Hibbett Q2 Not As Bad As Feared: Analyst's Spotlight On Lower Freight And Logistics Costs

Telsey Advisory Group analyst Cristina Fernandez reiterated an Outperform rating on Hibbett, Inc. HIBB, with a price target of $60.00.

Hibbett reported a second-quarter FY23 sales decline of 4.6% year-on-year to $374.88 million, missing the analyst consensus of $376.11 million. 

However, the analyst thinks Hibbett's Q2 was not as bad as feared, with expectations having been lowered after Foot Locker, Inc.'s FL comments earlier this week around a soft back-to-school and more promotional outlook for 2H23.

Q2 gross margin contracted 160 basis points Y/Y to 32.8%. This reflected a 215 bps decline in the product margin due to higher

promotional activity and 100 bps of occupancy deleverage, partially offset by lower freight and logistics costs, notes the analyst.

While Hibbett's comp came in below expectations, the shortfall was slight at (7.4%) vs. the FactSet (FS) consensus of (7.0%) and TAG at (6.0%).

However, Fernández is particularly curious about the company's assumptions for 2H23, given a still uncertain macro environment and high inventory balance (+14% YoY per store).

Hibbett maintained its 2023 EPS guidance of $7.00-$7.75 vs. Telsey Advisory Group at $7.40 and Fact Set at $7.18. 

Total sales are expected to be flat to +2%, including a 53rd week vs. analyst's estimate at 1.2% and FS at 0.4%.

In FY23, the analyst expects the margins to contract due to higher promotions, store occupancy deleverage, and SG&A

expenses.

However, the company expects SG&A expenses (ex depreciation) to deleverage 50-70 bps to 23.3%-23.5% vs. the analyst's expectation of 23.5% due to new store growth, wage inflation, higher incentive comp, and an increase in data and transaction processing fees.

Price Action: HIBB shares are trading higher by 22.87% to $45.29 on the last check Friday.