Hibbett Sports — Hibbett — Merger or Acquisition (June 2024)
36 slides from Hibbett Sports's merger presentation, Jun 25, 2024
Slide 1: JD Sports Acquisition Maximizes Value for Hibbett Shareholders
JUNE 2024 JD SPORTS ACQUISITION MAXIMIZES VALUE FOR HIBBETT SHAREHOLDERS
Slide 2: Forward-looking statements
This presentation contains forward-looking statements, which include all statements that do not relate solely to historical or current facts, such as statements regarding our expectations, intentions or strategies regarding the future. In some cases, you can identify forward-looking statements by th
Slide 3: Important Additional Information and Where to Find It
Important Additional Information and Where to Find It In connection with the transaction, Hibbett filed a definitive proxy statement on Schedule 14A with the SEC on June 13, 2024. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, COMPANY STOCKHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT A
Slide 4: JD Sports agreement is culmination of multi-month competitive process (Executive Summary 1)
JD Sports agreement is culmination of multi-month competitive process to maximize shareholder value EXECUTIVE SUMMARY (1) Board Believes Approval of JD Sports Agreement is Warranted and the Best Path to Maximize Value Process catalyzed by contemporaneous inbound interest from JD Sports and three oth
Slide 5: $87.50 per share cash purchase provides compelling, certain, immediate value
$87.50 per share cash purchase provides compelling, certain, immediate value EXECUTIVE SUMMARY (2) Substantial premium across multiple measures 21% premium to 4/22/24 closing price (day before announcement) 29% premium to 120-day VWAP (at announcement) 6.2x1 LTM Adj. EBITDA multiple considerably gre
Slide 6: Hibbett's standalone prospects carry meaningful risk
While we have continued to win share, growth is slowing and comp sales and margins are on a downward trajectory Recent peak performance was driven by temporary COVID stimulus benefit – which has been expended Retail industry is under significant, sustained pressure Hibbett’s core customer is particu
Slide 7: JD Sports agreement is culmination of multi-month competitive process
JD Sports agreement is culmination of multi-month competitive process designed to maximize shareholder value
Slide 8: Hibbett at a Glance: An Athletic-Inspired Fashion Retailer
$1.7BRevenue $40K to $60K avg. yearly income for core customer HIBBETT AT A GLANCE: AN ATHLETIC-INSPIRED FASHION RETAILER Note: all figures FY2024 Excluding effect of the 53rd week in Hibbett’s fiscal 2024 fiscal year and the effect of a non-recurring EBITDA benefit due to a change in Hibbett’s esti
Slide 9: Thorough, Multi-Month Competitive Process
THOROUGH, MULTI-MONTH COMPETITIVE PROCESS… OCT. 2023 Additional Inbound Indications of Interest; M&A Sale Rumors Begin Contemporaneous contact from three other interested parties – one of which cited sale rumors OCT. 2023 Strategic Review Committee Formed Due to JD Sports and contemporaneous multi-p
Slide 10: Thorough, Multi-Month Competitive Process (continued)
THOROUGH, MULTI-MONTH COMPETITIVE PROCESS… Robust process designed to deliver maximum value Extensive engagement with most strategically logical and motivated parties Multiple missed expectations and downward revisions to projections No alternative acquisition proposals received, including following
Slide 11: Overseen by Highly Qualified, Independently Led Board and Strategic Review Committee
…OVERSEEN BY HIGHLY QUALIFIED, INDEPENDENTLY LED BOARD AND STRATEGIC REVIEW COMMITTEE STRATEGIC REVIEW COMMITTEE Anthony Crudele Independent Chairman (director since 2012) 30+ years of retail strategy, financial, operations and accounting experience EVP CFO, Treasurer of Tractor Supply, EVP CFO of G
Slide 12: $87.50 per share cash purchase provides compelling, certain, immediate value
$87.50 per share cash purchase provides compelling, certain, immediate value
Slide 13: Compelling, Certain Premium Across Multiple Measures
21% PREMIUM to 4/22/24 closing price (day before announcement) COMPELLING, CERTAIN PREMIUM ACROSS MULTIPLE MEASURES (1) Excluding effect of the 53rd week in Hibbett’s fiscal 2024 fiscal year and the effect of a non-recurring EBITDA benefit due to a change in Hibbett’s estimate of gift card breakage.
