Hibbett Sports on Friday reported third quarter net sales rose 0.4% to $237.8 million, compared to the year-ago quarter, as same-store sales (including online) fell 1.3%. Online sales, just launched in July, were about 5% of total sales for the quarter, executives told analysts on Friday, according to a transcript from Seeking Alpha.
Also in July, the retailer had warned about plunging second quarter sales as it steeply discounted products to push out aging inventory. That took its toll on the third quarter, too, according to the company. Gross margin was 32% of net sales in the quarter, compared to 35.4% in the year-ago quarter.
But inventory turns improved significantly compared with the same period last year, and inventory levels declined 9.2%, according to a release. Earnings in the quarter fell 68% to 37 cents per diluted share with net income of $7.6 million, down from earnings of 66 cents per diluted share and net income of $14.6 million a year ago.
Hibbett Sports has suffered from the turmoil in sports apparel retail. But it's also had a few problems of its own making, including bloated inventories and zero e-commerce until this summer. When it comes to online sales, the retailer in the quarter proved that it’s better late than never.
"Our e-commerce sales consistently exceeded our expectations, which we believe was driven by our comprehensive marketing plan upon launch," CEO Jeffry Rosenthal told analysts, according to Seeking Alpha’s transcript.
Chief Financial Officer Scott Bowman said on the call that the retailer’s e-commerce operations have the potential of being better than its stores. "The reason for that is because the platform that we chose has a fairly high fixed cost component, and so we as grow that business, we'll actually see some nice leverage, and that percentage will continue to increase over time," Bowman said. "Now, it will take a little while for that percentage to equal brick-and-mortar. It won't be that way next year, but it will continue to get better."
The company’s new website also helped boost its relaunched loyalty program, which in turn helped accelerate the improvements in the quarter, Rosenthal said. Rewards have jumped from 46% last year to 57% of total sales this year. Revenue from rewards members, which total a little over 9 million, rose 24% year-over-year, with Hibbett’s seeing 19% more transactions from those customers, Rosenthal said.
"In the last 90 days, we have had a 25% increase year-over-year in the number of people joining the program, versus a negative 10% before we relaunched the program," Rosenthal said. "We have also improved our conversion rates with our ‘Save the Sale’ program by helping our customers find a size from any store at any time."