The Decade's Best Sports Stocks

By Will Ashworth | April 05, 2010 AAA

Hibbett Sports (Nasdaq:HIBB) recently announced fiscal 2011 earnings per share between $1.12 and $1.30 a share, with same-store sales growth of 1-4%, both of which meet analyst estimates. This got me thinking about my own ownership position in a large Canadian sporting goods retailer that has spent the better part of 10 years raising and dashing my hopes several times over. Its unofficial corporate slogan could be the old ABC "Wide World of Sports" motto: "The thrill of victory and the agony of defeat!"
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Before you go feeling sorry for me, I've done all right with my investment despite its stop-and-start nature. However, I could have done better with any number of sports-related businesses. Today's article looks at the winners and losers of the past 10 years and which stocks are setting up to be front-runners in the future.

Group A - Retailers

Company 10-Year Average Total Return
Hibbett Sports 22%
Dick\'s Sporting Goods (NYSE:DKS) 7.9%* (5-Year)
Foot Locker (NYSE:FL) 10.8%
Finish Line (Nasdaq:FINL) 15.4%
Big 5 Sporting Goods (Nasdaq:BGFV) -7.5%* (5-Year)


Regional Is Righteous
Hibbett smoked the rest of the retailers in Group A. It wasn't even close. Not only that, it beat the S&P 500 significantly over that stretch. That's some record. Recently, longtime CEO Mickey Newsome stepped down; he had served as the company's CEO since having been appointed in 1999. While the whole Hibbett team can take credit for its success, Newsome was the guiding light over the past decade. I remember seeing him speak several years ago in Chicago at the National Sporting Goods Association show. He struck me as a very humble person and it's nice to see good things happen to good people. Jeffry Rosenthal has his hands full as he takes over the reins. However, I'm sure he'll do just fine having spent the last 13 years working alongside Newsome.

Meanwhile, Dick's Sporting Goods comes up as a close second to Hibbet. Dick's is the largest sports retailer in the country, and it actually has a better five-year average than Hibbett.

Group B - Apparel

Company 10-Year Average Total Return
Under Armour (NYSE:UA) -15.5%* (3-Year)
Columbia Sportswear (Nasdaq:COLM) 13.2%
Lululemon (Nasdaq:LULU) 292.5%* (1-Year)
Quiksilver (NYSE:ZQK) -2.1%
VF (NYSE:VFC) 14.1%

The Younger Crowd
Group B, which encompasses sports apparel, is filled with the old and the new. Two of the companies, Lululemon and Under Armour, each have less than five years of performance numbers available, yet they probably have the greatest potential of all the companies mentioned in this article. Lululemon's fourth quarter was impressive, generating a same-store sales increase of 29%. This helped it to achieve a 9% increase for the entire fiscal 2009.

While I continue to question Lululemon's potential in the United States, where it's selling far less per square foot than in Canada, there's no denying its attraction for investors. Its stock is up 392% in the past year and 36.5% since January 1. Only Deckers Outdoor has come close to its one-year numbers. As for Under Armour, with the exception of its first day of trading back in November 2005, when it nearly doubled in price closing at $25.30, it's been a major disappointment as an investment. To make matters worse, Nike gained 2% U.S. footwear market share in the third quarter, taking the fight to both Under Armour and Adidas. That's not good news for anyone but Nike investors.

Group C - Footwear

Company 10-Year Average Total Return
Nike (NYSE:NKE) 17.8%
Deckers Outdoor (Nasdaq:DECK) 42.4%
Timberland (NYSE:TBL) 5.6%
Wolverine Worldwide (NYSE:WWW) 14.6%

Just Did It
Even Timberland, which prior to 2009 was having a terrible time getting its stock price out of the basement, is performing well in a resurgent stock market. Nike continues to build momentum and Tiger Woods' return to competitive golf only makes things that much rosier. The dark horse in the group is Wolverine World Wide, maker of Hush Puppies, the world's first casual shoe. While not as sexy as the UGG, made by stock superstar Deckers Outdoor, its returns are competitive nonetheless. (For mor on Tiger's economic fallout, see The Tiger Woods Effect.)

Group D - Miscellaneous

Company 10-Year Average Total Return
Brunswick(NYSE:BC) -1.1%
Fortune Brands (NYSE:FO) 10.5%
Jarden (NYSE:JAH) 20%
Polaris Industries (NYSE:PII) 13.8%

100 Brands and Counting
Of all the companies in Group D, Jarden is the one that I'm most confident can be a player in the years to come. Not too long ago, I was dead set against it because of the debt it accumulated building such a large brand factory. With free cash doing well (above $500 million in 2009), it's decided to buy back up to $150 million of its shares. I can only hope CEO Martin Franklin is careful about those purchases. I'd hate to see all the good work by employees wasted on something that in the end does little for shareholders.

Bottom Line
Nine of the 18 stocks mentioned above earned more than 12.7% for shareholders over 10 years. I'm not complaining mind you. Double-digit returns over an extended period are nothing to sneeze at. However, if I did sell my stock and I was to pick one stock from each group to replace it, my money would be on Hibbett, Nike, Quiksilver and Jarden. They're the best the sporting world has to offer. (With retail still on shaky ground, market share is up for grabs. Companies that have mastered the retail trifecta should be the most profitable. Check out Capturing The Retail Trifecta.)

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