Is it possible for a retailer to actually raise guidance in the midst of the worst consumer spending outlook in decades? Hibbett Sports (Nasdaq:HIBB) did just that after reporting fiscal third quarter results last week.
Hibbett Sports is a U.S. sporting goods retailer with 726 stores in 24 states, clustered mostly in the Southeast and Southwest.
Raised Guidance
Last week, the company reported earnings of 26 cents per share on revenue of $140.1 million. The chain's same-store sales gain of 0.4% for the quarter may not be a spectacular result, but it is certainly something to boast about in the current economic climate. Extending its winning streak, Hibbett Sports raised guidance for fiscal 2009 (ending January 31) to a range of 97 cents to $1.04 per share, with a same-store sales assumption between flat and up 2% for the holiday quarter. The implied expression of confidence in the holiday season was in marked contrast to other retailers that have been nothing but gloomy during the current earnings season. (Get an overview of where companies' expectations fit into the bigger picture by reading Can Earnings Guidance Accurately Predict the Future?)
During its conference call, management at Hibbett Sports gave a more linear outline of same-store sales during the quarter:
- August: Up 4%
- September: Down 3.7%
- October: Down 1%
Even in November, when things seemed to fall off a cliff for the economy, in general, and for the retailing sector, in particular, Hibbett Sports reported a 1% same-store sales gain for the first two weeks. By contrast, AnnTaylor (NYSE:ANN) stated that it expects same-store sales to fall 25% during the holiday season. (Read more about same-store sales in Analyzing Retail Stocks.)
Despite the strong sales, however, Hibbett is preparing for a deteriorating environment, with the number of new store openings next year being cut back to 60. Also, the company is delaying the release of fiscal 2010 guidance information until March 2009, partway through the company's first quarter.
Unique Strategy
So how has the company managed to keep its head above water at a time when so many other retailers are drowning? Hibbett Sports focuses on smaller markets with populations of 30,000 to 100,000 and it doesn't shy away from competing with Wal-Mart (NYSE:WMT). In fact, Hibbett Sports proudly overlaps Wal-Mart in almost every state in which it operates.
The company also stocks a much larger selection of athletic equipment and apparel. In addition, Hibbett Sports trains its sales force to have a deep knowledge of the product lines it carries - a strategy that attracts customers who seek service and expertise, rather than just low prices.
Competitors of Hibbett Sports so far have not had such an easy 2008. Dick's Sporting Goods (NYSE:DKS) cut its outlook last week citing "current business trends, the uncertainty in the overall economic environment and the unpredictability of consumer behavior approaching the holiday season." Big 5 Sporting Goods (Nasdaq:BGFV) reported a same-store sales decline of 6.6% in the third quarter.
Bottom Line
Hibbett Sports reported a slight increase in same-store sales during the third quarter and increased guidance for the full year, as its fairly distinctive business model has protected it from the effects of the challenging economic environment thus far.
Get an overview of valuations and other factors important to retailers at Industry Handbook: The Retailing Industry.
