HIBB short is (still) written in the cosmos. Prob not a bad read through on FL/DKS.
We’ve been short HIBB for the better part of 2-years. Sometimes high confidence, sometimes low – but always short.
I don’t like saying that, bc ‘perma shorts’ in retail almost never work. In other words, 2-years is a REALLY long time to be short. But expectations are consistently too high.
Last night’s miss is the second or third in a series of ‘many more’ misses barring a significant rebase in margin expectations (like coming down by another 400bp).
I’d argue that this name has even more margin downside than JWN.
- Sub-average management.
- Tapped with store growth
- No more WMT stores to move next to (that had been its strategy for 20 years – sell a $125 baseball bat to people who go to WMT to buy eggs).
- Moving out of core ‘bible belt’ area into regions where it has a higher cost structure bc of no DCs.
- The bull case is about ‘building e-comm’. Well guess what…I’m pretty sure that it does not have ecomm bc Nike told them not to. Now it’s trying to catch up to peers who have a 10-year head start. Good luck with that. That’s like ‘shopzilla’ trying to catch up to Amazon.
This is not terminal – there’s a definite need for it. But simply at a size 40% below where it is today, and at a margin structure nearly half of where it is today.
And, I actually don’t think this is a relevant read through to Foot Locker, the so-called basketball cycle, or whatever. It is probably not completely isolated…but this is very company specific.
I think FL is in deep deep trouble, but probably not in 1H as Nike throws it a bone to re-accelerate top line.
