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Sporting Goods

Sporting Goods. Valuation & Analysis by Wilbur Benitez, Taylor Blaney , Se Kim, & Kevin Pribil. Agenda. Background & Relevant Information Cabelas Footlocker Hibbett Walmart Valuation Cabelas Footlocker Hibbett Walmart Industry Analysis. 1. Background & Relevant Information.

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Sporting Goods

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  1. Sporting Goods Valuation & Analysis by Wilbur Benitez, Taylor Blaney, Se Kim, & Kevin Pribil

  2. Agenda • Background & Relevant Information • Cabelas • Footlocker • Hibbett • Walmart • Valuation • Cabelas • Footlocker • Hibbett • Walmart • Industry Analysis

  3. 1. Background & Relevant Information

  4. Cabela’s Overview • Was founded in 1961 and has been a leader in outdoor gear since • Leading retailer in hunting, fishing and outdoor gear • Went public in June 2004 • Market Cap of 4.6B • Total revenues of 3.6M in 2013 • Two main segments • Merchandise sales and financial services • Currently seeking to expand with smaller stores • Traditionally has operated using large “Legacy” stores

  5. Footlocker Overview • Largest retailer of athletic shoes in the U.S. • Located primarily in North America, Europe, Australia, and New Zealand • 11% market share • $6.5 billion in sales in 2013 (73% within U.S.) • Develops few products, mostly supplied by a few top-end product manufacturers • Operate in two ways: • Athletic Stores • Direct to Customers

  6. Hibbett Overview • Est. 1945 in the marine & small aircraft market- switched to sporting goods in ’60s • HIBB publicly offered in 1996 with 79 stores • Currently 873 stores with 4 formats (full service, footwear/headwear, superstore, and customized apparel) • Market Cap. $2.2 Billion • 2014 Revenue- $852 Million • 2014 Net Income- $112 Million • Strategy: • Close underperforming stores • Strengthen high-performing stores • Expand U.S. market reach

  7. Hibbett Stock History

  8. WalmartStores, Inc. • World’s largest retailer - $469.2 BN in total revenue • Walmart U.S. • Walmart International • Sam’s Club • Business model -> “Everyday Low Prices” (EDLP) • 6 strategic merchandise units: • Grocery (55%) • Entertainment(11%) • Heath & Wellness (11%) • Hardlines (9%) – Sporting Goods • Apparel (7%) • Home (7%)

  9. 2. Valuation

  10. Cabela’s Full Information

  11. Cabela’s Valuation

  12. Cabela’s Sensitivity Analysis • Conservative forecast • Still an attractive investment • Potential for significant returns if sales continue to grow at recent rates

  13. Footlocker Valuation

  14. Hibbett Valuation

  15. 3. Industry Analysis

  16. Sporting Goods Industry

  17. Industry Facts • Revenue - $42.3 BN • Highest expense – Wages at $4.4BN • Profit of $1.1BN • Split into three sections: • Sporting Equipment (46%) • Athletic Footwear (34%) • Athletic Apparel (20%) • Mature industry – yet, expected to grow at 2.3% next 5 years • As disposable income rises, the industry is becoming more specialized on a spectrum of sports with an increasing emphasis on fashion

  18. Key Revenue Drivers • New markets • Expansion into emerging & exclusive markets • Cabela’s is currently expanding into new markets with “next generation” stores • Footlocker is hoping to increase online sales • Participation in sports • Increased health awareness –> boost sporting goods revenue • Customer retention • Retaining customers& building a strong brand • Consumer Confidence Index • Positive financial security; more likely to spend on sporting goods

  19. New Markets • Cabela’s • Plan to continue increase of retail space in the next few years • Footlocker • Trend will continue and we will see additional store closings • Hibbett Sports • Harder to predict due to size • Will be based on company performance • Less customer loyalty

  20. Participation in Sports • Professional athletes • 5% of the market • Households • American culture promotes sporting activities

  21. Industry Revenue

  22. Selected Universe Revenue Growth • Cabela’s • Higher growth due to expansion plans • Footlocker • More mature company • Hibbett Sports • Harder to predict due to size and potential for growth

  23. Key Revenue Drivers- Disposable Income

  24. Sales Growth

  25. Operating Leases • Hibbett Sports and Foot Locker, Inc. both have significant operating leases that are off balance sheet transactions • These leases significantly effect the valuation when included in enterprise assets • Including leases significantly lowers EATO

  26. Effect of Operating Leases

  27. Questions?

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