Shares of Hibbett Sports (HIBB) are down -13% today. We’ve been short Hibbett for the better part of 2-years. Sometimes with high confidence, sometimes low – but always short.
I don’t like saying that, because "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 Nordstrom (JWN).
That's because of:
- Sub-average management.
- Tapped out on store growth
- No more Wal-Mart (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 because of no nearby distribution centers.
- The bull case is about 'building e-comm.' Well guess what…I’m pretty sure that it does not have ecomm because 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 a terminal story – 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 Foot Locker (FL) is in deep deep trouble, but probably not in 1H as Nike throws it a bone to re-accelerate top line.
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