Sporting goods retailer Hibbett Sports Inc. (HIBB) reported strong second-quarter fiscal 2014 results with earnings rising 33.3% year over year to 40 cents per share and surpassing the Zacks Consensus Estimate by a couple of cents. The year-over-year surge in earnings per share was primarily driven by strong sales growth and reduced operating expenses as a percentage of sales.
Highlights of the Quarter
Net sales of this Zacks Rank #3 (Hold) company jumped 12.6% year over year to $186.2 million and almost came in line with the Zacks Consensus Estimate of $186.0 million, primarily driven by strong performances at the newly opened stores. By products, Hibbett’s men business performed well while women business was down in the quarter.
Comparable-store sales (comps) for the quarter increased 4.8%, while on a calendar basis it rose 0.3%. Monthly comps reflected a decline of 0.4% each in May and July, while it increased 1.7% in June.
Hibbett’s gross profit surged 13.1% to $63.9 million from $56.5 million in the year-ago comparable quarter. Consequently, gross margin expanded 16 basis points (bps) to 34.3% during the quarter. Increase in gross margin rate was mainly driven by a reduction of 69 bps in warehouse and occupancy expenses as a percentage of sales, partially offset by a decline of 53 bps in product margin due to higher markdowns.
During the quarter, store operating, selling and administrative (SG&A) expenses increased 6.5% to $43.6 million, while as a percentage of revenues, it contracted 133 bps to 23.4%. The year-over-year decline in SG&A expenses as a percentage of sales was mainly due to leverage in salaries and benefits.
Gross margin expansion and leveraged operating expenses boosted the company’s operating margin. Hibbett’s operating margin for the quarter expanded 163 bps to 9.1% compared with 7.4% in the comparable year-ago quarter. In dollar terms, operating income jumped 37.1% year over year to $17.0 million.
Financials
Hibbett ended the reported quarter with a strong balance sheet comprising $80.9 million in cash and cash equivalents, no outstanding debt and $80 million available under its credit facility.
During the quarter, Hibbett bought back 110,361 shares for $6.2 million. As of Aug 3, 2013, Hibbett had nearly $238.1 million remaining under its share repurchase program worth $250.0 million, authorized on Nov 15, 2012.
Stores Update
During the quarter, Hibbett expanded its store base by opening 17 new stores and 3 high-performing stores, while it shuttered 4 underperforming stores. As a result, the company’s total store count at the quarter-end was 892 in 31 states.