors.
Shareholders. In the share capital structure, the largest share belongs to such a reputable investment company, как BlackRock Fund Advisors. This is a positive factor for the stock outlook., because it largely determines its investment reputation. The second place is occupied by another large and world-famous investment company - The Vanguard Group.
A good sign for stock prospects is a large stake, owned by retail investors and free float component. This indicates the high liquidity of securities.
Key figures. Chief Executive Officer - President Michael E. Longo. He joined the company as CEO and President in December 2019.. He previously served as Chief Executive Officer of City Gear., LLC, located in Memphis, where he led the company's successful acquisition in 2018 by the Hibbett Sports group. Prior to joining City Gear, he held senior positions at AutoZone, from Vice President in 1996 to Executive Vice President in 2005.
The second most important top manager of the group of companies - Robert J. Volke. He was appointed CFO of the company in April 2020. He previously served as Interim CFO of Fleet Farm LLC., where he served as Vice President, accountant and corporate controller. Volke received his Bachelor of Science in Accounting from Indiana University..
The third most important person in the company is David M. Bank. He was named Senior Vice President and General Counsel in March 2020.. Got a job in a group of companies in March 2005, and in April 2008 was appointed to the current position.
In addition to his role in the group of companies, Bank serves on the Board of Directors of the Federal Reserve Bank of Atlanta., he is also a board member of the American Arbitration Association, Court of Arbitration for Sport in Lausanne, Switzerland, Independent Dispute Resolution Commission of the NCAA and the National Association of Corporate Directors. He is also certified specialist IAPP Information Protection.
Business geography. The Hibbett Sports Group of Companies is a U.S.-only business.. Stores are located in 35 States, in total, as of April 2021, there were 1081. They are mainly located in the east., southeast and central US. Such geographical narrowness can be considered a weakness of the company., because it does not hedge risks through geographic diversification, especially against the backdrop of not the best economic indicators in the United States.
What he earns
Products and brands. The group of companies operates under the Hibbett Sports and City Gear trademarks.. In the range of almost all major brands of sports shoes and clothing.
Products are divided into three groups: clothes, footwear and equipment. In the sales structure during 9 months of 2021 dominated by shoes, but its share dropped sharply in the third quarter of 2021. Hypothetically, this can be attributed to the worsening situation with coronavirus, which led to, that people are less likely to leave their homes, while actively exercising consumers still continue to do so at home, which leads to the preservation of demand for equipment and clothing with a decrease in demand for shoes.
On the whole, despite takeover of City Gear, specializing in the sale of clothing, its share is still significantly inferior to the share of sports shoes. Although, certainly, It is now difficult to call a group of companies a purely shoe retailer.
Group sales structure for the third quarter, million dollars
| 3к2020 | 3к2021 | The change | share | |
|---|---|---|---|---|
| Shoes | 201,05 | 231,37 | 15,08% | 60,61% |
| clothing | 90,38 | 104,60 | 15,73% | 27,40% |
| Equipment | 39,96 | 45,76 | 14,52% | 11,99% |
Group sales structure for 9 Months, million dollars
| 9м2020 | 9м2021 | The change | share | |
|---|---|---|---|---|
| Shoes | 675,27 | 824,09 | 22,04% | 63,01% |
| clothing | 268,56 | 346,13 | 28,88% | 26,47% |
| Equipment | 98,99 | 137,62 | 39,02% | 10,52% |
Financial indicators. For 9 months of 2021, all financial indicators increased compared to the same period of the previous year. Basic and diluted earnings per share showed the highest growth, as well as net income. A significant excess of the growth of these indicators over the growth in monetary volumes of net sales and cost of goods sold indicates an increase in the attractiveness of investments in the shares of the group of companies.
The increase in margin is due to a combination of many factors. This is a decline in advertising spending against the backdrop of some recovery in the US economy after the peak of the pandemic in the second half of 2021, transition from e-commerce with additional shipping costs to physical sales due to the removal of the lockdown, the absence of additional costs for the assessment of reserves and other things due to the reduction of uncertainty, caused by the pandemic.
Should not be discounted either, that in 2020 the retail chain City Gear was acquired, which resulted in additional costs., in 2021, these costs were not.
But in the third quarter, the indicators no longer showed such dynamics., as for 9 months of 2021. Most likely, this is due to the general decline in the US economy in recent times and the negative expectations of the population, associated with the discovery of a new strain of coronavirus.
