What Happened:
Shares of athletic apparel and footwear retailer Hibbett (NASDAQ:HIBB) jumped 19.2% in the pre-market session after JD Sports agreed to acquire all outstanding shares of the company (Hibbett) for $87.50 per share in cash, representing an enterprise value of approximately $1.1 billion. The acquisition price represents a 21% premium to Hibbett's April 22, 2024, closing price and a 29% premium to the 120-trading day volume weighted average price.
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What is the market telling us:
Hibbett's shares are somewhat volatile and over the last year have had 22 moves greater than 5%. But moves this big are very rare even for Hibbett and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was about one month ago, when the stock dropped 14.7% on the news that the company reported fourth-quarter results with same-store sales, revenue, and EPS, all missing Wall Street's estimates. To add insult to injury, the full-year EPS guidance was well below expectations.
In addition, the growth outlook was underwhelming, with net sales projected for FY'25 expected to be flat to up ~2.0%, while comp sales growth is expected to be flat to negative low-single digit. Management noted that investments in new stores, technologies, and infrastructure would have an impact on profitability growth in the short term. However, these decisions should be accretive to profitability in the long term. Overall, the results could have been better, with markets likely struggling to digest the weak guidance.
Hibbett is up 20.6% since the beginning of the year. Investors who bought $1,000 worth of Hibbett's shares 5 years ago would now be looking at an investment worth $4,321.
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