Based on your analysis of Hibbett’s strengths and weaknesses, which generic strategy would you recommend for the firm? Develop a brief strategic proposal for the firm and explain how your answer provides the best possible fit with the firm’s strengths and weaknesses.

Based on your analysis of Hibbett’s strengths and weaknesses, which generic strategy would you recommend for the firm? Develop a brief strategic proposal for the firm and explain how your answer provides the best possible fit with the firm’s strengths and weaknesses.

 Resource Analysis

Introduction

Hibbett is an athletic fashion retailer headquartered in Birmingham, Alabama, in the United States. The company was founded in 1945 and has grown exponentially to become one of the biggest fashion retailers in the United States. In total, Hibbett has 1100 stores across the United States, and it is moving its sales to online platforms at an alarming rate. Hibett is experiencing an increasing trend in sales due to its acquisition of City Gear, which was initially its severe competitor in the wear retail industry. Hibbett has greatly benefitted from the acquisition of City Gear, especially in terms of market share and widening its product range. The main competitor of Hibbett is Academy Sports and Outdoor Inc., which has a very big market share and a wide range of products. Hibbett's latest analysis shows that it has more strength than Academy Sports Inc.

Assets

Assets are items that have a monetary value and are owned by a company to aid production (Mashkour 31). Some assets are purchased to aid a company's operations, and they are not for resale. On the other hand, some assets are purchased for resale at a profit. Assets show that a company is in a position to remain liquid after paying all its liabilities. In 2021, Academy had assets amounting to $4.3 billion. The value of assets increased to $4.5 billion in 2022 (SEC 46). The increase in assets results from the company's sales increase between 2021 and 2022. In 2021, Academy Sports made sales amounting to $5.6 billion, and the value of sales increased to $6.7 billion in 2022. The increase in sales led to increased profits in 2022, leading to the acquisition of more assets in the year.

On the other hand, Hibbett had assets amounting to $808 million, and the value of assets decreased to $703 million in 2022 (SEC 46). The value of assets decreased even after the company recorded an increase in net sales from $1.4 billion in 2021 to $1.6 billion in 2022 (SEC 46). The reduction is attributable to the company's resolve to clear all its outstanding debts and increase its free cash flow. In retrospect, the company prioritized clearing its debt to acquire more assets. Clearing debts increased the company's creditworthiness to $100 million. As such, the company can go for more funding from financial institutions to acquire more assets it may need for its production.

A company's need for assets is to secure its operations against liabilities. The current ratio is used to determine the essence of assets to Hibbett and Academy Sport. The current ratio shows whether the current assets available at a company are enough to cover the current liabilities the company has. In 2021, Hibbett had a current ratio of 1.95, which indicates that the company's current assets were enough to cover the current liabilities. Academy Sport had a current ratio of 1.212, implying that the company, too, had enough current assets to cover the current liabilities (Rashid 127). However, the current ratio of Hibbett indicates that the company was healthier than Academy Sport. In 2022, the current ratio of Hibbett reduced to 1.42, and the current ratio of Academy Sport increased to 1.52. The decrease in the current ratio of Hibbett indicates that the company's capacity to repay current liabilities was reduced while the capacity of Academy Sport to repay its current liabilities increased.

The decrease in the current ratio for Hibbett can be associated with the company's usage of resources to pay off its debt. Also, the company used much money to build its online IT system through which it could sell its products to consumers. The expenditures may have led to a reduction in investment in current assets. However, the company’s omnichannel approach strengthens it over its close competitor because customers can order goods from Hibbett's online platforms and receive them at their doors (SEC 6). Online selling will boost the company's sales in the future, and the close relationship the company has built with its third parties who are developing its online websites will lead to more innovations compared to its competitor.

