Shares of this sports retailer are crashing, dragging Foot Locker, Nike down with it

Key Points
  • Hibbett expects a drop in sales and "significant pressure on gross margins" will lead to a loss of 19 cents to 22 cents per diluted share in the fiscal second quarter.
  • Hibbett's updated forecast not only hurt the retailer itself, but it sent shock waves across the entire sporting-goods sector Monday.
  • Shares of Foot Locker, Nike, Under Armour and Dick's Sporting Goods were all falling after the news.
Hibbett Sports in Thomasville, Ala.
Dave Martin | AP

Sporting goods retailer Hibbett Sports issued a profit warning Monday that sent its shares spiraling down more than 25 percent and delivered a blow to some of the company's peers.

Hibbett said it expects its comparable-store sales — a metric closely watched by Wall Street for retail stocks — to fall about 10 percent during the fiscal second quarter on account of "very challenging sales trends."

The drop in sales combined with "significant pressure on gross margins" is expected to result in the company reporting a loss of 19 cents to 22 cents per diluted share for the second quarter, Hibbett said.

The retailer's forecast sent shock waves across the entire sporting goods sector, with shares of Foot Locker falling 3.9 percent, Dick's Sporting Goods dropping about 2.4 percent, and Finish Line was down about 4.8 percent. Sporting apparel brands also took a hit, with Nike shares sliding 1.2 percent, and Under Armour's stock dropped about 2.9 percent Monday morning.

The downward pressure from these stocks was weighing on the S&P Retail ETF (XRT), which was recently down about 1.1 percent.

"Hibbett's results suggest that the sports market is still in a state of flux following the recent spate of bankruptcies," Neil Saunders, managing director at GlobalData Retail, told CNBC.

"This, combined with the fact that consumed interest in sports has waned slightly, has been unhelpful to sales and especially to margins."

Hibbett also said it launched a new e-commerce platform that is integrated with its stores, so shoppers can view available in-store inventory and also fulfill online orders from stores.

"Despite the difficult retail environment, the Company remains focused on improving its business for the long term," Hibbett CEO Jeff Rosenthal said in a statement. "Launching an e-commerce site has been a key strategic goal for Hibbett, and we took time to invest in our omnichannel infrastructure to do it the right way."

Hibbett is in a particularly weak position compared with its rivals and doesn't have as much "financial muscle," GlobalData Retail's Saunders said. Thus, the retailer has made "lackluster efforts" in investing in digital and won't reap as many benefits, he added.

"Hibbett used to point out that the local nature of its store locations made it defensible against larger players and online. That logic no longer applies, and Hibbett is feeling the pain of not investing in new channels fast enough," Saunders said.

With Monday's declines, shares of Hibbett Sports have tanked more than 60 percent over the past 12 months, and the stock is down about 62 percent for the year so far.

HIBB year-to-date performance

Source: FactSet

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