Short FL/HIBB: Black Books Next Thursday (1/22) & Monday (1/26)

Takeaway: We’re releasing 2 Black Books – Deep Dive on FL and HIBB. Our Athletic Book focused on the Industry/Theme. This dives into the short ideas.

We’re going to release two Black Books over the next two weeks. One on Foot Locker next Thursday, January 22nd at 11:00 am ET. And the other on Hibbett on Monday, January 26th at 1:00 pm ET.  Dial-in info is below.  Since we launched our 90-page Athletic Black book in late December, our Short Call on Foot Locker has been something of a lightning rod, accounting for a disproportionate amount of our call volume. Since then, we’ve seen several Sell-Side downgrades on FL, the latest because of a ‘Slowdown in Basketball’, which we think misses the mark and understates the downside in this financial model in the intermediate-term and long-term. Simply put, the ‘newly bearish’ out there are simply not bearish enough. Conversely, people are not as focused as they should be on HIBB, which has major downside in the model.

 

Unlike in our Athletic Black Book, where we had just a few slides on each company, we’ll be doing a thorough deep dive into every line item and business driver for FL and HIBB.  

 

Note that this is a time we previously reserved for our e-commerce Black Book. That’s still on the way – and you should expect it in February. But we think that given the changing focus of the market, and the controversy around FL and HIBB warrant immediate attention.

 

Here’s Just a Few of the Topics We’ll Hit On For  FL/HIBB

 

1) Store footprint potential vs what we see today.

  • FL cannibalization analysis by region and by mall, and why it’s biggest competitor is actually itself.
  • HIBB overlap analysis with Dick’s, Academy, and Sports Authority – how much quality growth is left?

 2) Productivity

  • Opportunity to take productivity higher via mix, with all else equal.
  • Trends in pricing vs mix, and why it leaves little upside in the model from here.
  • Productivity and profitability if ‘Nike ratio’ shrinks – either by design or by misfortune.
  • Impact of category (basketball, running, etc…) trends on productivity.

 3) e-commerce.  One of our key points is that store sales (barring 6% industry growth) will never grow again. In that regard…

  •  What is each company’s installed investment base to facilitate e-commerce growth going forward.
  • How do consumers use the retail site as opposed to going to the Brand directly.
  • What are ‘free shipping’ trends in the Athletic space, and what are the ensuing margin implications for each company.
  • Which retailers have the greatest risk as Nike goes more direct? When and where should we see it?
  • We’ll quantify the AMZN risk for each retailer.

4) Ken Hicks was a bigger force inside FL than the market is recognizing. But FL is not in trouble because he left, he left because FL is in trouble.

 

5) What SG&A levers can both companies pull if the gross profit algorithm rolls

 

FL Call Info (Thursday 1/22, 11:00 am ET)

  • Toll Free Number:
  • Toll Number:
  • Conference ID/Password: 13598538
  • Materials: CLICK HERE

HIBB Call Info (Monday 1/26, 1:00 pm ET)

  • ***Call details to follow