Academy Sports and Outdoors saw shares rise on Thursday after the retailer reported second quarter numbers in line with expectations.
The Katy, Texas-based retailer delivered a 6.2 percent decline in net sales to $1.58 billion, down from $1.69 billion the same time last year. Net income in the quarter also took a 16.8 percent hit to $157.1 million, down from $188.8 million last year.
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Despite these decreases, the company surpassed analysts’ expectations of an adjusted earnings per share of $2.09, beating the consensus estimate of $1.99. Academy also saw its gross margin rate improve 30 basis points to 35.6 percent in Q2, likely another reason its stock was on the rise on Thursday.
CEO Steve Lawrence, who took the top job just three months ago, told analysts on the company’s quarterly earnings call that the team is working hard on “thoughtfully managing” through its short-term challenges and remains focused on delivering against its long-range plan objectives.
“While we are not happy with running a decrease, these results were in line with our first quarter trend and in line with the guidance we shared during our last call,” Lawrence said. “What was encouraging was that unlike Q1, we saw the business decelerate as we moved through the quarter. In Q2, we saw steady improvements in both sales and margin rates with each month getting successively better. Our belief is that we can continue to build on this momentum as we progress through Q3 and into the holiday selling season in Q4.”
As for its footwear business, Lawrence told analyst that the category was down 4.5 percent in the period, but saw continued strength in casual and work footwear driven by national brands such as Hayden.
In an interview with FN, EVP and chief merchandising officer Matt McCabe, added that newness is driving the footwear category. “Brands like Hey Dude and Brooks are doing well for us right now,” McCabe said. “But, running-inspired fashion styles continue to be the most difficult to move.”
Academy Sports president Michael Mullican added that its new partnership with L.L. Bean and Fanatics are also expected to “add value” in the back half of the year as the company looks towards holiday.
“Key selling seasons, like back-to-school and holiday, typically do well for us,” Mullican told FN. “Looking at back-to-school, we are particularly strong in the youth category, and we are very pleased with how we performed.”
Looking ahead, Mullican added that the company is moving full steam ahead on its store opening strategy. “We opened three new stores so far this year and we plan to open 11 to 12 more by the end of the year,” Mullican said. “These stores are expected to clear 20 percent in return on invested capital (ROIC), while the locations we opened last year are already contributing positively to our EBITA cash flow.”
A robust store expansion plan is a key element in Academy’s long-term growth plan. The company is aiming to open 120 to 140 new stores by 2027, expanding its store base by 50 percent in existing and new markets.
New stores are expected to generate between $2.4 billion and $2.8 billion in revenue for Academy by 2027. When it comes to choosing a new store location, Academy previously told FN that it makes sure there is a “localized assortments” of products designed for consumers in a specific region or market.
At its investor day in April, the retailer said that it looking to achieve $10 billion in revenue by 2027, with a net income margin of 10 percent. This goal, which Academy reaffirmed, will be accomplished by opening new stores as well as by investing in the company’s omnichannel and existing business.
For the full fiscal year 2023, Academy expects net sales between $6.18 billion to $6.37 billion, with net income between $520 million and $575 million.
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