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Take Advantage of the Momentum in These 3 Retail Stocks

The retail industry has been gaining momentum since the beginning of 2021 as investors rotate toward cyclical stocks. Therefore, we think sports retailers Academy Sports and Outdoors (ASO), Hibbett, Inc. (HIBB), and Sportsman’s Warehouse Holdings (SPWH), which have delivered double-digit percentage price gains over the past year, have plenty of upside remaining. Let’s discuss.

A solid vaccination drive and gradual reopening of the economy have benefited physical retail stores because people are yearning for in-person shopping following more than a year of online shopping. Furthermore, with rising consumer spending and an improving job market, retail sales have been rising substantially. The global retail market is expected to grow at a 7% CAGR over the next four years to $29.36 trillion.

Given the industry’s bullish growth prospects, investors have been investing heavily in retail stocks since the beginning of the year. This is evident in SPDR S&P Retail ETF’s (XRT) 46.5% gains year-to-date, versus the broader SPDR S&P 500 Trust ETF’s (SPY) 20.1% returns over this period.

Thus, popular retail stocks Academy Sports and Outdoors, Inc. (ASO), Hibbett, Inc. (HIBB), and Sportsman's Warehouse Holdings, Inc. (SPWH), with double-digit gains over the past year, appear to have plenty of upside left to deliver.

Click here to checkout our Retail Industry Report for 2021

Academy Sports and Outdoors, Inc. (ASO)

ASO sells sporting goods and outdoor products through Academy Sports + Outdoors and BCG. The Katy, Tex., company began  trading publicly on October 2, 2020, following a traditional IPO.

On August 16, ASO partnered with fast-food chain Whataburger for the Magellan Outdoors X Whataburger apparel line, which is available across 106 ASO locations in Texas for a limited time. The collaboration with a renowned brand  is expected to boost ASO’s revenues.

In  July, ASO became an official sponsor of Austin FC. The sponsorship is expected to build a stronger footprint for  the company in Texas due to the soccer club’s loyal  fanbase .

In its  second fiscal quarter, ended July 31, ASO’s net sales increased 11.5% year-over-year to $1.79 billion. Its  gross margin improved 29.4% from the prior-year quarter to $642.5 million. Its net income came in at $190.51 million, up 13.6% from the same period last year. And its adjusted EBITDA increased 41.3% year-over-year to $324.42 million.

A $4.84  consensus EPS estimate for  the current year (fiscal 2022) reflects a 26.4% year-over-year increase. Likewise, the $1.4 billion consensus revenue estimate  for the current quarter (ending October 2021) indicates a 10.9% year-over-year rise. ASO has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the four trailing quarters.

The stock has gained 239.3% in price since it began publicly trading on October 2, 2020. It is currently trading above its $38.77 and $34.34 respective 50-day and 200-day moving averages, indicating a golden-cross uptrend.

ASO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

ASO has a Momentum grade of A, and a Quality grade of B. In the 35-stock, A-rated Athletics & Recreation industry, it is ranked #23.

In total, we rate ASO on eight different levels. Beyond what we stated above, we have also given ASO grades for Growth, Value, Stability, and Sentiment. Get all the ASO ratings here.

Hibbett, Inc. (HIBB)

HIBB is a sporting goods retailer that operates through multiple subsidiaries. Its  product range includes athletic footwear and apparel, which can be purchased through its retail stores and online website. HIBB is headquartered in Birmingham, Ala.

Recently, HIBB opened city stores in various locations, including Raleigh, Kansas City, Griffin, Cedar Hill, etc. This broad initiative will potentially widen HIBB’s customer base.

In May, HIBB’s board of directors authorized a  share repurchase program extension to $800 million until February 1, 2025. This move reflects HIBB’s confidence in generating greater cash flows in the future and in its ability to pay back shareholders.

HIBB’s operating income increased 9.3% year-over-year to $61.5 million in its second fiscal quarter, ended July 31. Its gross margin rose 200 basis points from the same period last year to 39% of net sales. The company’s net income improved 15.7% from the prior-year quarter to $46.7 million, and its EPS increased 20.2% from its year-ago value to $2.86.

The Street’s $1.69 EPS estimate for the next quarter (ending January 2022) indicates a 20.7% year-over-year increase. Likewise, the $403.71 million consensus revenue estimate  for the next quarter reflects a 7.1% increase from the prior-year quarter.

The stock has gained 125.3% in price over the past year and 77.9% year-to-date. HIBB is currently trading above its $80.25, 200-day moving average , indicating an uptrend.

It’s no surprise that HIBB has an overall B rating,  which translates to Buy in our POWR Ratings system. The stock has an A grade for Momentum, and a B grade for Value and Quality. HIBB is ranked #17 of 35 stocks in the Athletics & Recreation industry.

Click here to see the additional POWR Ratings for HIBB (Growth, Stability, and Sentiment).

Sportsman's Warehouse Holdings, Inc. (SPWH)

SPWH and its subsidiaries operate as sporting products retailers for camping equipment, fishing equipment, and hunting equipment. In addition, the  Midvale, Utah, company  provides a smooth shopping experience for outdoor shoppers.

For its first fiscal half ended July 31, its net sales increased 9.7% year-over-year to $688.77 million. Its gross profit improved 9.9% from the prior-year half to $224.10 million. And its net cash provided by financing activities came in at $22.81 million, up 118.5% from the same period last year.

Analysts expect its revenue to increase 1.8% year-over-year to $1.47 billion in its next year (fiscal 2023).

SPWH’s stock has gained 30.5% in price over the last year to close yesterday’s trading session at $17.69. It is currently trading slightly above its 200-day moving average of $17.61, signaling an uptrend.

Under the POWR Ratings, SPWH has a Momentum grade of A, and a Value grade of B. In addition, it is ranked #25 of 35 stocks in the Athletics & Recreation industry.

To see additional POWR Ratings for Growth, Stability, Sentiment, and Quality for SPWH, click here.

Click here to checkout our Retail Industry Report for 2021

ASO shares were trading at $45.22 per share on Friday afternoon, up $1.15 (+2.61%). Year-to-date, ASO has gained 118.14%, versus a 20.36% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.


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