What happened
Shares of athletic retailer Hibbett (HIBB) soared on Friday following the report of relatively strong financial results for its fiscal second quarter of 2024. Both revenue and profits were down but not as much as the market had feared. And that's why Hibbett stock was up 20% as of 11:30 a.m. ET.
So what
The athletic retail space is generally slowing down right now, so investors already had low expectations for Hibbett. And true to the general slowdown, Hibbett reported net sales of about $375 million in Q2 (which ended in July) -- almost a 5% drop year over year.
Net sales might have fallen even more for Hibbett, but management stimulated demand as much as possible by offering promotional discounts. The flip side of this strategy, however, is that it hurts profit margins. Accordingly, the company's net income fell from $24.7 million in the prior-year period to $10.9 million in Q2.
Hibbett's profit decline was sharp, but it was better than what some analysts had predicted. And because of outperforming relative to expectations, Hibbett stock soared today.
Now what
When it comes to profit guidance, Hibbett also turned a lot of heads by reiterating guidance. Management expects earnings per share (EPS) of $7.00 to $7.75 for fiscal 2024, meaning the stock trades at a paltry 6 times this year's earnings at most, even after today's 20% gain. If it hits the high end of its guidance, the stock is even cheaper.
Hibbett's reiterated guidance stands in stark contrast to that of its biggest rival, Dick's Sporting Goods. In its most recent quarter, Dick's substantially reduced its EPS guidance. As a result, Hibbett stock sold off along with Dick's stock.
For whatever reason, Hibbett seems to be managing the slowdown in its space better than some of its rivals. And that's worth taking note of.
