Hibbett Sports has a unique brick-and-mortar advantage when it comes to winning over specific consumers.
The athletic speciality store focuses on “underserved markets,” where there is less competition. This strategy helps it win over consumers that have fewer shopping options available to them. It also drives value for its key vendors.
In a call with investors recapping the company’s third quarter results, Hibbett president and CEO Michael Longo said that the company expects that by January 2022, more than half of Hibbett stores will have no competition from stores within three miles that carry similar key products.
To illustrate this point, Longo recalled his experience shopping in a Hibbett store in what he described as an “underserved market” in Texas. When he asked the manager to name the store’s biggest rivals in the region, they could not come up with an answer, with so few competitors nearby.
“Our nearest competitor who sells product that looks like us anywhere close to us is 45 minutes away,” said Longo of this store, as well as many others. “So we basically are the only point of distribution for Nike, Jordan, Puma, Adidas, Under Armour etc, in this county, 45-minute radius around the store. So we’re pulling that entire trade area plus the areas around it, and that’s part of our competitive differentiation. It’s that underserved market consumer.”
As a result of this strategy, Hibbett is able to maintain strong partnerships with vendors that stand to benefit from these sales.
“We like that business model a lot,” Longo said. “We prosper in that environment and we’re incremental and complementary to the major brands business as a result. And we think that’s a big part of what we do.”
On the other hand, retailers that fail to provide these positive results for their brand partners are likely to fall behind. In a note to investors regarding Foot Locker’s recent performance, Williams Trading analyst Sam Poser said to “remain on the bench” about the footwear retailer, highlighting its declining position with top brands.
As Poser put it, Dick’s Sporting Goods, Hibbett, and JD Sports and “appear to be getting more love than Foot Locker by the major vendors.”
Having a strong connection with key brands like Nike and Adidas right now is crucial, especially as brands end certain retail partnerships in favor of focusing on DTC channels. Additionally, brands are more likely to allocate product to higher performing partners amid inventory shortages due to supply chain slowdowns.
“In conjunction with all of the distribution changes that the brands are deploying, that leaves us in a very, very strong position to recapture sales and to essentially, in the majority of our markets, be the only distribution point for all of our primary brands,” said EVP of merchandising Jared Briskin in a call with investors. “And that has significantly elevated our positioning with the brands and the focus on our business especially with regard to inventory and some of the impacts on the supply chain.”
Hibbett posted a Q3 net sales increase of 25.4% to $1.31 billion compared with $1.04 billion in 2020. Net income was $25.2 million, or $1.68 per diluted share.