• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Consumer Discretionary

Opportunity in Downtrodden Retail Stocks Hibbett, Big 5

While I am not typically a fan of retail in general, I do like 'fifty-cent dollars' no matter how ugly they are.
By JONATHAN HELLER
Mar 02, 2018 | 12:00 PM EST
Stocks quotes in this article: HIBB, BGFV

While the markets continue to gyrate, I've continued to find potential opportunities in the downtrodden small specialty retail names that suffered mightily during much of 2017. While I am not typically a fan of retail in general, I do like "fifty-cent dollars" no matter how ugly they are. The great purge for some of these names occurred in August; while the broad markets were humming some specialty retailers were being left for dead.

Some have recovered somewhat, and demonstrated that the market overreacted. Hibbett Sports (HIBB) , a member of my 2018 Double Net Value Portfolio is a great example. After opening 2017 at $33, shares bottomed out intraday at $9.40 on August 18th. Since then, some better than expected results, and a "correction of the correction" have pushed shares above $25.

Preliminary fourth quarter results also point to a good quarter, a rise in same store sales, and earnings that should beat the consensus. While I still have a position in HIBB, I reduced it in late January. I may sometimes be among the first to arrive on the scene of taking a position in these distressed situations, but usually not the last to leave. Sometimes that means leaving money on the table, but that's ok.

I used some of the proceeds of the HIBB sale recently to take a position in another down and out specialty retailer, Big 5 Sporting Goods (BGFV) , also a member of my 2018 Double Net Value Portfolio. This name also suffered through a rough 2017, but unlike HIBB, the stock has not recovered. In fact, it trades below where it did after the August purge. There are good reasons for that; the company reported a 9.4% same store sales decline for the fourth quarter, declining margins and a net loss for the quarter. Management pointed to a dry and warm December as the major culprit for the bad quarter; namely a 50% decline in sales of cold-weather products.

Currently yielding 9.5%, the market is expecting a dividend cut for BGFV, and frankly, I did not take a position with the belief that the dividend will be sustained, while others may disagree. But at 1.4 X net current asset value (current assets minus total liabilities) and 10.5 X 2019 consensus estimates, the punishment the stock has taken may have been too severe. Interestingly, management continues to buy back stock, including 795K shares for the full year, and 118K during the fourth quarter, and has another $15.7 million available under the current $25 million repurchase program. I am intrigued when management continues to buy back stock when times are tough, and many investors have written off a name. The hope is that such a move shows confidence, and not blind faith, but time will be the judge.

BGFV ended the year with about $49 million in debt, and $7 million in cash. I've definitely seen better retailer balance sheets, and I've also seen worse. The question is whether the recent period is the worst we'll see for this 435 store chain, with an obscenely low enterprise value of $171 million, or less than $400K per store.

This is investment dumpster diving at its finest, and is not for everybody.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Jonathan Heller was Long HIBB, BGFV.

TAGS: Investing | U.S. Equity | Consumer Discretionary | E-Commerce | Sports business | Stocks

More from Consumer Discretionary

I'm Warming Up to Carnival, but Not Ready to Climb Aboard Yet

Jonathan Heller
Jun 27, 2022 10:00 AM EDT

The stock price of a cruise line operator is becoming more reasonable, but its heavy debt load remains a huge concern.

There's No Clear Sailing Ahead for Carnival: Here's How to Play It

Stephen Guilfoyle
Jun 24, 2022 11:32 AM EDT

CCL did lose a lot of money, much more than anticipated, but there are positives.

Bearish Bets: 3 Well-Known Stocks You Should Consider Shorting This Week

Bob Lang
Jun 19, 2022 10:30 AM EDT

These recently downgraded names are displaying both quantitative and technical deterioration.

Beyond Meat Gives Investors Something to Chew On

Bruce Kamich
Jun 15, 2022 1:50 PM EDT

This veggie name is rallying sharply after a summer promotion announcement, but here's my beef with the charts.

Tapestry's 50% Correction Makes the Stock More Stylish

Bruce Kamich
Jun 15, 2022 10:16 AM EDT

Let's check the charts of TPR.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:04 AM EDT PAUL PRICE

    Two Good Signs -- Especially for Small-Cap Investors

  • 12:10 AM EDT PAUL PRICE

    More Insider Buying in American Woodmark (AMWD)

    American Woodmark , which I've discussed here fr...
  • 08:55 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    The 10 personality traits of successful traders an...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login