1. November 16, 2016
HIBBETT
SPORTS
INCORPORATED
HIBB/NASDAQ
Continuing
Coverage:
Hibbett
Builds
On
Its
Winning
Streak
Investment
Rating:
PRICE: $ 44.53 S&P 500: 2,176.94 DJIA: 18,868.14 RUSSELL 2000: 1,302.20
• Hibbett’s
Strategy
of
focusing
on
smaller,
less-­‐served
markets
has
certainly
worked
• Productivity
improvements
help
achieve
a
better
customer
experience
• Growing
in
contiguous
markets
adds
to
distribution
efficiency
and
lower
cost
• E-­‐commerce
will
contribute
to
increased
sales
• Superior
customer
service
through
invested
human
capital
leads
to
brand
loyalty
• Our
12-­‐month
target
price
is
$52.
Valuation
2016
A
2017
E 2018
E
EPS $
2.92 $
3.43 $
3.71
P/E 15.3x
13.0x
12.0x
CFPS $
2.42 $
6.06 $
4.32
P/CFPS 18.4x
7.3x
10.3x
Market
Capitalization Stock
Data
Equity
Market
Cap
(MM): $
979.66 52-­‐Week
Range:
$27.58
-­‐
$45.85
Enterprise
Value
(MM): $
954.69 12-­‐Month
Stock
Performance: 46.82%
Shares
Outstanding
(MM): 22.00 Dividend
Yield: Nil
Estimated
Float
(MM): 21.80 Book
Value
Per
Share: $
14.49
3-­‐Mo.
Avg.
Daily
Volume: 354,000 Beta: 1.20
Short
Ratio 16.14 EV/EBITDA 7.1x
Company
Quick
View:
Hibbett
Sports
is
on
deck
with
Sports
Authority
striking
out.
Hibbett
Sports
is
a
sporting
good
retail
operator
headquartered
in
Birmingham,
Alabama.
Hibbett
Sports
provides
name
brand
footwear,
apparel
and
equipment
to
its
loyal
customers.
The
Company
specializes
in
local
and
regional
markets.
Hibbett
Sports
is
known
for
its
superior
customer
service
and
small
market
focus.
Company
Website:www.hibbett.com
Analysts:
Investment
Research
Manager:
Cole
Mancuso
Matt
Rizner
Jacob
Singer
Daniel
Iavarone
Daniel
Karp
The BURKENROAD REPORTS are produced solely as a part of an educational program of Tulane University's
Freeman School of Business. The reports are not investment advice and you should not and may not rely on
them in making any investment decision. You should consult an investment professional and/or conduct your
own primary research regarding any potential investment.
Wall Street's Farm Team
BURKENROADREPORTS

2. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
2
Figure
1:
Five-­‐year
Stock
Price
Performance
Source:
Yahoo
Finance
INVESTMENT
SUMMARY
Our
team
gives
Hibbett
Sports
an
investment
rating
of
Market
Perform
by
assigning
a
12
month
target
stock
price
of
$52.
We
predict
that
the
November23rd
price
of
$41.50
will
increase
by
25.3%
to
reach
our
target
stock
price.
We
forecasted
revenue
by
using
a
quantity
and
price
method
focusing
on
revenue
per
square
foot
and
total
store
square
footage.
For
this
forecast,
we
factored
in
the
seasonality
of
the
sporting
goods
industry
by
using
historical
data
to
predict
revenue
per
square
foot
by
quarter.
Hibbett
Sports
is
a
sporting
goods
retailer
headquartered
in
Birmingham,
Alabama.
Hibbett
Sports
focuses
on
the
small
to
mid-­‐sized
markets
located
in
the
Mid-­‐Atlantic,
Midwest
and
Southern
regions
of
the
U.S.
The
Company
offers
high
quality
and
regionally
specific
apparel,
footwear,
and
equipment
in
order
to
appeal
to
its
customers
in
different
markets.
Hibbett’s
ability
to
respond
quickly
to
major
sporting
events
allows
the
Company
to
appeal
to
thelocal
interests
of
its
customers.
Hibbett
employs
3,300
full
time
and
5,600
part-­‐time
employees
that
are
dedicated
to
establishing
strong
relationships.
The
Company
operates
1,044
retail
stores
throughout
33
states.
Hibbett
takes
advantage
of
efficiencies
in
logistics,
marketing,
and
regional
management
by
opening
new
stores
that
are
within
a
two-­‐hour
driving
distance
from
an
existing
store.
Hibbett
Sports
focuses
on
developing
significant
relationships
within
local
communities
and
customers
in
order
to
build
brand
loyalty.

3. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
3
Table
1:
Historical
Burkenroad
Ratings
and
Prices
Report
Date
Stock
Price
Rating
12
Month
Target
Price
10/30/15
$34.16
Market
Outperform
$42.00
11/22/13
$62.72
Market
Perform
$63.00
11/06/12
$53.95
Market
Perform
$56.00
11/29/11
$44.05
Market
Perform
$48.00
11/26/10
$34.61
Market
Perform
$37.36
12/08/09
$19.85
Market
Perform
$22.10
04/11/08
$16.00
Market
Outperform
$20.36
INVESTMENT
THESIS
Our
team
assessed
Hibbett
Sports
with
a
Market
Perform
rating.
We
attribute
this
rating
to
a
12-­‐month
target
price
of
$52.
The
Company’s
future
growth
can
be
attributed
to
its
expanding
store
operations,
satisfying
customer
experience,
and
investments
in
human
capital.
Considering
these
factors,
Hibbett
appears
to
possess
significant
upside
potential.
Hibbett’s
Strategy
of
focusing
on
smaller,
less-­‐served
markets
has
certainly
worked
Hibbett’s
strategy
involves
targeting
isolated
markets
with
less
competition.
As
such,
the
Company
is
currently
undergoing
a
clustered
expansion
program.
Under
this
program,
Hibbett
aims
to
open
new
stores
within
two
hours
driving
distance
of
existing
stores
(see
Figure
2).
By
targeting
smaller
communities,
avoiding
congested
urban
regions,
and
expanding
in
a
clustered
method,
Hibbett
achieves
greater
marketing
success,
larger
economies
of
scale,
and
decreasing
costs
per
store.
Furthermore,
suburban
and
rural
markets
result
in
lower
corporate,
logistical,
and
operational
expenses.
Hibbett
also
combats
low
customer
frequency
by
locating
stores
near
strip
centers
and
super
stores
like
Walmart.
Figure
2:
Hibbett
Store
Map
by
State
Source:
Hibbett’s
Roadshow
Presentation

4. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
4
Productivity
Improvements
help
achieve
a
better
customer
experience
Hibbett’s
management
capitalizes
on
its
customer
base
by
choosing
different
products
lines
for
different
communities.
The
Company
offers
regional
team
and
college
inspired
apparel
and
sports
gear.
Additionally,
the
sports
gear
offered
is
based
on
the
weather
conditions
and
fields
in
the
area.
With
products
correlated
to
community
needs
and
wants,
Hibbett’s
customers
find
a
highly
satisfying
customer
experience.
After
management
creates
a
product
line,
it
maintains
relevant
product
offerings
through
high-­‐tech
information
systems.
These
systems
help
record
customer
data
and
decipher
trends
in
the
market
so
Hibbett
is
always
selling
exactly
what
the
customer
wants.
Growing
in
contiguous
markets
adds
to
distribution
efficiency
and
lower
cost
All
of
Hibbett’s
merchandise
is
shipped
and
received
from
a
single
wholesale
and
logistics
facility
in
Alabaster,
Alabama.
This
centralized
distribution
facility
allows
Hibbett
to
maintain
low
operating
costs,
as
well
as
to
use
third-­‐party
logistic
providers
to
help
it
gain
efficiencies
by
25%
at
their
outlying
stores.
The
Company’s
logistic
and
wholesale
facility
is
designed
with
automation
and
to
ensure
efficiency
and
lower
costs.
E-­‐commerce
will
contribute
towards
increased
sales
Hibbett’s
primary
revenue
source
will
continue
to
be
from
brick
and
mortar
stores;
however,
a
growing
and
more
developed
website
should
lead
to
significant
revenue
generation.
E-­‐
commerce
is
an
integral
section
of
Hibbett’s
omni-­‐channel
initiative
with
a
strategy
of
engaging
the
consumer
in
multiple
platforms.
Growth
in
Hibbett’s
e-­‐commerce
sales,
which
currently
represents
only
5%
of
Company
sales,
could
potentially
lead
to
more
accurate
information
systems.
Ultimately,
the
increase
in
technology
and
implementation
of
the
omni-­‐channel
initiative
will
create
a
more
individualized
customer
experience
which
will,
in
turn,
lead
to
higher
customer
satisfaction.
Superior
customer
service
through
invested
human
capital
leads
to
brand
loyalty
The
final
piece
in
Hibbett’s
strategy
is
carrying
out
exceptional
customer
service.
Sales
associates
are
trained
and
specialized
in
sporting
goods
products.
As
a
result,
employees
are
able
to
effectively
manage
customers’
needs
and
provide
assistance
throughout
their
visit.
This
further
enhances
the
customer
experience
and
builds
strong
brand
loyalty
to
Hibbett.

5. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
5
VALUATION
Hibbett’s
Stock
price
is
$44.53
as
of
November
16,
2016.
We
calculated
a
12-­‐month
target
price
of
$51
for
Hibbett
using
the
discounted
cash
flow
(DCF)
and
relative
multiple
methods
(See
figure
3).
Figure
3:
Hibbett’s
Current
Stock
Price
and
12-­‐Month
Target
Price
Source:
Burkenroad
Valuation
Discounted
Cash
Flow
A
large
component
of
Hibbett’s
performance
is
based
on
the
amount
of
square
footage
their
stores
cover.
As
such,
we
forecasted
revenue
using
a
quantity
and
price
method
based
on
revenue
per
square
foot.
In
projecting
total
square
footage,
we
estimated
a
growth
rate
in
stores
using
both
historical
figures
and
management
projections.
Other
notable
figures
we
used
to
discount
free
cash
flows
to
the
firm
are
the
risk
free
rate,
market
risk
premium,
and
Hibbett’s
beta,
all
of
which
we
found
on
Bloomberg.
In
order
to
calculate
the
weighted
average
cost
of
capital
(WACC),
we
used
the
capital
asset
pricing
model,
as
the
Company
has
no
debt.
We
then
assumed
a
liquidity
premium
to
further
discount
the
cash
flows.
Finally,
we
assumed
a
terminal
growth
rate
of
3%.
Discounting
the
next
ten
years’
free
cash
flows
and
terminal
value
to
present
value,
we
calculated
Hibbett
having
a
target
price
of
$51.
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
$50.00
$55.00
$60.00
DCF
P/E
15X
P/BV
3.16X
12-­‐Month
Target
Price:
$52.00
Current
Price:
$44.53

6. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
6
Relative
Multiple
Methods
In
our
analysis,
we
also
used
two
relative
multiples:
price
to
equity
(P/E)
and
price
to
book
value
(P/BV).
When
looking
at
Hibbett’s
peers
to
calculate
multiple
values,
we
used
historical
figures
from
Dick’s,
Cabela’s,
Footlocker,
and
Genesco.
We
found
an
industry
average
P/E
ratio
of
15x
and
when
applied
to
Hibbett,
we
calculated
a
target
price
of
$54.
We
found
an
industry
average
P/BV
of
3.16
and
when
applied
to
Hibbett,
we
calculated
a
target
price
of
$51.
After
analyzing
all
three
calculated
prices,
we
decided
on
a
12-­‐month
target
price
of
$51.
INDUSTRY
ANALYSIS
Hibbett
Sports,
Inc.
operates
in
the
sporting
goods
store
industry.
The
sporting
goods
industry
is
highly
fragmented
with
no
single
company
controlling
more
than
17%
of
the
total
market
share.
In
recent
years
the
industry
has
experienced
more
competition
from
e-­‐commerce,
specialty
stores,
and
mass
merchandisers.
The
introduction
of
these
new
competitors
has
led
to
a
more
fragmented
market
as
well
as
a
price-­‐based
competition
environment.
According
to
the
American
College
of
Sports
Medicine,
alternative
exercise
methods,
such
as
yoga
and
pilates,
are
expected
to
drive
industry
revenue
growth
in
the
coming
years.
This
is
due
to
the
growing
health
consciousness
of
middle
aged
and
elderly
Americans.
These
individuals
are
expected
to
participate
in
low
intensity
exercises
such
as
swimming,
yoga,
and
bowling
which
will
stimulate
sales
of
both
apparel
and
sports
equipment
for
these
exercises.
Additionally,
team
sport
participation
is
expected
to
rise
by
1%
in
the
next
five
years.
Current
state
of
the
industry
and
changing
cultural
trends
have
presented
a
number
of
challenges
for
Hibbett’s
management.
Hibbett
primarily
focuses
on
selling
quality,
brand
name
merchandise
such
as
Nike,
Adidas,
and
Oakley.
The
growing
presence
of
online
retailers,
such
as
Amazon,
and
mass
merchandisers,
such
as
Walmart
and
Target,
have
forced
Hibbett
to
lower
its
prices
to
remain
competitive.
Additionally,
Hibbett
has
been
slow
to
respond
to
the
increasing
importance
of
e-­‐commerce,
as
online
sales
represent
just
5%
of
total
revenue.
This
is
in
stark
contrast
with
competitors
such
as
Dick’s
Sporting
Goods
and
Academy
Sports.
Individuals,
specifically
those
aged
7-­‐17,
are
choosing
to
participate
in
more
leisure
activities
than
sporting
activities
in
recent
years.
Individuals
aged
7-­‐17
participated
in
slightly
fewer
team
sports.
This
can
be
attributed
to
a
number
of
factors
but
one
of
the
primary
reasons
is
the
growing
video
gaming
industry.
As
these
games
become
more
advanced
and
interactive,
individuals
are
choosing
to
spend
their
time
playing
these
games
as
opposed
to
participating
in
exercises
or
team
sports
(IBIS
World).

7. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
7
Industry
State
The
sporting
goods
industry
is
currently
consolidating
and
experiencing
low
revenue
volatility,
low
revenue
growth,
and
high
competition.
These
factors
are
indicative
of
an
industry
in
the
mature
lifecycle
stage.
The
high
number
of
consolidations
has
allowed
some
retailers
to
bypass
sporting
wholesalers
and
reduce
overall
costs.
Additionally,
as
more
competition
has
entered
the
industry,
retailers
have
started
to
pursue
exclusive
deals
with
both
wholesalers
and
manufactures
in
order
to
limit
availability
of
products
and
drive
their
brands.
Sporting
goods
stores
have
begun
to
focus
on
apparel
and
footwear
in
recent
years,
as
these
high
margin
products
have
grown
in
popularity.
Apparel
sales
have
been
spurred
by
the
increased
sports
participation
among
women
as
well
as
sport-­‐specific
apparel
such
as
tennis
shorts
and
golf
shirts.
Developing
Health
Consciousness
According
to
IBIS
World,
individuals
are
expected
to
participate
in
more
exercise
and
team
sports
in
the
coming
years
due
to
the
increased
health
consciousness
of
the
population.
Individuals
aged
18-­‐44
have
been
growing
more
health
conscious
in
recent
years
as
they
engage
in
physical
activities
such
as
camping
and
fishing.
This
group
presents
two
opportunities
to
the
sporting
goods
industry.
The
primary
opportunity
is
this
groups’
increasing
demand
for
sports
apparel
and
footwear.
According
to
IBIS
World,
this
group
is
expected
to
comprise
42.5%
of
industry
revenue
in
2016.
Additionally,
many
individuals
in
this
age
group
have
children.
As
more
schools
no
longer
require
fitness
classes,
these
parents
are
emphasizing
physical
activities
for
both
themselves
and
their
children.
These
activities
often
include
fishing
and
camping
which
suggests
that
the
parents
will
become
more
active
as
their
children
get
older
(IBIS
World).
One
major
concern
is
that
17%
of
children
and
adolescents
are
obese.
This
is
a
historically
high
number
and
it
provides
a
counterbalance
towards
the
overall
growing
health
consciousness
environment.
Key
Success
Factors
Due
to
the
fragmented
nature
of
the
sporting
goods
industry,
companies
must
be
efficient
with
their
resources
and
maximize
revenue
opportunities
through
marketing,
product
selection,
and
market
control.
Hibbett
attempts
to
maximize
its
revenue
by
offering
products
that
are
regionally
favored,
such
as
Atlanta
Braves
and
Crimson
Tide
apparel
in
Georgia
and
Alabama.
Another
key
success
factor
is
location
in
key
markets.
High
foot
and
vehicle
traffic
correlates
with
increased
revenue.
Hibbett,
with
its
emphasis
on
small
and
medium
sized
markets,
is
limited
in
its
ability
to
generate
high
traffic.
Other
key
success
factors
are
disposable
personal
income
(DPI),
consumer
confidence,
and
gross
domestic
product
(GDP).
As
disposable
income
rises,
individuals
can
purchase
more
luxury
items
such
as
sports
apparel,
footwear
and
sports
equipment.
This
is
particularly
important
to
Hibbett
as
its
products
are
generally
more
expensive
than
those
products
offered
by
mass
merchandisers.
Additionally,
as
gross
domestic
product
grows,
consumer
confidence
grows
and
this
makes
it
more
likely
that
individuals
will
spend
money
on
more
expensive,
higher
quality
items.

8. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
8
Growing
E-­‐Commerce
A
major
development
in
general
retailing
is
the
tremendous
growth
e-­‐commerce
has
played
in
sales.
In
fact,
sporting
goods
retailers
have
developed
their
own
websites
to
connect
with
customers
at
home.
The
emergence
of
online
sales
has
not
only
increased
competition
between
sporting
goods
stores,
but
online
sales
has
allowed
general
retailers
and
athletic
brands
to
enter
the
market.
Online
distributors
and
merchandisers,
like
Nike,
are
able
to
sell
directly
to
customers.
This
access
to
customers
allows
online
distributors
and
merchandisers
to
cut
out
retail
stores
such
as
Hibbett
Sports.
In
fact,
Nike’s
annual
online
sales,
totaling
over
$1
billion,
now
amount
to
more
than
Hibbett’s
total
sales.
To
fight
this
growing
trend,
sporting
goods
retailers
are
relying
on
the
consumer's’
desire
to
test
equipment
or
ask
a
specialist
for
assistance.
Availability
of
Substitutes
Sporting
goods
are
not
difficult
to
purchase.
Consumers
can
look
to
alternatives
such
as
department
stores,
big-­‐box
retailers,
and
online
distributors.
Online
distributors
pose
a
significant
threat
as
popularity
grows
and
prices
drop.
Currently,
Hibbett
has
only
about
5%
of
its
sales
online.
Hibbett’s
major
draw
is
the
knowledge
employees
can
provide
on
specific
sports
equipment,
coupled
with
the
understanding
of
what
best
matches
the
needs
of
the
community
where
customers
are
located.
For
example,
sales
associates
will
know
which
cleats
perform
best
on
the
local
high
school's
field.
Bargaining
Power
of
Suppliers
In
order
to
maintain
high-­‐quality
merchandise,
sporting
goods
stores
are
reliant
on
a
few
top
brands
to
supply
products.
The
sporting
goods
industry
is
primarily
brand
name
driven.
As
such,
over
70%
of
Hibbett’s
inventory
purchases
can
be
attributed
to
three
vendors.
This
heavy
reliance
on
a
few
vendors
gives
suppliers
significant
bargaining
power
over
sporting
goods
retailers.
This
dependence
on
few
vendors
requires
small
and
mid-­‐sized
sporting
goods
stores
to
maintain
strong
and
stable
relationships
with
these
vendors.
Bargaining
Power
of
Buyers
As
a
sporting
goods
store
that
sells
directly
to
the
end
user,
Hibbett
has
no
major
single
customer.
Consumers
are
able
to
gain
their
small
bargaining
power
through
their
ability
to
purchase
products
from
alternative
stores.
Hibbett
must
be
constantly
aware
of
competitors’
prices;
however,
due
to
the
Company’s
investment
in
employee
knowledge
in
training
and
product
knowledge,
consumers
are
less
price
sensitive
than
competitors.

9. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
9
Threat
of
Entry
The
high
initial
costs
to
entering
the
sporting
goods
industry
make
up
a
large
portion
the
barriers
to
entry.
These
costs
include
the
building,
inventory
to
fill
a
retail
store,
and
cost
of
training
employees.
A
new
entrant
would
likely
need
to
spend
additional
capital
on
marketing
expenses
in
order
to
compete
against
the
well-­‐established
sporting
goods
stores.
Furthermore,
a
new
entrant
would
require
a
line
of
credit.
Retailers
use
lines
of
credit
to
purchase
inventories
and
cover
other
short-­‐term
operating
expenses.
Additionally,
retail
is
a
relatively
unregulated
industry
with
very
few
competitive
advantages
other
than
capital.
For
these
reasons,
the
threat
of
entry
in
the
sporting
goods
industry
is
moderate.
Competitive
Rivalry
The
retail
sporting
goods
industry
is
increasingly
competitive.
This
has
directly
led
to
decreasing
prices
and
aggressive
marketing
campaigns.
Firms
compete
primarily
on
price
but
also
battle
over
service,
quality
and
range
of
products,
and
knowledge
of
the
communities.
A
consequence
of
this
stiff
competition
is
consolidation
and
a
sharp
rise
in
acquisitions.
Companies
are
focusing
on
decreasing
costs,
increasing
efficiency,
and
gaining
market
share.
ABOUT
HIBBETT
Hibbett
Sports
Inc.
is
a
sporting
goods
retail
operator
headquartered
in
Birmingham,
Alabama.
Hibbett
Sports
focuses
on
the
small
to
mid-­‐sized
markets.
The
Company
also
targets
the
Mid-­‐
Atlantic,
Midwest,
and
Southern
regions
of
the
U.S.
In
1945,
Hibbett
Sports
opened
a
single
location
in
Florence,
Alabama
that
sold
athletic,
marine
and
small
aircraft
equipment.
In
1960,
Hibbett
decided
to
focus
primarily
on
sporting
goods
merchandise.
Mickey
Newsome
was
soon
hired
as
Chief
Executive
Officer,
and
he
helped
expand
Hibbett
Sports
Inc.
from
12
stores
to
79
stores,
eventually
taking
the
Company
public
in
October
of
1996.
As
of
January
2016,
Hibbett
Sports
operated
1,044
retail
stores
in
33
states
of
the
U.S.
Hibbett
Sports
stores
account
for
98%
of
the
Company’s
locations,
while
the
other
2%
are
smaller-­‐format
sports
athletic
shoe
stores
(see
figure
4).

10. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
10
Figure
4:
Hibbett
Sports
Inc.
Store
Location
by
State
Products
Hibbett
provides
an
array
of
quality
name
brand
footwear,
apparel,
and
athletic
equipment
at
an
economical
price
point
with
a
full
service
environment.
The
Company
emphasizes
the
importance
of
providing
local
products.
For
fiscal
year
2016,
Hibbett
generated
49%
of
net
sales
from
footwear,
29%
from
apparel,
and
22%
from
equipment.
Competitive
Advantage
Hibbett’s
competitive
advantage
is
derived
from
six
key
factors:
Logistics-­‐
All
of
Hibbett’s
merchandise
is
shipped
and
received
from
a
single
wholesale
and
logistics
facility
in
Alabaster,
Alabama.
This
centralized
distribution
facility
allows
Hibbett
to
maintain
low
operating
costs,
as
well
as
to
use
third-­‐party
logistic
providers
to
help
it
gain
efficiencies
by
25%
at
their
outlying
stores.
The
Company’s
logistic
and
wholesale
facility
is
designed
with
automation
and
operational
efficiencies.
All
of
these
aspects
play
a
key
role
in
Hibbett
Sports
expansion
strategy.
Small
Market
Focus-­‐
Hibbett
Sports
targets
small
communities
that
range
in
population
from
25,000
to
100,000
residents.
The
Company’s
strong
focus
on
regional
markets
has
resulted
in
reduced
corporate
expenses,
lower
logistic
costs,
and
increased
economies
of
scale
from
marketing
activities.
Store
Concepts-­‐
Hibbett
Sports’
retail
format
is
approximately
5,000
square
feet
per
store,
with
locations
near
a
highly
populated
Walmart
store.
About
80%
of
all
Hibbett
Sports
stores
are
located
in
strip
centers
which
allow
greater
access
for
consumers.

11. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
11
Merchandise-­‐
Hibbett
provides
quality,
brand
name
merchandise
at
an
economical
price
that
is
lower
than
its
competitors.
Although
Hibbett
stocks
a
mostly
identical
general
inventory
within
its
locations,
the
Company
often
caters
to
local
and
regional
communities
through
inclusion
of
event
and
community
specific
offerings.
Customer
Service-­‐
Hibbett
Sports
is
known
for
its
superior
customer
service
at
every
location.
Hibbett
Sports
provides
customers
in
different
communities
with
extensive
knowledge
on
mainstream
products,
as
well
as
the
regionally
targeted
products
that
the
Company
offers
to
different
communities.
Because
of
its
competitive
industry,
Hibbett
offers
a
personalized
customer
experience
that
affords
the
Company
a
competitive
advantage
over
its
peers.
This
aspect
of
the
Company
is
a
core
value
that
has
driven
success
day
in
and
day
out.
Information
Systems-­‐
Over
the
past
few
years,
Hibbett
has
invested
in
information
systems
that
are
flexible
enough
to
meet
the
needs
of
each
store
location.
These
systems
assist
in
financial
control,
cost
management,
inventory
control,
merchandise
planning,
logistics,
replenishment,
and
product
allocation.
Corporate
Expansion
Strategy
Top
executives
at
Hibbett
Sports
are
implementing
two
main
strategies,
which
they
hope
can
help
expedite
growth.
The
first
strategy
primarily
focuses
on
opening
new
stores
within
120
miles
of
an
existing
Hibbett
location.
The
second
strategy
involves
investing
in
infrastructure
to
reach
customers
through
digital
commerce.
Recent
Developments
In
order
to
satisfy
the
strategies
for
corporate
expansion,
Hibbett
Sports
has
implemented
an
upgrade
to
its
point-­‐of-­‐sale
(POS)
system,
which
allows
the
Company
to
gain
inventory
visibility
across
all
stores
and
allow
store-­‐to-­‐store
transfers
to
complete
a
customer
sale.
This
new
POS
system
will
allow
Hibbett
Sports
employees
to
provide
a
better
customer
experience,
which
will
layer
onto
the
Company’s
current
superb
customer
service.
In
addition
to
the
upgrade
of
the
POS
system,
Hibbett
Sports
will
implement
a
new
Customer
Relationship
Management
(CRM)
capability
that
improves
its
ability
to
communicate
and
market
to
its
loyal
customers.
This
CRM
software
will
also
allow
the
Company
to
enable
a
store-­‐to-­‐home
capability,
which
allows
Hibbett’s
chain-­‐wide
inventory
to
be
shipped
directly
to
a
customer’s
home.
The
addition
will
help
retain
the
Company’s
five
million
loyalty
members
who
are
enrolled
in
a
MVP
rewards
program.
The
goal
is
to
have
these
systems
provide
a
better
customer
experience,
which
in
turn
will
gain
more
loyalty
members
following
a
positive
experience.
Recent
2016
figures
show
that
Hibbett
Sports
added
56
stores
between
the
fourth
quarters
of
2015
and
2016.
This
increase
in
stores
has
caused
net
sales
to
increase
2.6%,
from
$239.3
million
to
$245.7
million
from
the
fourth
quarter
of
2015
to
the
fourth
quarter
of
2016.

12. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
12
PEER
ANALYSIS
Hibbett
Sports,
Inc.
has
many
established
peers
active
in
the
sporting
goods
retail
industry.
Its
peers
include
Dick’s
Sporting
Goods
Inc.,
Big
5
Sporting
Goods
Corporation,
Cabela’s
Incorporated,
and
Academy
Sports
+
Outdoors.
It
is
important
to
note
that
a
former
peer,
The
privately-­‐owned
Sports
Authority,
filed
for
bankruptcy
earlier
in
the
year
and
its
brand
was
acquired
by
Dick’s.
Table
2:
Hibbett’s
Peers
Company Hibbett
Dick’s
Big
5
Cabela’s
Symbol HIBB
DKS
BGFV CAB
Market
Cap 972M 7.04B
318M 3.53B
P/E 13.64 21.58 2.85 0.83
EPS 3.05 2.85 0.52 2.64
Beta
1.05 0.83 0.52 0.97
ROE
22.19% 18.25% 7.77% 10.39%
Operating
CF
58.80M 643.00M 16.40M 177.22M
Source:
Google
Finance
September
22,
2016
Dick’s
Sporting
Goods,
Inc.(DKS/NYSE)
Dick’s
Sporting
Goods,
Inc.,
is
one
of
the
largest
players
in
the
sporting
goods
market.
Dick’s
was
founded
in
1948
and
is
currently
headquartered
in
Coraopolis,
Pennsylvania.
It
has
a
market
capitalization
of
$6.94
billion
and
operates
in
all
50
states.
Dick’s
primary
operations
consist
of
sales
in
equipment,
apparel,
footwear,
and
other
sports
accessories.
Additionally,
it
has
subsidiaries
in
a
range
of
specialty
sports
stores.
Big
5
Sporting
Goods
Corporation
(BGFV/NASDAQ)
Big
5
Sporting
Goods
is
a
major
player
in
sporting
goods
retail
for
Western
America.
The
company
currently
operates
approximately
440
stores
in
over
ten
different
states.
Big
5
operates
as
a
retailer
for
big
merchandising
brands
as
well
as
selling
private
merchandise
under
its
various
trademarks.
The
company
also
sells
merchandise,
specialty
sports
equipment,
and
footwear
through
its
online
platform.
Compared
to
the
industry,
Big
5
stores
are
significantly
smaller
than
the
competition,
averaging
11,000
square
feet
per
store.
However,
Big
5
is
known
for
its
diverse
range
of
brands
throughout
its
stores.
Cabela’s
Incorporated
(NYSE:
CAB)
Cabela’s
Incorporated
is
a
specialty
outdoor
activities
retailer
made
up
of
three
business
segments.
Headquartered
in
Sidney,
Nebraska,
Cabela’s
operates
77
retail
stores
in
the
U.S.
and
Canada.
Its
two
primary
forms
of
revenue
generation
consist
of
the
retail
and
the
direct.

13. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
13
The
retail
segment
consists
of
in-­‐stores
sales
while
the
direct
segment
is
composed
of
e-­‐
commerce
and
mail
catalogs.
Both
segments
sell
primarily
outdoor
apparel,
equipment,
footwear,
and
technology.
The
third
business
segment
performed
by
Cabela’s
is
Financial
Services.
This
segment
offers
credit
cards
and
other
financing
options.
Academy
Sports
+
Outdoors
(Private)
Academy
Sports
+
Outdoors
is
one
of
the
largest
private
retailers.
Academy
operates
approximately
200
stores
in
over
15
states
with
$4.6
billion
in
revenue
throughout
the
south
and
southwest.
Operations
primarily
consist
of
sports,
outdoor
activities,
and
lifestyle
products.
In
August
2011,
Academy
Sports
+
Outdoors
was
acquired
by
Kohlberg
Kravis
Roberts
&
Co
L.P.,
a
private
equity
firm.
Academy
emphasizes,
convenience,
quality,
and
service
throughout
the
customer
experience.
MANAGEMENT
PERFORMANCE
AND
BACKGROUND
Hibbett
Sports,
Inc.’s
top
level
management
has
significant
experience
and
knowledge
of
the
sporting
goods
industry
which
allows
for
continued
growth
of
the
Company.
Jeffry
O.
Rosenthal
Chief
Executive
Officer,
President
(58)
Jeffry
Rosenthal
is
currently
Hibbett’s
Chief
Executive
Officer
(CEO)
as
well
as
President
and
Chief
Operating
Officer
(COO).
He
was
promoted
from
Vice
President
of
Merchandising
to
the
duties
of
CEO
in
2010
and
has
retained
that
position
to
date.
Mr.
Rosenthal
has
served
as
President
and
and
COO
since
2009.
In
2014,
Mr.
Rosenthal
was
nominated
for
CEO
of
the
year
by
the
Alabama
Retail
Association.
He
was
awarded
the
Silver
award,
which
recognizes
the
CEO
that
reaches
annual
sales
of
more
than
$20
million.
Mr.
Rosenthal
previously
worked
for
a
sporting
goods
company
named
Champs
Sports,
where
he
held
the
position
of
Vice
President
of
Divisional
Merchandise
(DMM)
for
apparel
from
1981
to
1998.
Scott
J.
Bowman
Senior
Vice
President,
Chief
Financial
Officer,
Principal
Accounting
Officer
(49)
Scott
Bowman
has
been
Hibbett’s
Chief
Financial
Officer
and
Senior
Vice
President
since
July
2012.
Mr.
Bowman’s
expertise
comes
from
his
work
as
a
financial
leader
of
a
795
store
division
that
represented
$25
billion
in
annual
sales.
Prior
to
joining
Hibbett
Sports,
Mr.
Bowman
served
as
Home
Depot’s
Division
Chief
Financial
Officer
for
three
years.
Cathy
E.
Pryor
Senior
Vice
President
of
Operations
(53)
Cathy
Pryor
has
been
with
Hibbett
Sports
since
1988
where
she
served
as
a
District
Manager
and
Director
of
Store
Operations.
From
1995
to
2012,
Ms.
Pryor
was
the
Vice
President
of
Operations
and
eventually
earned
the
title
of
Senior
Vice
President
of
Operations.

14. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
14
Jared
S.
Briskin
Senior
Vice
President
and
Chief
Merchant
(43)
Jared
Briskin
was
named
Senior
Vice
President
and
Chief
Merchant
at
Hibbett
Sports
in
2014.
Before
then,
he
served
as
the
Vice
President
of
Apparel
and
Equipment
at
Hibbett
Sports
from
2004
to
2010.
In
2010,
he
was
promoted
to
Vice
President
of
Footwear
and
Equipment.
He
retained
that
position
until
his
2014
promotion
to
Senior
Vice
President
and
Chief
Merchant.
Michael
J.
Newsome
Non
Executive
Chairman
of
the
Board
(75)
Michael
Newsome
is
currently
a
non-­‐independent
Director
of
Hibbett’s
Board
and
has
been
a
member
since
1996.
In
1981,
Mr.
Newsome
was
the
President
of
Hibbett
Sports
and
in
1999
he
was
named
the
Chief
Executive
Officer.
In
2004,
he
was
named
as
the
Chairman
of
the
Board.
Mr.
Newsome
held
his
positions
until
2010.
In
2014,
Mr.
Newsome
resigned
from
his
executive
management
positions
to
serve
as
the
Chairman
of
the
Board.
In
2007
the
National
Sporting
Goods
Association
inducted
Mr.
Newsome
into
the
Sporting
Goods
Industry
Hall
of
Fame.
Mr.
Newsome
had
a
pivotal
role
in
the
transformation
of
Hibbett
Sports
from
a
small
privately
owned
retailer
to
the
successful
public
company
it
is
today.
Return
on
Invested
Capital
(ROIC)
Return
on
invested
capital
(ROIC)
measures
the
Company’s
ability
to
generate
cash
flows
relative
to
their
invested
capital.
This
measurement
allows
investors
to
view
how
well
a
company
uses
its
own
money
to
generate
returns.
Table
3
shows
the
five
year
ROIC
of
Hibbett
Sports
and
their
comparable
companies.
Hibbett
Sports
Inc.
has
a
higher
ROIC
for
every
year
as
compared
to
the
peer
average.
Table
3:
Return
on
Invested
Capital
Company Ticker 2015 2014 2013 2012 2011
Hibbett
Sports
Inc. HIBB 22.01% 23.33% 25.86% 32.46% 28.98%
Dick’s
Sporting
Goods
Inc. DKS 18.33% 19.57% 20.56% -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐ 16.56%
Big
5
Sporting
Goods
Corporation BGFV 6.32% 6.38% 12.38% 7.41% 6.24%
Cabela’s
Incorporated CAB 3.29% 4.20% 5.75% 5.15% 4.70%
Peer
Average 9.31% 10.05% 12.90% 6.28% 9.17%
Source:
Thomson
One
September
22,
2016

15. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
15
Management
Compensation
Hibbett
Sports’
Management
compensation
panel
has
an
extensive
procedure
when
setting
goals
and
guidelines
to
motivate
its
executive
officers
to
improve
performance
from
past
years.
This
panel
is
specifically
responsible
for
managing
the
guidelines
for
the
compensation
program
as
well
as
managing
equity
bonuses
for
executive
officers.
Factors
considered
include
performance-­‐based
cash
bonuses,
performance
based
equity
awards,
and
base
salary.
The
panel
warrants
competitive
compensation
by
evaluating
a
group
of
equally
qualified
executives
from
22
peer
companies.
The
executive’s
compensation
correlates
with
the
progress
of
the
Company
as
well
as
making
sure
the
executives
are
always
doing
what
is
best
for
the
shareholders.
The
program
ensures
that
equity
awards
and
cash
bonuses
account
for
a
higher
portion
of
the
total
compensation
to
keep
these
executives
motivated
for
the
right
reasons.
Each
executive
position
payment
is
calculated
individually,
which
takes
into
account
factors
such
as
the
responsibility
of
the
executive
officer,
tenure,
performance,
and
the
amount
of
Company
stated
goals
achieved.
Overall
compensation
is
evaluated
by
Hibbett
Sports
performance
goal
and
earnings
before
interest
and
taxes
(EBIT),
which
is
found
in
Table
4.
The
Compensation
Panel’s
idea
of
“pay
for
performance”
allows
named
executive
officers
(NEOs)
to
receive
annual
cash
bonuses
based
on
the
Company’s
targeted
EBIT.
Table
4
shows
the
relationship
between
NEO’s
percentage
earning
of
performance
bonuses
and
the
Company’s
EBIT
goal
for
the
fiscal
years
of
2014,
2015
and
2016,
respectively.
Table
4:
Estimated
Bonuses
according
to
EBIT
Goal
Attained
%
of
Company
Performance
Goal
Attained
%
of
Executive’s
Performance
Bonus
Earned
Below
85.0% 0.0%
85.0% 62.5%
90.0% 75.0%
95.0% 87.5%
100.0% 100.0%
105.0% 112.5%
110.0% 125.0%
115.0% 137.5%
120.0%
or
above 150.0%
Source:
Hibbett
Sports
Proxy
Statement
Fiscal
Year
2016

16. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
16
Table
5
shows
the
past
three
fiscal
years
of
how
percentage
payout
for
NEOs
is
affected
by
the
Company’s
EBIT:
Table
5:
Annual
EBIT
Goals
and
Achievements
EBIT
Goal EBIT
Achieved %
of
Goal
Achieved %
of
Payout
Fiscal
2016 $123.0
Million $110.1
Million 89.0% 72.5%
Fiscal
2015 $119.0
Million $118.1
Million 99.3% 97.5%
Fiscal
2014 $122.1
Million $113.9
Million 93.3% 82.5%
Source:
Hibbett
Sports
Proxy
Statement
Fiscal
Year
2016
SHAREHOLDER
ANALYSIS
As
of
September
21,
2016,
Hibbett
Sports
Inc.
had
21,987,475
shares
outstanding
with
a
free
float
of
21,748,644.
Additionally,
Hibbett
had
436
shareholders,
of
which
the
ten
largest
are
from
the
U.S.
(see
Table
6).
Fidelity
Management
&
Research
Company
remains
the
largest
stakeholder
owning
15.30%
of
shares
outstanding.
TimesSquareCapital
became
a
new
investor
this
calendar
year
and
now
owns
5.78%
of
shares
outstanding.
In
the
last
three
months,
Times
Square
Capital
has
increased
its
stake
in
the
Company
by
purchasing
429,850
common
shares
outstanding.
Hibbett’s
shares
are
primarily
controlled
by
the
top
ten
shareholders.
These
shareholders
own
69.85%
of
shares
outstanding
and
all
except
Arrowpoint
Asset
Management,
LLC
have
a
low
turnover
rate.
This
low
turnover
rate
keeps
Hibbett’s
stock
stable
and
active
with
a
three
month
average
daily
trading
volume
of
393,780
shares.
Table
6:
Hibbett’s
Largest
Shareholders
Holder
Name
%
O/S Shares
Held %
Change
(YTD)
Fidelity
Management
&
Research
Company 15.30 3,363,207 (6.23)
BlackRock
Institutional
Trust
Company,
N.A. 9.41 2,068,044 1.66
Arrowpoint
Asset
Management,
LLC
8.47 1,861,518 39.17
The
Vanguard
Group,
Inc. 8.23 1,808,753 (0.36)
Neuber
Berman,
LLC
6.92 1,521,530 (6.46)
TimesSquare
Capital
Management,
LLC
5.78 1,270,150 100
Epoch
Investment
Partners,
Inc. 4.75 1,045,343 6.22
ClearBridge
Investments,
LLC
3.90 858,284 (3.73)
GW&K
Investment
Management
3.71 815,472 (0.54)
Champlain
Investment
Partners,
LLC
3.38 743,005 (13.38)
Total
69.85 15,355,306
Source:
Thompson
One
September,
21
2016

17. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
17
Stock
Repurchase
Program
Hibbett
has
not
historically
issued
dividends
and
does
not
plan
to
do
so
in
the
coming
years.
Instead,
the
Company
has
a
history
of
repurchasing
stocks.
In
November
2012,
the
Board
of
Directors
authorized
a
$250
million
Stock
Repurchase
Program.
In
November
2015,
this
authorization
was
replaced
by
a
new
Stock
Repurchase
Plan.
This
program
authorized
the
repurchase
of
$300
million
common
stocks
through
February
2,
2019.
During
the
13
weeks
ended
July
30,
2016,
Hibbett
repurchased
620,455
shares
of
common
stock
at
a
cost
of
$27.9
million.
As
of
July
30,
2016,
Hibbett
had
approximately
$271.2
million
remaining
under
the
Stock
Repurchase
Program.
RISK
ANALYSIS
AND
INVESTMENT
CAVEATS
Hibbett’s
future
success
is
challenged
by
multiple
risks.
These
risk affect
management
strategies
and
could
potentially
limit
growth.
Hibbett’s
risk
can
be
broken
into
two
main
groups:
Operational
Risk
and
Financial
and
Governmental
Risk.
Many
of
these
risks
can
be
attributed
to
the
retail
sporting
goods
industry;
however,
others
are
unique
to
Hibbett
because
of
its
size,
location,
and
strategic
position.
Operational
Risk
Economic
Hibbett’s
sales
primarily
come
from
customers’
discretionary
spending.
This
dependence
on
discretionary
spending
makes
Hibbett
susceptible
to
economic
factors
such
as
interest
rates,
inflation,
housing,
prices,
and
taxes.
Many
of
the
economic
risks
are
outside
of
Hibbett’s
control
and,
therefore,
cannot
be
completely
mitigated.
Any
major
disruption
in
the
U.S.
economy
or
financial
markets
would
likely
lead
to
decreased
sales
as
well
as
smaller
profit
margins.
Seasonality
Similar
to
other
retailers,
Hibbett
faces
seasonal
fluctuations
in
revenue.
Due
to
holiday
buying
patterns,
the
Company
consistently
records
its
highest
sales
in
the
first
and
fourth
quarters.
Specifically,
customers
increase
purchasing
directly
before
the
December
holidays.
First
quarter
sales
are
credited
to
New
Year’s
resolutions
to
get
in
shape
and,
thus,
purchase
workout
gear
and
equipment.
An
economic
decline
during
either
of
these
periods
would
likely
adversely
affect
the
Company’s
earnings
to
a
greater
extent
than
if
a
downturned
occurred
during
the
second
or
third
quarter
of
the
year.
Additionally,
merchandising
apparel
can
lead
to
an
increase
in
sales
if
a
regional
team
has
a
successful
sports
season.
Along
the
same
lines,
if
a
team
is
underperforming,
apparel
sales
can
be
significantly
lower
than
average.
Furthermore,
any
trends
or
new
products
can
cause
temporary
spikes
in
sales.

18. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
18
Vendors
Hibbett
relies
on
a
select
number
of
key
vendors
to
supply
its
products.
This
selection
process
is
a
direct
result
of
customers
preferring
top
brands.
As
such,
Hibbett
is
dependent
on
maintaining
strong
relationships
with
its
major
vendors
and
manufacturers.
In
fact,
Hibbett’s
top
three
vendors
account
for
over
70%
of
products
purchased.
A
major
risk
would
be
any
conflict
in
these
relationships.
If
such
a
conflict
were
to
occur,
Hibbett
would
experience
operational
declines
as
they
search
for
new
vendors.
If
the
new
vendors
were
not
of
the
same
quality
as
the
existing
vendors,
these
operational
declines
could
persist
into
the
future.
Furthermore,
when
a
product
is
limited
by
supply
rather
than
demand,
a
vendor’s
allocation
of
products
among
retailers
plays
a
major
role
in
sales.
Continuing
a
strong
relationships
with
its
vendors
will
give
Hibbett
an
advantage
on
new
product
launches
and
will
help
Hibbett
keep
pace
with
market
trends.
Imported
Goods
Most
of
Hibbett’s
vendors
produce
and
import
a
large
majority
of
products
from
foreign
countries.
These
imported
goods
are
less
expensive
than
domestically
made
products
and
contribute
positively
to
Hibbett’s
profit
margins.
If
imported
goods
increase
in
price
or
become
unavailable,
the
Company’s
profit
margins
would
suffer
significantly.
Additionally,
the
domestic
products
used
to
supplement
the
foreign
products
may
be
of
a
lesser
quality
than
those
our
vendors
currently
import.
Additional
risks
associated
with
the
Company’s
reliance
on
imported
goods
include,
but
are
not
limited
to,
raw
materials
shortages,
problems
with
oceanic
shipping,
international
disputes,
rising
commodity
prices,
and
trade
restrictions.
Additionally,
if
a
vendor
is
associated
with
questionable
labor
practices,
it
could
negatively
affect
the
public’s
perception
of
Hibbett.
Information
Systems
Hibbett
claims
in
its
most
recent
10-­‐k
that
the
operation
of
its
business
is
dependent
on
the
successful
integration
and
operation
of
its
information
systems.
Hibbett
uses
its
information
system
to
manage
sales,
logistics,
merchandise
planning,
and
to
select
the
optimal
inventory
amounts
for
its
stores.
Hibbett
attempts
to
control
the
risk
of
business
interruptions
through
control
protocols
and
a
disaster
recovery
plan.
The
Company
primarily
uses
third-­‐party
service
providers
for
certain
system
applications.
A
disruption
or
failure
by
these
service
providers
in
the
form
of
inadequate
encryption,
data
separation,
or
technical
problems
could
negatively
affect
Hibbett’s
business.
Additionally,
Hibbett
does
not
have
the
necessary
technology
to
support
all
of
its
current
information
needs
and
rely
on
third-­‐party
service
providers
for
specific
software
and
applications.
Furthermore,
Hibbett’s
insufficient
focus
on
technology
infrastructure
leaves
it
vulnerable
to
technological
and
human
capital
losses.
The
Company’s
inability
to
invest
in
the
current
technology
and
replace
obsolete
equipment
pose
long-­‐term
threats
to
Hibbett’s
growth.

19. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
19
Financial
and
Governmental
Risks
Uninsured
Assets
Hibbett
manages
cash
and
cash
equivalents
beyond
federally
insured
limits.
Additionally,
Hibbett
purchases
investments
that
are
not
guaranteed
by
the
Federal
Deposit
Insurance
Corporation.
This
creates
the
risk
that
Hibbett
may
not
recover
the
full
principal
of
its
investments
as
well
as
the
risk
that
its
future
liquidity
may
be
diminished.
In
an
attempt
to
combat
this
risk,
Hibbett
practices
an
investment
policy
that
emphasizes
preservation
of
principal
and
liquidity.
Significant
Stockholders
As
a
publicly
traded
Company,
Hibbett
is
vulnerable
to
attempts
by
significant
stockholders
attempting
to
take
control
over
or
influence
the
Company.
This
action
could
adversely
affect
Hibbett’s
operation
and
financial
health.
Responding
to
stockholder
actions
and
motions
is
both
time
consuming
and
costly.
Additionally,
it
forces
the
Board
of
Directors
and
senior
management
to
step
away
from
its
daily
operation
of
the
business.
Labor
Unions
Hibbett
cannot
be
certain
that
it
will
always
avoid
pressure
from
labor
unions
or
labor
union
campaigns.
This
risk
could
grow
if
federal
legislation
or
regulatory
changes
facilitate
union
organization
and
development.
If
this
risk
materialized,
Hibbett
would
be
forced
to
negotiate
wages,
salaries,
and
benefits
with
its
employees.
This
could
negatively
affect
operations
by
increasing
Hibbett’s
overall
cost
to
operate.
Hibbett
believes
that
it
can
mitigate
some
of
this
risk
by
maintaining
strong
relationships
with
its
employees.
FINANCIAL
PERFORMANCE
AND
PROJECTIONS
Our
12-­‐month
price
projection
for
Hibbett
Sports
is
$52
with
a
Market
Perform
rating.
To
calculate
revenue,
our
team
used
the
quantity
and
price
method.
To
use
this
model,
our
team
looked
at
historical
revenue
per
square
foot
as
well
as
historical
growth
in
square
footage.
Historically,
Hibbett
has
generated
revenue
of
between
$0.18
and
$0.20
per
square
foot.
However,
Hibbett
Sports
revenue
per
square
foot
is
seasonal
as
the
first
and
fourth
quarters
generate
the
most
revenue
per
square
foot
out
of
the
four
quarters.
Our
team
used
historical
store
growth
as
well
as
discussions
with
management
to
forecast
store
growth
of
between
3%
and
5%
a
year
for
the
next
few
years.
This
projected
growth
is
from
two
main
sources.
The
growth
in
revenue
is
attributable
to
two
main
sources.
First,
is
the
planned
expansion
into
new
states
such
as
California.
This
will
increase
the
number
of
stores
as
well
as
revenue.
The
second
source
of
revenue
growth
is
the
growth
of
Hibbett’s
online
sales.
This
will
increase
the
amount
of
revenue
per
square
foot
as
well
as
overall
sales.
Some
key
assumptions
we
made
are
that
Hibbett
will
maintain
its
moderate
growth
strategy
by
avoiding
acquisitions
and
by
avoiding
taking
on
excessive
amounts
of
debt
in
order
to
increase
the
growth
of
the
Company.
Additionally,
we
assumed
that
Hibbett’s
revenue
per
square
foot
will
remain
similar
to
historical
trends.

20. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
20
To
calculate
costs,
our
team
looked
at
Hibbett’s
historical
costs
such
as
costs
of
goods
sold,
selling,
general
and
administrative
and
depreciation
costs.
Historically,
these
costs
have
represented
around
65%,
21%
and
2%,
respectively.
Management
did
not
expect
this
cost
structure
to
change
dramatically
in
the
future.
Some
short-­‐term
costs
due
to
the
implementation
of
the
omni-­‐channel
system
are
expected
but
these
costs
are
not
expected
to
be
long
term
expenses.
The
Company’s
Stock
Repurchase
Plan
is
one
considerable
use
of
cash
that
our
team
forecasts
will
end
soon.
We
expect
the
stock
repurchases
to
end
sometime
in
the
2018
fiscal
year.
Carrying
the
repurchases
any
further
could
potentially
turn
cash
flow
negative
as
the
Company
has
historically
avoided
debt
due
to
its
preference
for
a
strong
balance
sheet.
SITE
VISIT
Our
team
of
four
flew
out
on
the
morning
of
October
28
to
Birmingham,
Alabama
where
Hibbett
Sports
is
headquartered.
Upon
arrival
we
were
escorted
to
the
boardroom
where
we
met
with
the
Jeffry
Rosenthal
(Chief
Executive
Officer),
Scott
Bowman
(Senior
Vice
President
and
Chief
Financial
Officer)
and
Cathy
Pryor
(Senior
Vice
President
of
Operations).
We
began
the
site
visit
with
a
question
and
answer
session.
Mr.
Rosenthal
focused
a
great
deal
on
the
new
Omni-­‐Channel
initiative,
which
will
provide
a
better
experience
for
customers.
He
had
mentioned
the
efforts
they
were
going
through
to
activate
their
e-­‐commerce
plans,
which
he
had
hoped
to
occupy
10-­‐20%
of
their
revenues
once
implemented.
Mr.
Bowman
provided
details
about
the
costs
for
building
a
new
store.
He
provided
us
with
great
insight
on
lease
terms
for
new
stores
as
well
as
their
target
goals
for
how
many
new
stores
they
wish
to
open
per
year.
The
executives
focused
a
great
deal
on
their
brand
new
store
opening
in
California
and
their
hopes
to
open
100
new
stores
in
California
in
the
coming
years.
Ms.
Pryor
touched
on
Hibbett’s
training
systems
in
place
for
each
new
store,
as
well
as
how
the
implementation
process
works
for
stores.
We
asked
about
the
differences
in
stores
and
how
Hibbett
determines
markets
in
which
to
enter,
and
we
learned
that
location
selection
depends
on
their
competition.
We
touched
on
Hibbett’s
no-­‐debt
model
as
well
as
their
investment
plans
for
the
future.

21. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
21
Each
executive
had
a
unique
view
on
the
Company
and
seemed
to
blend
well
together,
which
we
thought
allowed
them
to
create
a
successful
business
model.
Our
team
gained
great
insight
into
the
future
of
the
Industry,
Hibbett’s
operations,
and
the
Company’s
future
plans
for
continued
success
in
the
sporting
goods
industry.
Site
Visit
Photo

22. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
22
INDEPENDENT
OUTSIDE
RESEARCH
Our
team
had
the
opportunity
to
visit
a
local
Hibbett
Sports
in
New
Orleans.
We
knew
that
actually
visiting
a
local
Hibbett
Sports
location
would
be
the
best
way
to
test
Hibbett’s
outstanding
service
and
selection
claims.
Hibbett
Sports
has
two
locations
in
the
greater
New
Orleans
area
and
we
decided
to
go
to
the
store
located
in
the
Lakewood
area
to
evaluate
the
shopping
experience.
Entering
Hibbett
was
a
crucial
step
in
understanding
the
Company’s
direction
because
it
was
our
first
look
at
the
store
layout.
Since
the
majority
of
Hibbett
Sports
stores
are
5,000
Sq.
ft.
this
visual
gave
us
a
good
representation
of
what
other
stores
look
like.
We
noticed
how
the
aspect
of
implementing
a
5,000
Sq.
ft.
store
plan
for
each
store
was
beneficial
because
the
customer
has
a
full
view
of
every
product
offered
in
store.
In
turn,
this
perspective
could
lead
customers
to
purchase
more
than
one
item.
After
walking
throughout
the
store,
we
recognized
almost
every
brand
name,
which
confirmed
our
expectation
that
Hibbett
is
stocked
with
the
top
tier
brands
and
high
quality
merchandise.
Another
aspect
of
the
5,000
sq.
ft.
store
was
that
it
made
it
easy
on
the
consumer
to
ask
for
help
by
having
employees
covering
the
limited
space.
Employees
were
able
to
provide
enough
space
to
consumers
so
they
felt
no
pressure
to
purchase
an
item,
yet
the
consumer
also
never
had
to
wait
for
help
if
needed.
In
our
site
visit
to
the
store,
we
could
see
how
the
5,000
sq.
ft.
store
format
was
mutually
beneficial
for
both
consumer
and
employee.
In
the
store
we
decided
to
shop
for
basketball
shoes,
because
two
of
the
team
members
were
strong
enthusiasts
of
the
sport
and
knew
basketball
shoes
well.
Our
goal
was
to
judge
the
customer
service
that
the
employees
would
provide
to
us.
At
the
time
of
arrival
to
the
store
there
were
only
two
employees
working,
which
seemed
to
be
a
small
number
of
employees
for
a
5,000
Sq.
ft.
store.
But,
as
we
spent
more
time
in
the
store,
we
realized
that
both
employees
were
moving
around
the
store
efficiently
and
helping
customers
in
a
timely
fashion.
As
we
found
our
way
over
to
the
basketball
shoe
section,
we
noticed
they
offered
a
wide
variety.
As
we
were
looking
over
the
shoes,
an
employee
came
over
to
ask
us
if
we
needed
help.
We
mentioned
we
were
looking
for
a
basketball
shoe
that
had
great
comfort
on
court,
but
could
also
be
worn
as
a
lifestyle
sneaker
off
the
court.
She
immediately
found
a
newly
released
Nike
shoe.
She
offered
her
reasoning
as
to
why
the
shoe
was
great
for
on
court,
and
also
explained
why
you
could
wear
this
as
a
lifestyle
sneaker.
In
addition
to
finding
a
shoe
that
satisfied
our
criteria,
she
advised
us
to
get
the
shoe
one
size
bigger
based
on
her
experience.
We
were
impressed
with
her
knowledge
of
shoes
and
Hibbett’s
overall
shoe
line.

23. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
23
As
our
other
team
members
were
looking
around
the
store,
they
met
Troy,
the
Assistant
Manager
of
the
store.
He
happily
guided
them
to
find
the
exact
item
they
were
searching
for
in
the
store
and
he
asked
if
they
were
in
need
of
any
other
products.
One
team
member
said
he
was
looking
for
the
newest
Nike
lifestyle
shoe
release
that
had
come
out
earlier
in
the
day.
Troy
told
our
team
member
that
they
were
sold
out
of
the
item
and
continued
to
explain
the
process
of
inventory
for
each
store
to
the
group.
This
led
to
the
high
point
of
our
experience
at
Hibbett
Sports
because
Troy
proceeded
to
have
a
45
minute
conversation
with
one
of
our
team
members
about
all
of
the
new
and
old
shoe
releases,
as
well
as
discussing
Troy’s
personal
interests.
Our
group
truly
saw
the
passion
and
knowledge
Troy
had
for
shoes
and
how
proud
he
was
to
be
an
Assistant
Manager
at
this
Hibbett
Sports
location.
Troy’s
politeness
and
helpfulness
exceeded
our
expectations
for
Hibbett’s
customer
service
and
it
is
clear
why
this
Company
retains
so
many
loyal
customers.
Overall,
our
surprise
visit
to
the
local
Hibbett
Sports
not
only
confirmed,
but
exceeded,
our
expectations
for
merchandise,
staff
knowledge,
and
customer
service.
Though
our
interactions
with
Hibbett’s
employees,
it
was
evident
how
focused
Hibbett
is
on
properly
training
its
employees.
Competition:
Dick’s
Sporting
Goods
On
our
site
visit
to
Dick’s
Sporting
Goods,
we
noticed
that
it
was
a
very
large
store
compared
to
Hibbett
Sports.
The
large
store
size
made
it
difficult
to
determine
where
products
were
located.
We
found
our
way
over
to
the
Basketball
shoe
section,
but
found
no
help
in
sight.
We
saw
they
had
most
of
the
up
to
date
shoe
releases
and
latest
technology,
but
we
were
not
able
to
get
any
information
about
the
products.
We
stood
around
for
a
minute
or
two
had
to
go
over
to
another
department
of
the
store
to
ask
for
help.
The
employee
had
mentioned
to
us
that
they
have
to
call
the
specific
employee
due
to
the
fact
that
each
employee
works
only
in
their
department.
Once
we
found
this
out
about
Dick’s
Sporting
Goods,
it
was
clear
that
the
Hibbett
Sports
had
a
clear
competitive
advantage
by
having
well
rounded
and
knowledgeable
employees
compared
to
their
competitors.
Big
5
Sporting
Goods
Unfortunately,
we
could
not
do
a
site
visit
to
Big
5
Sporting
Goods
store
because
there
were
no
locations
nearby.
We
conducted
research
on
their
website
and
searched
for
Men’s
Basketball
shoes.
We
judged
Big
5
Sporting
Goods
to
have
a
poor
selection
due
to
their
lack
of
brand
name
merchandise
and
limited
selection.
Also,
Big
5
did
not
offer
the
latest
technology
advanced
basketball
shoes
to
their
consumer
as
well.

24. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
24
Conclusion
After
our
site
visits
and
online
research,
our
team
concluded
that
Hibbett
Sports
has
a
clear
competitive
advantage
in
the
shoe
market
over
Dick’s
Sporting
Goods
and
Big
5
Sporting
Goods.
Even
though
Dick’s
Sporting
Goods
offered
the
same
caliber
basketball
shoes,
they
did
not
provide
the
customer
service
that
Hibbett
offered
to
customers.
Also,
Big
5
Sporting
Goods
did
not
provide
the
selection
that
most
consumers
are
hoping
to
find.
Even
though
Big
5
may
offer
a
good
customer
service
experience
in
store,
Big
5’s
product
selection
is
no
match
for
Hibbett
Sports.
It
was
clear
that
Hibbett
Matches
its
competitors
with
the
high
quality
products,
and
thoroughly
surpassed
competitors
in
customer
service.
Analyst
Reports
Multiple
analysts
on
the
Thomson
One
Database
believe
that,
in
order
for
companies
to
succeed
in
this
industry,
they
not
only
need
to
have
strong
sales
within
the
stores,
but
their
e-­‐
commerce
must
serve
as
a
key
contributor
in
these
sales.
We
spoke
to
one
analyst
who
believes
that
Hibbett
Sports
has
a
strong
brick
and
mortar
presence
in
the
Sporting
Goods
Industry
that
is
rapidly
growing,
but
he
said
that
their
lack
of
e-­‐commerce
is
a
weaknesses
against
competitors.
Hibbett’s
CEO,
Jeffry
Rosenthal,
is
aware
of
their
situation
and
is
investing
in
the
proper
technology
and
issuing
strategies
that
will
develop
a
competitive
e-­‐
commerce
by
2017.
In
the
future,
this
analyst
believes
that
Hibbett
Sports
must
have
15-­‐20%
of
the
Company’s
revenue
coming
from
its
website.
If
it
only
reaches
a
target
of
10%,
which
is
believed
to
be
too
low,
Hibbett
Sports
will
risk
losing
market
share.
Mr.
Rosenthal
understands
that
the
e-­‐commerce
business
will
not
grow
overnight,
but
Hibbett
must
set
the
bar
high
to
keep
market
share
and
stay
highly
competitive
in
the
industry.

25. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
25
ANOTHER WAY TO LOOK AT IT
ALTMAN
Z-­‐SCORE
In
1968,
Dr.
Edward
Altman
developed
the
Z-­‐Score
test
to
determine
the
risk
of
a
manufacturing
company
going
bankrupt.
Over
time,
his
test
has
been
applied
to
publicly
traded
companies
in
all
industries.
The
Altman
Z-­‐Score
is
a
multiple
discriminant
analysis
that
tracks
changes
in
bankruptcy
risk
over
time.
To
determine
the
Z-­‐Score,
one
uses
the
following
ratios:
working
capital/total
assets,
retained
earnings/total
assets,
EBIT/total
assets,
market
value
of
equity/book
value
of
total
liabilities
and
sales/total
assets.
The
Z-­‐Score
separates
companies
into
four
different
bankruptcy
risk
classifications.
Companies
with
a
Z-­‐Score
greater
than
3.0
are
considered
to
have
a
very
low
risk
of
bankruptcy
and
is
considered
by
lenders
to
be
a
safe
investment.
A
Z-­‐Score
between
2.7
and
2.99
represents
a
company
that
is
considered
to
have
a
low
risk
of
bankruptcy,
but
lenders
tend
to
be
cautious
in
this
range.
A
Z-­‐Score
between
1.8
and
2.7
represents
a
significant
chance
that
the
company
may
go
bankrupt
within
the
next
two
years.
A
Z-­‐Score
below
1.8
signifies
a
company
with
a
very
high
risk
of
bankruptcy
within
the
next
two
years.
Lenders
would
be
extremely
wary
of
investing
in
this
company.
Table
7:
Hibbett
Sports
Altman
Z-­‐Score
Ratio
2009
2010
2011
2012
2013
2014
2015
Multiplier
Working
Capital
to
Total
Assets
0.455
0.533
0.557
0.565
0.538
0.565
0560
1.2
Retained
Earnings
to
Total
Assets
0.898
0.880
0.923
1.113
1.117
1.183
1.251
1.4
EBIT
to
Total
Assets
0.204
0.189
0.234
0.297
0.307
0.273
0.261
3.3
Market
Cap
to
BV
of
Liabilities
4.000
6.074
8.259
12.246
10.258
14.033
9.444
0.6
Sales
to
Total
Assets
2.310
2.145
2.116
2.336
2.170
2.046
2.019
1.0
Total
Altman
Z-­‐
Score
7.276
8.287
9.804
12.900
11.547
13.702
10.969
As
shown
in
Table
7,
Hibbett
Sports
has
maintained
a
Z-­‐Score
significantly
above
the
3.0
cut-­‐off
and
is
considered
a
very
low
risk
for
bankruptcy.
Hibbett’s
Z-­‐Score
decline
in
2015
can
be
attributed
to
the
decrease
in
market
capitalization.
That
year,
the
Company’s
market
capitalization
decreased
by
slightly
over
$370
million.
On
all
other
metrics,
Hibbett
has
almost
maintained
its
position
or
shown
positive
growth.

26. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
26
PETER
LYNCH
EARNINGS
MULTIPLE
VALUATION
Peter
Lynch,
who
managed
Fidelity
Investments’
fund,
was
known
as
arguably
the
greatest
mutual
fund
manager
in
history.
His
simple
yet
effective
technique
was
to
compare
a
company’s
stock
price
to
the
S&P
500
by
using
the
price
to
earning
ratio
of
15x.
Peter
Lynch
was
the
author
of
multiple
books,
but
his
most
famous
book
“One
Up
On
Wall
Street”
included
investing
tips,
questions
you
should
ask
yourself
before
investing,
and
of
course
details
on
Lynch’s
charting
tool
that
simplified
all
of
his
investment
choices.
Figure
5
shows
Hibbett
Sports’s
closing
stock
prices
for
the
past
five
years
multiplied
by
15.
According
to
Peter
Lynch
if
the
stock
is
traded
well
below
the
earnings
line
he
would
buy
it,
and
when
it
rose
above
the
earnings
line,
he
would
sell.
This
technique
allowed
him
to
capture
enormous
amounts
of
profit.
Hibbett’s
stock
price
as
of
October
27,
2016
is
$39.075,
which
is
12.8x
of
its
earnings.
As
such,
Peter
Lynch
would
purchase
the
Company’s
stock.
Figure
5:
Hibbet’s
Peter
Lynch
Chart
Source:
Bloomberg
Data/
Burkenroad
Analysis
accessed
October
27,
2016
Stock Price
Earnings

27. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
27
WWBD?
What Would Ben (Graham) Do?
Benjamin
Graham
is
credited
as
the
father
of
value
investing.
Graham’s
methodology
has
yielded
amazing
success.
Graham’s
value
investing
methodology
revolves
around
eight
hurdles.
The
hurdles
measures
how
undervalued
a
company’s
stock
currently
is
and
its
future
growth
potential.
If
a
given
stock
passes
four
of
the
eight
hurdles,
Graham’s
framework
determines
the
stock
is
an
attractive
investment.
Hibbett
Sports,
Inc.
passes
five
of
Graham’s
eight
hurdles.
With
a
high
earnings
to
price
yield,
no
debt,
and
a
substantial
amount
of
inventory
on
hand,
Hibbett
passes
hurdles
one,
five,
and
six
easily.
On
the
contrary,
the
Company
is
far
from
passing
hurdles
three
and
four,
as
Hibbett
has
never
paid
dividends
to
common
shareholders
and
has
a
stock
price
of
nearly
300%
of
book
value.
According
to
Ben
Graham’s
value
investing,
Hibbett
Sports
is
an
attractive
investment
(see
Figure
6).
Figure
6:
Ben
Graham
Diagram

28. Hibbett
Sports
Incorporated
(HIBB)
BURKENROAD
REPORTS
(www.burkenroad.org)
November
16,
2016
28
Earnings per share (ttm) 2.99$ Price: 39.05$
Earnings to Price Yield 7.65%
10 Year Treasury (2X) 3.70%
P/E ratio as of 1/31/16 11.0
P/E ratio as of 1/31/15 16.4
P/E ratio as of 1/31/14 22.2
P/E ratio as of 1/31/13 19.4
P/E ratio as of 1/31/12 22.3
Current P/E Ratio 13.1
Dividends per share (ttm) -$ Price: 39.05$
Dividend Yield 0.00%
1/2 Yield on 10 Year Treasury 0.93%
Stock Price 39.05$
Book Value per share as of 7/30/16 14.20$
150% of book Value per share as of 7/30/16 21.30$
Interest-bearing debt as of 7/30/16 -$
Book value as of 7/30/16 318,693$
Current assets as of 7/30/16 354,599$
Current liabilities as of 7/30/16 123,096$
Current ratio as of 7/30/16 2.9
EPS for year ended 1/31/12 2.15$
EPS for year ended 1/31/13 2.72$
EPS for year ended 1/31/14 2.70$
EPS for year ended 1/31/15 2.87$
EPS for year ended 1/31/16 2.92$
EPS for year ended 1/31/12 2.15$
EPS for year ended 1/31/13 2.72$ 27%
EPS for year ended 1/31/14 2.70$ -1%
EPS for year ended 1/31/15 2.87$ 6%
EPS for year ended 1/31/16 2.92$ 2%
Stock price data as of November 16, 2016
HIBBETT SPORTS INC. (HIBB)
Ben Graham Analysis
Hurdle # 1: An Earnings to Price Yield of 2X the Yield on 10 Year Treasury
Hurdle # 2: A P/E Ratio Down to 1/2 of the Stocks Highest in 5 Yrs
Yes
Yes
Hurdle # 3: A Dividend Yield of 1/2 the Yield on 10 Year Treasury
Hurdle # 4: A Stock Price less than 1.5 BV
No
No
No
Hurdle # 8: Stability in Growth of Earnings
Hurdle # 5: Total Debt less than Book Value
Hurdle # 6: Current Ratio of Two or More
Hurdle # 7: Earnings Growth of 7% or Higher over past 5 years
Yes
Yes
Yes