Deutsche Bank Prefers Dicks Sporting Goods After Hibbett Sports' Weak Outlook

Deutsche Bank favors Dicks Sporting Goods Inc DKS after peer Hibbett Sports, Inc. HIBB issued a weak forecast for the fourth quarter and fiscal 2018.

Trends In The Space

Hibbett said its comps were hit due to weaker traffic during the holiday season and lower than expected sales in apparel and equipment, while promotional costs hurt margins.

“[I]t seems as if a warmer than hoped holiday period is leading to string of weak data points. This includes weak sales trends from Under Armour Inc UA UAA, Big Five and now HIBB, as well as some softness from Columbia Sportswear Company COLM,” analyst Mike Baker wrote in a note.

Hibbett said fourth quarter comps would be down 2.2 percent, missing estimates of +1.1 percent, despite cycling a negative comp from last year. The weak comps will lead to an EPS miss at $0.53 -$0.55 versus consensus of $0.66.

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Worse still, for fiscal 2018, the company is guiding EPS to $2.65–$2.85, lower than consensus of $3.06. Comparable store sales are expected to be in the flat to low-single-digit range.

Ratings And Preferences

As such, Baker prefers the Dicks Sporting Goods, saying that Hibbett’s comps have been weak throughout the year, while Dicks has shown acceleration tin the same period.

“We maintain our Hold rating on HIBB. We maintain our Buy rating on DKS as we think they will continue to take market share and beat 2017 consensus comp and EPS estimates,” Baker highlighted.

But, the analyst noted that Dicks may not be completely immune to weaker trends, especially given its higher sales mix of apparel and equipment. Apparel and equipment make up 29 percent and 22 percent of Hibbett’s mix, while they account for 35 percent and 45 percent for Dicks.

“Therefore, we think there could be some risk to the consensus estimate of 4.9 percent for DKS 4Q. We are at 4.0 percent,” Baker added.

Hibbett shares plunged to a new 52-week low of $28.26, while Baker has a price target of $36.

At last check, shares of Hibbett plunged 12.33 percent to $29.15. Dicks Sporting also fell 1.64 percent to $51.56.