Inventory Turnover

Inventory turnover measures how fast a company sells its goods and the rate at which it restocks its stores with new inventory within a year. In 2021, Hibbett had an inventory turnover of 4.53, implying that the company restocked its stores 4.53 times within the year. In 2022, the inventory turnover increased to 4.72, implying that the company put in more effort to market its products and sold more than in the previous year. The increase in inventory turnover is attributable to the company's improvement of its online selling systems. Also, the increase in turnover is attributable to the company's constant supply of sportswear from its vendors. Hibbett’s new subsidiary, City Gear, also expanded the company's market territories, leading to more sales than in the previous years.

On the other hand, Academy Sport had an inventory turnover of 3.99 in 2021, which decreased to 3.77 in 2022. The decrease in the inventory turnover rate for Academy Sport indicates that the company's sales gained little traction in 2022. The reduction in the company's inventory turnover indicates that the company's strategies could be more efficient than the strategies being implemented by Hibbett. Overall, the rate of turnover of Hibbett is higher than the rate of inventory turnover for Academy Sport, which indicates that Hibbett is doing more to increase its market penetration than Academy Sport.

Asset Turnover Ratio

Using assets to make a profit is one of the strengths a company requires for it to make profits. A company with a high value of assets but a low asset turnover ratio indicates that it does not utilize its assets well to generate profits (Mashkour 57). Hibbett had an asset turnover of 1.75 in 2021, which increased to 2.4 in 2022. The increase in asset turnover rate points to an efficient operational system at the company. Utilizing assets to make profits is a strength that shows the company does not waste the resources it has. In terms of assets, Hibbett reduced the value of its assets in 2022 but used the assets it had to generate high profits.

According to the company's SEC (2022) report, Hibbett attributes its high efficiency to its high-performance culture, which encourages regular communication between managers and workers (10). Also, the report attributes the high efficiency to leadership training which spurs innovation at all levels in the company. The asset turnover of Academy Sport was 1.29 in 2021, and it increased to 1.47 in 2022. Though it improved, the asset turnover for Academy Sport is lower than Hibbett's asset turnover. As such, the asset turnover indicates that Hibbett's operations are more aligned to the utilization of assets better than the case at Academy Sport.

Cash Ratio

The cash ratio shows whether a company has enough cash and its equivalents to clear off current assets. It is a strength to have enough cash and its equivalents because it enables a company to run its day-to-day operations quite efficiently (Rashid 127). In 2021, Hibbett had a cash ratio of 0.93, and the cash ratio slumped to 0.88 in 2022. The high cash ratio indicates that the company can clear all its current liabilities using the cash at hand. On the other hand, Academy Sport had a cash ratio of 0.32 in 2021, which increased slightly to 0.43 in 2022. Despite the slight increase, the ratio shows that the company cannot cover 50% of its current liabilities using the cash it has at hand.

Conclusion

The analysis shows that Hibbett is more efficient than Academy Sport in terms of propensity to generate high profits from sales and proper utilization of resources. All other key factors affecting the firms are similar, including leasing spaces and competing for the available market due to the entrance of new sports ware retailers. All the ratios suggest that Hibbett is performing better in terms of marketing and actual sales to customers. Compared to Academy Sport, Hibbett has a more appealing online channel for selling goods to customers. As such, Hibbett is stronger in the sportswear retailing industry than Academy Sport.

 

 

 

 

 

 

 

References

Mashkour, Saoud. Analysis of Financial Statements. https://www.researchgate.net/publication/338385318_ANALYSIS_OF_FINANCIAL_STATEMENTS, 2020.

Rashid, Chnar. "The Efficiency of Financial Ratios Analysis to Evaluate Company's Profitability." Journal of Global Economics and Business 2021: 2(4), Pp. 119–132, https://www.researchgate.net/publication/348686551_THE_EFFICIENCY_OF_FINANCIAL_RATIOS_ANALYSIS_TO_EVALUATE_COMPANY' S_PROFITABILITY.

SEC. Hibbett Inc. Washington: Securities Exchange Commission, https://last10k.com/sec-filings/hibb, 2022.