Hibbett says customers are not just worried about high prices. They're afraid of losing their jobs.

By Ciara Linnane

'Consumers are focused on a narrower range of products,' says CEO Mike Longo

Hibbett Inc.'s stock fell 10% Friday, after the sporting goods retailer joined rivals in posting weaker-than-expected fiscal first-quarter earnings and cutting its guidance as its customer is still grappling with high inflation and worrying about the labor market.

"Our consumers are facing a number of headwinds that range from inflation to concerns over outright job loss. ," Chief Executive Mike Longo said in a statement. "Of note, the total amount of the average tax refund was unfavorable to last year by approximately 10%. We believe this disproportionately impacted our consumer and impacted our sales in the important first quarter of the year."

But the company also had high levels of inventory that required an elevated level of promotional activity, he said.

"Consumers are focused on a narrower range of products. The combination of these factors is a major contributor to our revised guidance for the remainder of this fiscal year," said Longo.

On a call with analysts, Longo said he still believes Hibbett can leverage its operating model to support the business, regardless of market conditions, and highlighted its customer service, product selection, omnichannel experience and the fact that it's in under-served markets as positives.

Jared S. Briskin, executive vice president of merchandising, said sales started to slow in March and remained soft in April. That's inline with the experience of many retailers this earnings season.

And clothing proved a particularly weak point, another feature in this crop of earnings.

"Slowdown in sales in the back half of the quarter, the continued promotional environment and a much more selective consumer prompted additional markdowns and promotional activity during the back half of the quarter," he told analysts, according to a FactSet transcript.

The numbers are similar to those reported by rival Foot Locker Inc. (FL) and even Nike Inc. (NKE), which was hit by a rare downgrade to sell on Monday that sent its stock to a new 2023 low.

Read: Foot Locker's stock tumbles 22% on Q1 top- and bottom-line miss, lowered outlook

That's left Dicks Sporting Goods Inc. (DKS) as a clear winner in the athletic space with its customers shopping more often and spending more in its latest quarter.

"Dick's continues to trend better than others in the space as the company is taking share while maintaining significantly better margins than in the past," said D.A. Davidson analysts on Wednesday.

"While others in the space are missing and guiding down and are still struggling with higher inventories, [Dick's] strong vendor relations, which results in better and differentiated merchandising, as well as strong internal operations, continue to support double-digit profits," the analysts said.

Birmingham, Alabama-based Hibbett (HIBB) posted net income of $35.9 million, or $2.74 a share, for the quarter to April 29, down from $39.3 million, or $2.89 a share, in the year-earlier period. Sales rose 7.4% to $455.5 million from $424.1 million.

The FactSet consensus was for EPS of $3.00 and sales of $460.0 million.

Same-store sales rose 4.1%, also below the FactSet consensus of a rise of 4.8%.

Gross margins fell by 330 basis points, driven by lower average product margin which was down 375 basis points versus the prior-year period. The company was forced to discount footwear and apparel.

See now:Clothing stores are the big losers in retail as they grapple with inflation-weary consumers -- and it's going to get worse

The company is now expecting full-year EPS to range from $7.00 to $7.55, compared with prior guidance of $9.50 to $10.00. It expects sales to be flat to up 2%, versus prior guidance of up in mid-single digits.

Same-store sales are expected to be down in the low-single digits, versus prior guidance of up in the low-single digits. Gross margins are expected to range from 33.9% to 34.0% versus prior guidance of 34.9% to 35.0%.

The stock has fallen 35% in the year to date, while the S&P 500 has gained 8%.

See: Here's how Lowe's wants to target rural customers

-Ciara Linnane

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05-26-23 1206ET

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