Hibbett Looking Strong Despite Net Income Drop

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While many retailers face tremendous disruption from e-commerce, sporting-goods stores have some respite in that customers tend to want to see their gear in person. Still, not all are strong performers, especially in this challenging consumer-spending environment. Luckily for its investors, Hibbett Sports may be on the industry's strongest performers with a nice growth runway to keep things moving in the long-term. In its most recent earnings, Hibbett came in ahead of analyst expectations, but the stock still slid as investors and analysts didn't care for the year-over-year declines. Of course, quarterly earnings reports aren't everything, so let's look and see what the implications are for the longer term.

Earnings recap
Despite a 7% drop in net income from the year-ago quarter, Hibbett came in one penny ahead of analyst expectations at $0.66 per share. Sales grew 2.5% to $208 million, but increased expenses kept net income from joining in the gains.

The company enjoyed top line growth from its new stores but was limited by an extra week in the comparable quarter from last year -- responsible for a $14 million difference this year.

Calendaring aside, things looked pretty good. Same-store sales grew a chunky 4.8%, with monthly comparables in August and October looking especially appealing at 8.7% and 7.3%, respectively. September was quite weak, with numbers down 2.3%, but management seems satisfied with the results thus far in November.

As mentioned, expenses ballooned by 8.6%, partially because of higher salaries and benefits. The company opened 16 new stores and four high-performing stores while closing four underperformers.

Looking ahead to fiscal 2014, the company narrowed its expectation for EPS to $2.68-$2.77.

The stock took a minor hit because of the net income drop, but things look pretty good for the company. Here's why it can go higher.

Bigger shoe size
Hibbett is trying to become the biggest sporting-goods provider around, and it's moving fast. For 2014, management expects to open up to 75 new stores and close between 15 and 20. The long-term goal is to hit 1,500 locations in the nation. Currently, Hibbett has just over 900.

With solid same-store sales figures (which applies only to stores open more than one year), investors should feel good about the ROI the company is receiving on its invested capital. Store growth is great and helps that top line grow fast, but it isn't a sole indicator of a healthy business. The fact that Hibbett stores are continuing to perform well after opening is a good sign for the company's longevity.

At around 20 times forward earnings, Hibbett isn't the cheapest play in the book, but it might be justified given the growth prospects. Hibbett's balance sheet looks great, with zero debt on the books. In fact, the company could probably lever up to increase shareholder value. For growth investors, this may be one of the best options in sporting goods, or even retail at large.

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The article Hibbett Looking Strong Despite Net Income Drop originally appeared on Fool.com.

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