On another otherwise dreary Friday for the markets, one sporting goods retailer bucked the trend.
It was indeed a great day for Hibbett Sports Inc. (HIBB) , a member of my 2019 Double Net Value Portfolio, as it rose more than 20% after reporting fourth-quarter earnings. Earnings per share of 57 cents were 18 cents ahead of consensus estimates, while revenue of $306 million easily beat the $282 million consensus.
Same-store sales rose 3.8% (excluding City Gear) and the chain broke the $1 billion annual sales mark for the first time in its history. City Gear, which Hibbett acquired in late October, was responsible for $49.1 million in fourth-quarter sales, and online sales climbed 60%, accounting for 10.6% of total fourth-quarter sales. This is still a company in transition, as it intends to open 10 to 15 new stores this year while closing 95 others.
HIBB has been a serial repurchaser of its stock and has reduced its shares outstanding by 27% over the past five years. However, it slowed that activity considerably in the fourth quarter, buying back just 3,900 shares. For the full year, Hibbett bought back nearly 776,000 shares. The plan for the coming year is to repurchase $10 million to $15 million in stock, but also to repay the $35 million the company borrowed to acquire City Gear.
Company guidance for this year is for earnings per share in the range of $1.80 to $2.00, which implies a forward price-to-earnings (P/E) ratio in the range of 11x to 12x earnings. HIBB shares now trade at about 2.5x net current asset value.
Yes, the retail landscape is still changing, but there is money to be made in certain situations as the markets prematurely price in the death of brick and mortar.
Back to Friday's action: The trouncing smaller names took relative to their larger counterparts on Friday -- with the Russell 2000 and Russell Microcap indices falling more than 3.5% even as the S&P 500 was down 1.9% -- is a bit concerning. Smaller names are typically the first to go when investors become skittish, and we'll see if this is the beginning of a larger move or just simply some profit taking. The Russell 2000 (up 12%) and Russell Microcap Indexes (up 11.3%) are still doing quite well year to date following a very bad end to 2018.
Who knows, maybe a little downside volatility will reveal some gems.