Sam Poser of Williams Trading shared information on the recent purchase of 5% of the shares of Hibbett Sports.
[J]ust yesterday a 13-D filing showed that James Khezrie, the owner of Jimmy Jazz (Private), a strong competitor of both Hibbett and City Gear, owned over 5% of HIBB stock (800,000+ shares). Jimmy Jazz has ~170 stores.
To get a clear understanding of this, you can visit: Schedule 13D and 13G filing information for institutional investment manager or hedge fund KHEZRIE JAMES.
I’m writing this post because it reminds me of the Sports Direct and JD Sports situation from 2018:
The Overlooked Aspect of JD Sports’ $558 Million Acquisition of Finish Line $FINL | Business
It’s not exactly the same situation as JD and Sports Direct were battling for ownership of Finish Line. Sports Direct had an almost 32% share when JD moved in to acquire Finish Line. As a matter of fact, I’m drawing a comparison where there isn’t one. This is a compelling situation, which speaks clearly to how Nike’s dominant Fiscal 21 and Q4 is pushing businesses to adjust their strategies. As Sam Poser wrote, Jimmy Jazz owns 170 locations. I’ve written on this site Jimmy Jazz is the last remaining major, indie account holder with the Swoosh. JD Sports bought DTLR/Villa and Shoe Palace. Hibbett Sports purchased City Gear.
Why is this investment important?
According to Fox Williams:
5% of the company’s shares
Owning 5% of the company’s shares gives a shareholder more ability to influence the affairs of the company, including the right to:
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require a resolution to be proposed at shareholders’ meetings;
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require a general meeting be held;
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require the company to circulate to members a statement relating to a matter referred to in a proposed resolution to be put to shareholders’ meetings; and
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prevent the deemed re-appointment of the company’s auditor.
I’ve stated continuously that Nike’s Consumer Direct Acceleration isn’t removing only mom and pop stores. Nike’s CDA is shaping established, bigger sneaker retail as well. Consider that Nike announced a drop ship program with FootLocker. Less than a year later FootLocker announced the closing of all Footaction locations. FootLocker had already begun layoffs and moved Eastbay operations to Florida basically consolidating Champs and Eastbay. When you consider that there are only 4 major retailers carrying Nike (Dicks, JD Sports, FootLocker and Hibbett Sports), with Jimmy Jazz as the sole lone warrior in urban accounts, you have to question if the owner of Jimmy Jazz is ensuring that he has input on Hibbett Sports potentially acquiring the 170 store chain? Or is there something more interesting taking shape here?
Sam Poser seems to think that James Khezrie believes in the alignment of Nike and Hibbett Sports. I’m a novice at this type of analysis, but purchasing 5% of the stock gives James Khezrie a position of authority with Hibbett Sports. There is also a unique hypothesis that has entered my mind. FootLocker is closing Footaction. That chain was considered a more urban version of FootLocker. The chain carries more apparel and is typically situated in malls where the cash customer carries the revenue. Jimmy Jazz is a company that I have said is only one strategy away from figuring out how to shift their demographic into digital. They have already worked hard to create loyalty programs and they recently launched an app to initiate their consumer into the digital economy.
FootLocker is placing itself into a position to recoup a considerable amount of money as they close Footaction. Of all of the bigger chains, they are the only company that hasn’t added an urban retail chain to their coffers. If FootLocker makes an offer to purchase Jimmy Jazz, could this generate the type of money that allows James Khezrie to buy a larger share of Hibbett Sports? Could James Khezrie potentially generate enough to purchase 15% of the shares?
I’m only pondering here. I have no working knowledge of what’s happening with Jimmy Jazz or Hibbett Sports, beyond my own observations. To be honest, I thought that Hibbett Sports would begin fracturing when they brought City Gear’s CEO on board to run the entire company. Unlike the upbeat predictions of Sam and other analysts, I still see issues with the chain.
I also realize that Hibbett Sports is the beneficiary of smart real estate deals that existed long before the new C-Suite took over. Hibbett Sports was built in the right places from its foundation and that is why the company has been able to maintain momentum. When you add this to Nike’s decision to remove accounts and how the chain has benefited primarily because of their location, Hibbett Sports is really a lucky business that is benefiting considerably based on the previous CEO Jeff Rosenthal. The incredible e-commerce platform, which saved the business in my opinion, was built under that team. When Mike Longo came aboard, I would have expected that adding an urban retailer would mean that the management team would diversify. That team remains all male and all white. At the store level, supply chain issues are getting better, but the repositioning of Hibbett Sports/City Gear as an urban chain primarily, isn’t smart. The location of Hibbett Sports was important because a lot of smaller towns throughout the south didn’t have sports gear. Hibbett Sports served as small town USA’s sporting goods retail outlet, with just enough Jordan and Nike to attract cash customers. It was a good mix. It seems to me that they are abandoning one demographic for another. It makes sense as the Black consumer is always an anchor for any retail outlet in a deep relationship with Nike and Jordan Brand. I think this shift to urban isn’t being considered, and it should be. As Nike reduces wholesale accounts Dick’s is a company I feel is smart enough to create a small store concept to take care of those consumers being alienated by Hibbett Sports.Even if it isn’t Dick’s, Nike itself will continue to encroach on all of their accounts and the fact that Nike Unite and Refurbished are both growing considerably in the next year. This means that Nike is also looking to find a way to digitize the cash customer, who happens to be Black.
When Nike begins developing concepts, it takes years for them to play out. Every few months I remind people of the Konbini concept. I then add that this is a critical step in Nike’s future North American strategy that will efficiently cut into the urban consumer market. No one is safe from Nike, but real estate is expensive and JD, Hibbett, Dicks’ and FootLocker are all going to remain wholesale accounts, but here is your guide: Smartphones and their relationships to wholesale. There aren’t any Apple, or Samsung stores in the hood, but Black folks and Brown folks utilize smartphones more than their counterparts. Blacks are tech savvy, but the unbanked population isn’t utilizing digital, they visit stores, but the moment 1+1 becomes 2 and Nike figures out Konbini… I know this is a lot. I got all of this from James Khezrie’s power play. It’s fascinating to watch.
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