Benzinga | Jul 8, 2021 05:36PM EDT

Hibbett Analyst: Athletic Goods Retailer Has Different Approach, High Growth Potential

Hibbett, Inc.'s (NASDAQ:HIBB) differentiated approach to athletic retail and growth potential are turning Telsey Advisory Group bullish on the retail stock.

The Hibbett Analyst: Cristina Fern?ndez initiated coverage of Hibbett with an Outperform rating and $110 price target.

The Hibbett Takeaways: Hibbett has benefited from strong athletic apparel and footwear demand during the pandemic, and further growth is ahead, Fern?ndez said in a Thursday note.

The company's operating margins doubled in 2020 to 10% and are forecast to expand to 13.5% in 2021, the analyst said. By 2025, revenue is expected to reach $2 billion, with a 13.5% operating margin, she said.

Hibbett has a "unique geographic footprint" relative to its peers in that its stores are primarily situated in small rural areas, giving it near-exclusive access to these markets, Fern?ndez said.

Additionally, the company is expected to accelerate store openings over the next several years, the analyst said.

Hibbett also emphasizes a complete head-to-toe look, she said, adding that this complete outfit emphasis gives Hibbett a more balanced sales mix between footwear (64% of sales) and apparel (27% of sales), differentiating it from primary competitors Foot Locker (NYSE:FL) and Finish Line, which derive 85-90% of sales from footwear.

The company offers an attractive valuation given its growth potential, said Fern?ndez.

It trades at a 10.3x P/E multiple over the next 12 months, a discount to its historical multiples but a premium to its peer group, the analyst said.

Telsey's $110 price target was calculated by applying a 12x P/E multiple on projected 2022 EPS of $9.17.

HIBB Price Action: Hibbett shares lost 0.33% Thursday, closing at $92.79.

Photo: a Hibbett Sports store. Photo by Thomson200 via Wikimedia.