Hibbett Sporting Goods to acquire athletic wear retailer
Hibbett Sporting Goods just made a big play that could help strengthen its position in the competitive sporting goods segment.
The company said late Monday that it will acquire City Gear, a privately held specialty retailer of premium athletic footwear, apparel and accessories. City Gear operates 135 stores in 15 states.
According to terms of the transaction, Hibbett will pay $88 million in cash at the closing of the deal. There is also the potential for up to $25 million in additional consideration paid over the next two years, subject to certain performance-based targets. Hibbett expects to complete the transaction by early December.
City Gear will operate as a subsidiary of Hibbett Sporting Goods. The company will maintain its current headquarters in Memphis, Tennessee, and will continue to be led by members of City Gear’s senior management team.
“We are pleased and excited to announce this acquisition, which provides substantially greater scale in the athletic specialty market and is an extension of our strategy to provide high demand, branded products to underserved markets,” said Jeff Rosenthal, president and CEO for Hibbett.
“City Gear represents a key brand with the fashion-forward consumer and will allow us to extend our customer base and provide a significant opportunity for growth,” he added. “In addition, Hibbett will provide City Gear the needed infrastructure for future growth, including strong internal systems, omnichannel capabilities, and real estate expertise.”
City Gear is known for its customer service and a compelling merchandise assortment, one that is driven by the “sneaker culture.” For the last fiscal year ended Feb. 4, the retailer reported total revenue of approximately $190 million. For the past three years, same-store sales have averaged in the mid-single digit range.
Meanwhile, Hibbett ended the second quarter of fiscal 2019 with $119.6 million of available cash and cash equivalents, with no bank debt outstanding. The company currently operates more than 1,000 stores primarily located in small and mid-sized communities across the country.
While both companies sell strong, attractive brands that resonate with customers, such as Nike, Jordan, Adidas, Puma, Converse, Fila, and others, there is no “significant” geographic overlap between both companies’ stores. This poses a strong opportunity for future store growth, according to Hibbett.
“We believe that Hibbett provides City Gear the ideal platform to expand upon our successes in serving our loyal customers, and are excited to continue to grow leveraging Hibbett’s capabilities,” said Mike Longo, CEO, City Gear.
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Kroger’s earnings outlook stays on track, sales take a hit
Despite its store remodels slowing sales in the final months of the year, The Kroger Co.’s strong digital sales will enable the company’s second half financial results to match those achieved in the first half of 2018.
The supermarket giant is standing by its earnings per share guidance of $2.00 to $2.15 per diluted share as it heads into the last months of 2018. This guidance is also still in line with analysts’ forecasts.
However, the company expects its financial results of the second half of 2018 to be similar to those achieved in the first half of the year. While Kroger’s same-store sales increased 1.8% in the first half of the year, the company issued guidance that same-store sales would rise anywhere from 2% to 2.5% for the year.
This impact is based on a series of ambitious projects through the company’s Restock Kroger initiative, including space optimization projects, store remodels, and technology enhancements. All projects affected more than 1,000 of its of the company’s 2,800 store locations.
While these stores continue to gain strength, remodeling initiatives did impact sales negatively, creating “a headwind to sales for the remainder of the year,” according to the company.
The company still remains bullish on the growth of its digital sales. Kroger expects an annual digital sales run rate of just over $5 billion at year end 2018, growing to an annual run rate of $9 billion at year end 2019.
“We are on a transformation journey and we are making strong progress on redefining the customer experience,” said Rodney McMullen, Kroger’s chairman and CEO.
“We are proactively investing in our stores, customers and associates for the future, and we are committed to delivering shareholder value through Restock Kroger,” said McMullen. “Everything we are doing today is creating a truly seamless shopping experience, so we can serve customers anything, anytime and anywhere.”
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