Earnings Preview: Dick’s, Foot Locker And Hibbett

Foot Locker x Air Jordan ad
Foot Locker's ad for the Air Jordan Russell Westbrook.
Courtesy photo

If you’re keeping track of the financial performance of footwear’s major players, you know that Wall Street is knee-deep in earnings season.

Next up are Dick’s Sporting Goods, Foot Locker Inc. and Hibbett Sports Inc.

Here’s what you need to know ahead of these companies’ earnings releases.

Dick’s Sporting Goods

Since it reported Q1, Dick’s has been on an expansion spree, opening multiple doors and launching its new women’s specialty athletic store, Chelsea Collective, in two locations. Market watchers have been increasingly upbeat on the firm since Q1, in which Dick’s profits were down 10 percent but revenues gained 9 percent year-over-year, to $1.6 billion.

But ahead of Dick’s Q2 release, slated for Aug. 18, analysts caution that sluggish back-to-school traffic could weigh on the firm.

Ongoing challenges for team sports and tough apparel comparisons in Q2 are among the other potential obstacles, noted Citi Research analyst Kate McShane.

McShane still maintains a “buy” rating on the stock and, along with Sterne Agee CRT analyst Sam Poser, expects the company to gain from its extensive Under Armour Inc. assortment.

“[Dick’s] stands to benefit the most from Under Armour’s success,” said Poser in an Aug. 9 note. “[Under Armour] told us that they are looking to expand their footwear business by more than 100 percent at Dick’s.”

McShane added that Nike Inc.’s fall apparel assortment should be a “true standout.”

Susquehanna Financial LLLP analyst Christopher Svezia also remains fairly bullish — stating his case in an Aug. 11 note.

“Since April, Dick’s has declined 10 percent given unwarranted concerns in golf (i.e., TaylorMade) and over-tough compares in 4Q,” Svezia wrote. “Against this, we remind that recently lowered guidance at TaylorMade was due to overly ambitious targets instead of further category weakness, while Dick’s 4Q expectations appear sound given a strong product pipeline and a potential 3-4 percent comp from e-commerce alone.”

Foot Locker Inc.

“Expect another strong quarter, with additional opportunity throughout the year,” Svezia wrote on Aug. 17 of his “positive” rated the stock.

When the New York-based specialty-athletic athletic retailer last reported, its shares soared on a robust first quarter, with gains in profits, sales and comparable-store sales. Since then, the firm tapped former Target executive Pawan Verma as its SVP and chief information officer, effective Aug. 10.

The company’s Q1 net income was $184 million, up 17 percent year-over-year, while its diluted EPS landed at a robust $1.29.

Svezia said he expects an EPS (diluted) of 69 cents in Q2 and sees upside potential on several fronts, including operating leverage due to a slightly higher comp.

“Importantly, our checks continue pointing to broad-based momentum, starting in basketball, with potentially higher growth in running and casual,” Svezia wrote. “We also note that recent read-throughs at both Adidas and Nike are supportive of continued strength in Europe.”

Poser also reiterated his “buy” on Foot Locker’s stock last week — calling the firm one of his top picks.

“Basketball and fashion/retro running businesses remain strong, and there is no indication of a slowdown. Such strength, combined with new systems and store remodels will drive ongoing SSS momentum and ASP improvement,” Poser wrote in an Aug. 14 note.

Foot Locker is scheduled to report earnings on Friday, Aug. 21.

Hibbett Sports Inc.

Last week, Hibbett warned of softer-than-expected Q2 performance in an earnings preview of its own. In a press release dated Aug. 10, the company said its Q2 comparable store sales declined 1.1 percent, while sales increased 2.8 percent, to $199.3 million, compared with $193.9 million in the comparable quarter of last year.

For the Q2 release, scheduled for Aug. 18, Hibbett also predicts declining EPS in the range of 26 cents to 28 cents, compared with 32 cents in the year-ago quarter.

In the release, Hibbett President and CEO Jeff Rosenthal said that while the firm anticipated slower sales due to 10 states delaying their tax-free weekend by one week, “there also was underlying business softness.”

Poser attributed that softness to Hibbett’s lack of “an e-commerce platform.”

“The miss does not come as a big surprise to us, as we have warned investors about the shift in free tax holidays, an issue that management chose to dismiss,” Poser wrote on Aug. 11. “It appears [that] Hibbett is continuing to cede share to competitors due to e-commerce. Share loss will likely continue, at least until an e-commerce platform is put in, likely in FY18 (CY17).”