Financial performance for 9 Months, million dollars
| 9м2021 | 9м2020 | The change | |
|---|---|---|---|
| Basic earnings per share | 10,13 $ | 3,04 $ | 233,22% |
| Diluted earnings per share | 9,74 $ | 2,98 $ | 226,85% |
| Net profit | 156,654 | 50,334 | 211,23% |
| Operating profit | 205,063 | 67,386 | 204,31% |
| Gross margin | 511,809 | 364,78 | 40,31% |
| Net sales | 1307,837 | 1042,827 | 25,41% |
| Cost of goods sold | 796,028 | 678,047 | 17,40% |
Financial indicators for the third quarter, million dollars
| 3к2021 | 3к2020 | The change | |
|---|---|---|---|
| Cost of goods sold | 243,02 | 204,35 | 18,93% |
| Net sales | 381,72 | 331,38 | 15,19% |
| Basic earnings per share | 1,75 $ | 1,52 $ | 15,13% |
| Diluted earnings per share | 1,68 $ | 1,47 $ | 14,29% |
| Gross margin | 138,70 | 127,04 | 9,18% |
| Operating profit | 33,41 | 33,17 | 0,75% |
| Net profit | 25,19 | 25,27 | −0,29% |
Plans and prospects
The pandemic is playing a positive role for the sporting goods industry as a whole, regardless of, is it about clothes?, shoes or equipment. In 2022, the popularity of these product groups will continue, despite problems with production and delivery, as well as low stocks, which do not make it possible to fully organize all sorts of large-scale sales like Black Fridays and Cyber Mondays.
The most intensified, according to analysts of US sports organizations, sales of goods for hiking and tourism, as people increasingly seek to escape cities during the pandemic, which, due to overcrowding, carry the risk of infection.
According to members of the Sports Conference & Fitness Industry Association’s Trends & Insights 2021, Other socially distancing sports could become 'stars of the industry': run, tennis, a ride on the bicycle.
The conference also voiced the hypothesis that, what, even if the coronavirus is defeated, the American sports goods market by inertia until 2025 will grow annually by 9%: people, fearful for their health, accustomed to an active lifestyle.
All of these factors will positively affect the stock price.. The plans of the group of companies themselves can also have a "green" impact. In 2022, the company will invest about $70 million in organic growth projects. It is planned to continue the buyback of own shares. Dividends to shareholders will be paid on 0,25 $ per share quarterly.
Hibbett counts, that at the end of 2021, financial results will show an increase compared to the previous year, what, undoubtedly, in the short term will cause the share price to rise. This is due to the fact, that during the year the company attracted new customers to its stores and to its multi-channel platform. The influx of customers was due to unsatisfied demand, market disruptions and government stimulus payments. Accelerating e-commerce adoption will continue to benefit its omnichannel business. The company's stable relationships with suppliers also have a positive effect on its activities..
Risks
The most significant risk comes from another wave of COVID-19, caused by a new strain of coronavirus. As already mentioned above, coronavirus contributed to the development of the market. But the economic crisis can do its dirty deed, and there is an example: in 2020, the sporting goods industry contracted for the first time since the financial crisis of 2007-2008.
Most brands, retailers and manufacturers ended the year significantly in the red, despite the recovery of activity after the first and before the second wave of blocking, related to COVID-19. This is especially true for sales of goods for sports., which are done in the halls, because people are afraid, that such sports facilities can be a hotbed of infection.
Risk, however, leveled by the, that a similar phenomenon continued only in the first months of the pandemic, when a hard lockdown was introduced, in the future, the company, specializing in the production and trade of sporting goods, increased financial performance and share price.
But as far as disrupting the supply chain, then this can continue with a new wave of COVID-19 much longer, than with previous, and none of the experts can predict, how long will the next wave last. One can only hope, that the increase in demand for goods for sports at home and individually outside the gym compensates for these losses to a certain extent.
conclusions
The shares of the group of companies have serious upside potential, despite, that they fall short. The short-term negative dynamics can be attributed to the insufficiently strong results of the third quarter of 2021. However, the company's 2021 results are encouraging, what, if the predictions come true, stocks resume rally.
Risk factors are generally not very significant, since the coronavirus rather positively affected not only Hibbett, but also for the industry as a whole.. But if the new strain has a stronger impact on the US economy, than previous, the situation around the issuer's shares can be unpredictable. In the event of a significant deterioration in the economic situation in the absence of clear forecasts, it is better to approach the purchase of company shares very carefully.
Nevertheless, it makes sense to buy Hibbett Sports shares.. The company managed not only to overcome the crisis of 2020, but also significantly increase financial performance. If the crisis resumes next year, then its consequences for the issuer's shares will be less serious, than in general for the US stock market.
