Academy Sports + Outdoors saw second-quarter top- and bottom-line declines, yet the results beat expectations, encouraging the company to stick to its sales forecast and raise its earnings per share guidance for the year.
Net income in the quarter ended July 30 decreased 0.9 percent to $188.8 million compared to $190.5 million in the year-ago period. Diluted EPS increased 11.6 percent to $2.22 compared to $1.99 per share, based on a share count of 84.9 million shares compared to 95.9 million in the prior year quarter.
Adjusted net income, which excludes the impact of certain non-cash and extraordinary items, was $195 million. Adjusted diluted EPS was $2.30 compared to $2.34 per share.
Net sales were $1.69 billion, a decrease of 5.8 percent, compared to $1.79 billion a year ago. Comparable sales declined 6 percent primarily due to fewer transactions compared to last year, partially offset by an increase in average ticket. When compared to the second quarter of 2019, net sales increased 36.3 percent. E-commerce sales grew 12.1 percent year-over-year and 244.5 percent compared to 2019.
Wall Street was impressed by Academy’s results and pushed the stock price up more than 14 percent, or about $6, to close at $47.81 on Wednesday. The report from the Katy, Texas-based sporting goods and outdoor recreation retailer seemed better than other second-quarter reports from major retailers, which have been widely lowering their forecasts for the year and grappling with excess inventories.
“Our performance this quarter was in line with our expectations as Academy continues to substantially outperform our pre-pandemic levels of sales and profits,” Ken Hicks, chairman, president and chief executive officer, said in a statement Wednesday. “We remain confident that the durability of our strong assortments and everyday value model positions us well to deliver consistent sales and profitability growth going forward.
“This growth is supported by consistent operational excellence, healthy inventory levels, a strong balance sheet, new store expansion and omnichannel advancement,” Hicks added.
“Academy delivered record quarterly earnings per share results, which demonstrates our earnings potential as well as our ability to deliver strong results in a challenging environment,” said Michael Mullican, executive vice president and chief financial officer. “We also continued our capital allocation strategy of investing in growth and increasing shareholder value by investing in new stores, repurchasing a significant amount of shares and returning cash to shareholders through our dividend program. Based on our results to date and current trends, including the sequential improvement in comparable sales, we are reiterating our full-year sales and comp guidance while updating our earnings per share forecast to reflect the reduction in our share count.”
Academy maintained its forecast for $6.43 billion to $6.63 billion in sales and $550 million to $615 million in net income for 2022, though the forecast for earnings per diluted common shares rose to $6.50 to $7.25, from the earlier forecast of $6.30 to $7, reflecting share repurchasing and a shift in the tax rate.
In an interview with WWD, Steve Lawrence, executive vice president and chief merchandising officer, acknowledged the company would feel better if there was a positive gain on the sales side though he did indicate that going against last year’s stimulus was a challenge, and that the company is “extremely proud” that it beat the 2019 numbers. “That was the last normalized quarter we have had. The question was, how much of the gains from a year ago could we hold onto, and the answer is, most of it. We held onto a big chunk of it.”
He said inventories, on a dollar basis, were up 17 percent versus the year-ago period, and up 8 percent versus the 2019 quarter. In units, the inventory was down 12 percent versus 2019.
He said building a “good, better, best” pricing structure in the assortment over the last couple of years benefited the company because many customers are trading down and opting for private brand merchandise that’s on the lower side of the price spectrum. “Our customers give us credit for being the value provider, offering better prices day-in and day-out compared to our competitors,” said Lawrence.
Asked what has been selling the best, Lawrence cited sporting goods including baseball, football and soccer equipment, cleats for those sports, footwear overall and private label merchandise in hard and soft goods. Fitness equipment, bicycles and fishing equipment haven’t been selling as well, but are still tracking ahead of 2019 levels.
“Behaviors we saw happen during the pandemic I think are sticky,” Lawrence said. “That tells me customers are still pursuing those activities. We also think more people are spending time playing sports and hanging out outdoors.”
During the second quarter, Academy opened one new store, for a total of 261 stores. The company expects to open nine new stores this fiscal year and 80 to 100 stores over the next five years.