Why Hibbett Sports, Inc. Stock Fell on Friday

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What happened

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After Hibbett Sports (NASDAQ: HIBB) reported its second-quarter results for fiscal 2018, shares took a dive on Friday, falling as much as 18.3%. The stock is down about 6.7% at the time of this writing. The stock's decline reflects worse-than-expected results and lowered guidance amid a challenging retail environment.

"We experienced a very difficult retail environment in the quarter, with a significant decline in transactions and resulting pressure on gross margin," said Hibbett CEO Jeff Rosenthal.

So what

Hibbett reported second-quarter revenue of $188 million, down 9.2% compared to the year-ago quarter. And the company reported a loss per share of $0.15, down from earnings per share of $0.29 in the year-ago quarter.

Declining revenue was driven by a painful 11.7% decrease in comparable-store sales. Meanwhile, the company's profitability was pressured by a drop in gross margin, from a rate of 33% in the year-ago quarter to 28.9% in Q2. "The decrease was mainly due to promotions and markdowns taken to liquidate excess and aged inventory, and de-leverage of logistics and store occupancy expenses associated with lower comparable store sales," management said.

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Now what

In its outlook, Hibbett significantly reduced its forecast for earnings per share. Management now expects fiscal 2018 EPS to be between $1.25 and $1.35, down from a previous guidance range of $2.35 to $2.55. This lower guidance range reflects management's forecast for a lower gross profit margin. Management guided for fiscal 2018 gross profit margin to come down by 250 to 285 basis points compared to fiscal 2017. Previous guidance was for a reduction in gross margin of 55 to 75 basis points.

Looking ahead, Rosenthal said he expects "the external environment to remain challenging." On the bright side, however, Rosenthal said early e-commerce sales appear promising, exceeding management's expectations. "We will continue our efforts to grow our online business aggressively in the future," Rosenthal noted, "while continuing to improve our stores to provide a great overall customer experience."

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Daniel Sparks has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.