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Hibbett Sports, Inc.

“Game Tested. Athlete Approved.”. Hibbett Sports, Inc. Kevin A. Pribil. Module 5. Company overview Intro to valuation using DCF Steps to find DCF Revisit growth a ssumptions Hibbett enterprise v alue calculations. Agenda. Est. 1945 as Dixie Supply Co. in Alabama

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Hibbett Sports, Inc.

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  1. “Game Tested. Athlete Approved.” Hibbett Sports, Inc. Kevin A. Pribil Module 5

  2. Company overview • Intro to valuation using DCF • Steps to find DCF • Revisit growth assumptions • Hibbett enterprise value calculations Agenda

  3. Est. 1945 as Dixie Supply Co. in Alabama • Began in the marine and small aircraft markets but moved into sporting goods by the ‘60s • IPO in October 1996; operated 79 stores at the time • Incorporated in Delaware in 2007 • Immense growth into a now 873 store company • CEO- Jeffry Rosenthal, 55, former executive at Champs • Chairman- Michael Newsome, 74, began at Hibbett over 45 years ago and worked his way up from cashier Company Overview

  4. As a retailer Hibbettoperates typically in 5,000 sq. ft. stores usually influenced by the location of a WalMart • 4 different types of stores • Hibbett Sports: full retail format • Sports Additions: 90% footwear and headgear • Sports & Co.: a 25,000 sq. ft. superstore (1 in operation) • Team: leading customized apparel supplier • CEO and CFO conduct annual evaluation of efficiency of internal controls procedures based on COSO standards • KPMG released audit report on Hibbett’s internal controls Company Operations

  5. Increased competition not only between sporting goods stores but also with departments stores and online merchandisers • Increased store overhead (ex: rock-climbing walls, putting greens) • The fight for exclusive contracts with vendors • Analysts expect a slight decline in revenue of .1% per year through 2018. Industry Drivers Source: www.ibisworld.com

  6. Estimate enterprise value based on projected future CF’s • Underlying notion: current value represents future payoffs • Accounting info needs manipulation in order to be useful in determining future CF’s Intro to Valuation using DCF

  7. Forecast 5-year Sales with EPAT and NEA • By finding year-to-year change in NEA, calculate FCF • Discount FCF’s according to forecast year and discount rate (10%) • Sum forecasted PV of FCF’s • Calculate the continued value beyond 5-year forecasts to account for infinite cash flow stream • Add PV of FCF’s and PV of continued value to find current enterprise value Steps to find DCF

  8. Revisit Growth Assumptions

  9. Create 5-year forecast based on previously mentioned assumptions Hibbett Sports DCF - 1

  10. Calculate FCF by subtracting expected change in NEA from forecasted EPAT Hibbett Sports DCF - 2

  11. Discount yearly projected FCF’s and sum to find the PV of Cash Flows Hibbett Sports DCF - 3

  12. Calculate continued value to account for infinite life project Hibbett Sports DCF - 4

  13. Sum PV of FCF’s with PV of continued value to arrive at enterprise value Hibbett Sports DCF - 5

  14. Questions…

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