Slide 14: Premium Value Across All Relevant Time Periods – EV / LTM Adj. EBITDA
M&A DISCUSSIONS AND RUMORS PREMIUM VALUE ACROSS ALL RELEVANT TIME PERIODS – EBITDA EV / LTM ADJ. EBITDA – Last 3 Years Source: Capital IQ as of 5/31/24. Note: Medians as of 4/22/24. (1) Excluding effect of the 53rd week in Hibbett’s fiscal 2024 fiscal year and the effect of a non-recurring EBITDA be
Slide 15: Premium Value Across All Relevant Time Periods – P/E
PREMIUM VALUE ACROSS ALL RELEVANT TIME PERIODS – P/E 6.5x 1-yr median 6.4x 3-yr median 6.3x 2-yr median 10.7x transaction Forward P/E (FY+1)1 – Last 3 Years BENEFIT FROM COVID-19 RELATED STIMULUS OCT. 9, 2023 JD Sports’ initial indication of interest ~OCT. 18, 2023 Contemporaneous contact from three
Slide 16: Locks in Re-Baselining Due to Stimulus Benefit
LOCKS IN RE-BASELINING DUE TO STIMULUS BENEFIT Source: Capital IQ as of 5/31/2024. COVID stimulus benefits kick in $28.30 median pre-pandemic $68.60 median during M&A discussions and rumors $54.01 median from pandemic onsetuntil Oct. 9, 2023
Slide 17: Valuation In-Line with Comparable Precedent Transactions
VALUATION IN-LINE WITH COMPARABLE PRECEDENT TRANSACTIONS Source: SEC filings, public documents and news articles. (1) Excluding effect of the 53rd week in Hibbett’s fiscal 2024 fiscal year and the effect of a non-recurring EBITDA benefit due to a change in Hibbett’s estimate of gift card breakage. D
Slide 18: $87.50 Higher Than Market's Expectations for Standalone Company
$87.50 HIGHER THAN MARKET’S EXPECTATIONS FOR STANDALONE COMPANY $77 median one-year forward per share sell-side target prior to deal announcement Hibbett stock price has traded BELOW offer price since agreement announced Trading ranges over periods leading up to agreement are BELOW $87.50 per share
Slide 19: Trading Ranges Are Below Final $87.50 Per Share Offer
TRADING RANGES ARE BELOW FINAL $87.50 PER SHARE OFFER – WITH OVERWHELMING MAJORITY BELOW $75.00 Source: Capital IQ as of 4/22/24. 180-DAY 96% of shares traded below $75.00 1-YEAR 94% of shares traded below $75.00
Slide 20: Process Created Clear Value for Hibbett Shareholders
PROCESS CREATED CLEAR VALUE FOR HIBBETT SHAREHOLDERS PANDEMIC TAILWINDS FADE (Jun. 25, 20211 – Oct. 9, 2023) Hibbett traded in line with closest athletic footwear peers during the pandemic… M&A Discussions and Rumors (Oct. 9, 2023 – Apr. 22, 2024) …However, Hibbett’s stock diverged significantly fro
Slide 21: Hibbett's standalone prospects carry meaningful risk
Hibbett’s standalone prospects carrymeaningful riskBoard believes standalone value is significantly less than certain, premium $87.50 per share value on risk adjusted basis
Slide 22: Growth Is Normalizing After Stimulus Peak
GROWTH IS NORMALIZING AFTER STIMULUS PEAK… HIBBETT COMPARABLE SALES GROWTH (%) HIBBETT EBIT MARGIN (%) While We Have Continued to Win Share, Growth Is Slowing and Comp Sales and Margins Have Been Under Sustained Pressure (108%) (46%)
Slide 23: …And Reflecting Significant, Sustained Macro Pressures
…AND REFLECTING SIGNIFICANT, SUSTAINED MACRO PRESSURES Inflationary pressures High interest rates Record levels of consumer debt More selective discretionary spending Post-pandemic move of spending from goods back to services Intense promotional environment vs. the atypical full-price selling duri
Slide 24: Challenges Persisting into FY2025 and Likely to Continue
CHALLENGES PERSISTING INTO FY2025 AND ARE LIKELY TO CONTINUE Source: Management projections for Q1 FY25 plan. Net Sales 1Q FY2025 Results and FY2025 Guidance Are Lower than Latest Projections Provided as Part of Transaction Due Diligence Process EBITDA (4%) (11%) ($ in millions)
