No. of Recommendations: 1
HG Fools
As part of the internship, we have to give a stock pitch presentation. My first one was on Hibbett Sports. Below is the link to the write up I did on my pitch and the initial research from the 10-K. If you belong to SA, they've posted the actual slides from the presentation over there if anyone is interested.

Foolish Regards

Company: Hibbett Sports (HIBB); Market Cap $1.42B

Business: Sporting goods stores in small and mid-sized markets predominantly in the South, Southwest, Mid-Atlantic and the Midwest.

Value Proposition: Convenient locations (small markets) and a broad assortment of brand name quality athletic equipment, footwear, and apparel with a high level of customer service.

Strategy and Advantage:
• Store growth in small markets with strong regional focus and little competition (75-80 open, 15-20 closed)
• Target markets with county populations that range from 25,000 to 75,000
• Quality, brand name merchandise with an emphasis on team sports
• Merchandise to community interests; strives to respond quickly to major sporting events of local interest
• Emphasis on IT infrastructure (MDO, Labor Scheduling, Logistics, POS) to maintain operating margin & improve efficiencies

Other Details:
• 5,000 square foot store located primarily in strip centers, which are usually near a Wal-Mart
• 939 stores (10-Q) in 31 states w/market id for 1300 stores (clustered expansion of new stores w/in 2hrs)
• New wholesaling and logistics facility can support 1500 stores
• Footwear – 45%, Apparel – 32%, Equipment – 23%
• No debt, lots of cash – Growth financed through free cash flow
• Share repurchase
• Other concepts: 17 Sports Additions and Hibbett Team Sales
• Omni-channel development
• Glassdoor rating of 3.2/5, CEO approval 66% - Higher than Big 5 & Dick’s

• Downturn in the economy
• Poor performance of college and professional sports teams within core regions of operation
• Loss of key vendors
• Highly competitive marketplace w/many different retailers

Big Few: New Corporate HQ? Comps w/Big 5 & Dick’s

Valuation: P/E - 20; EV/EBIT - 11; Cap IQ Fair Value - $75; Buffett (10x pretax earnings) - $45

Metrics: ROA – 17%, ROC – 25%, ROE – 25%, Gross Margin – 36%, NI Margin 8.4%, Inventory T/O – 2.7, Cash Conversion Cycle – 93 days, Current Ratio – 3.6

Reasons to Buy:
1. Good growth for several more years at least
2. Strong free cash flow
3. Great returns on capital
4. Share buyback program
5. Reasonably valued

- Little Competition
- Focus on local/regional sports
- Great brands offered
- No debt, very profitable

- No true online sales
- More expensive products in rural areas
- Long cash conversion cycle

- Growth runway of 1500+
- Online business reaches new markets
- Expand Hibbett Team Sales

- Amazon
- Dicks or Walmart decide to copy format
- Product substitution
- Poor performance of local teams
- Vendor bargaining power
- Bad economy
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