Slide 25: Core Customer Particularly Exposed to Macro Challenges
CONSUMER CREDIT AND SAVINGS RATE 1,2 CORE CUSTOMER PARTICULARLY EXPOSED TO MACRO CHALLENGES Savings Rate At all-time high: $17.7 trillion3 Recent savings rate well below pre-COVID average Pre-COVID 10-Year Savings Average: 7.3% Consumer Credit Outstanding (YoY % Change) May '244 69.1 Average (3M): 7
Slide 26: Actual Results Have Mostly Missed Management's Expectations
OUTSIDE OF COVID-IMPACTED PERIOD, ACTUAL RESULTS HAVE MOSTLY MISSED MANAGEMENT'S EXPECTATIONS Management Initial Total COMp Sales guidance vs actual results Source: Capital IQ, Company public filings. Note: Initial EPS estimates assume midpoints of EPS guidance ranges. (1) Consensus estimate three m
Slide 27: Challenging Backdrop Led to Multiple Downward Revisions
CHALLENGING BACKDROP LED TO MULTIPLE DOWNWARD REVISIONS Net Sales EBITDA FY2024 (incl. 53rd week) Rolling LTM – By Quarter Q1’25 P (1) Actual $1,760 $1,740 $1,729 $196 $187 $186 $183 $1,722 $1,721 $1,702 $1,715 $1,694 Q1’25 P (1) Actual $193 $195 $179 $182 $176 Source: Company public filings and man
Slide 28: EBITDA and Adjusted EBITDA History
EBITDA Non-GAAPAdjustment Adj. EBITDA Source of historical financials: Company public filings. (1) Adjustments for expenses related to acquisition of City Gear, LLC and strategic realignment initiative. (2) Adjustments for expenses related to acquisition of City Gear, LLC and COVID-19 pandemic. (3)
Slide 29: Hibbett's Highly Concentrated Vendor Base Creates Business Risk
“Nike (NKE, covered by Baird analyst Jonathan Komp) accounted for ~70% of HIBB's inventory purchases in FY22. The loss of key vendor support or decline/discontinuation of vendor incentives could have a material adverse effect on business.” Mar.15, 2024 “We attribute the [HIBB] softness to a difficul
Slide 30: Hibbett's Avenues for Growth Are Limited
No remaining strategically logical, needle-moving acquisition targets that Hibbett would have the scale and resources to pursue Hibbett is reliant on organic growth, but ability to execute is unproven and heavily dependent on factors outside our control Backing of NIKE to support growth Ability and
Slide 31: Independent Analysts Recognize the Challenges Facing the Company and Industry
INDEPENDENT ANALYSTS RECOGNIZE THE CHALLENGES FACING THE COMPANY AND THE INDUSTRY Median one-year forward sell-side target prior to deal announcement was $77 “TAG View: We are downgrading our rating on HIBB to Market Perform from Outperform given that 2024 is projected to be a more difficult year th
Slide 32: Board believes approval of JD Sports agreement is the best path to maximize value
Board believes approval of JD Sports agreement is warranted and the best path to maximize value
Slide 33: Conclusion
CONCLUSION JD Sports agreement is culmination of multi-month competitive process to maximize shareholder value $87.50 per share cash purchase provides compelling, certain, immediate value Despite full engagement with multiple parties and rumored process, no other acquisition proposal was or has been
Slide 34: Appendix
Appendix
Slide 35: Non-GAAP reconciliation of EBITDA and adjusted EBITDA
In this presentation and the below reconciliation table, Hibbett makes reference to the non-GAAP financial measures EBITDA and adjusted EBITDA. Hibbett defines EBITDA as net income, calculated in accordance with GAAP, before interest expense, tax expense, and depreciation and amortization. In this p
Slide 36: Hibbett | City Gear
HIBBETT | CITY GEAR