Academy Sports reported first-quarter results that topped Wall Street targets, but the retailer slightly lowered its outlook due to macroeconomic challenges.

First Quarter 2022 Results
“We are satisfied with our first-quarter results. The company continued to position itself for long-term growth and expansion as we executed effectively in a highly dynamic environment and against a very strong prior-year quarter,” said Ken Hicks, chairman, president and CEO. “In April, we opened our first new store in over two years and are excited and proud of its early performance. We expect to open at least eight new stores in 2022 as part of our plan to open 80-to-100 stores over the next five years. Looking ahead, the team is focused on executing our 2022 priorities which will help drive long-term growth and sustainable profitability.”

Net sales were $1.47 billion, a decrease of 7.1 percent, compared to $1.58 billion. E-commerce sales grew 18.8 percent, and comparable sales declined 7.5 percent, primarily due to lapping 38.9 percent comparable sales in the prior-year quarter, partially driven by the first quarter of 2021 release of government stimulus payments. Compared to the first quarter of 2019, net sales increased 36.3 percent.

Gross margin was $521.4 million, or 35.5 percent of net sales, compared to gross margin of $563.7 million, or 35.7 percent of net sales in the prior-year quarter. An increase in merchandise margins and a decrease in freight costs were offset by an increase in inventory and e-commerce shipping costs.

Pre-tax income was $195.3 million in the first quarter compared to $224.9 million; this is the second-highest reported first-quarter pre-tax income in the company’s history. When compared to the first quarter of 2019, it is an increase of more than 650 percent.

GAAP net income decreased 15.7 percent to $149.8 million compared to $177.8 million. Diluted earnings per share were $1.69 compared to $1.84 per share. Adjusted net income, which excludes the impact of certain non-cash and extraordinary items, was $153.2 million. Adjusted diluted earnings per share were $1.73 compared to $1.89 per share.

Adjusted EPS of $1.73 topped Wall Street’s consensus target of $1.40. Sales of $1.47 billion surpassed Wall Street’s consensus estimate of $1.43 billion.

Balance Sheet and Capital Allocation Update
At the end of the first quarter, the company’s cash and cash equivalents totaled $472.4 million with no borrowings under the $1 billion credit facility. Adjusted free cash flow was $79.8 million during the first quarter. Merchandise inventories were $1.3 billion, an increase of 22.5 percent compared to the first quarter of 2021 and 8.8 percent higher than the first quarter of 2019.

During the first quarter, Academy returned $95.0 million in cash to stockholders through share repurchases and a dividend payout. The company repurchased 2.3 million shares for $88.5 million. On April 14, 2022, the company paid its first quarterly cash dividend of $0.075 per share, or $6.5 million, to stockholders of record as of the close of business on March 17, 2022.

After the end of the first quarter, on June 2, 2022, Academy announced that its Board of Directors (Board) declared a quarterly cash dividend with respect to the quarter ended April 30, 2022, of $0.075 per share of common stock. The dividend is payable on July 14, 2022, to stockholders of record as of the close of business on June 16, 2022. The Board also approved a new, three-year $600 million share repurchase program, bringing the total amount currently available under both share repurchase programs to $700 million.

2022 Outlook
Michael Mullican, executive vice president and CFO said, “Academy continues to effectively manage costs through this inflationary environment and generate strong cash flow, allowing us to fund investments in our strategic initiatives and new store growth. While our internal initiatives continue to drive operational improvements and consistent execution, we believe it is prudent to revise our full-year outlook to reflect the current macroeconomic challenges.”

Academy revised its initial guidance for fiscal 2022 for the following metrics:

  • Total net sales of $6.43 to $6.63 billion, down from guidance in the range of $6.56 to $6.77 billion previously;
  • Comparable sales of -6.0 percent to -3.0 percent versus -4.0 percent to -1.0 percent previously;
  • GAAP Income before taxes of $725 to $805 million, down from $780 to $845 million previously;
  • GAAP net income of $550 to $615 million, down from $590 to $640 million previously;
  • GAAP diluted EPS of $6.30 to $7.00 from $6.55 to $7.10 based on 88.0 million diluted weighted average shares outstanding;
  • Adjusted diluted EPS of $6.55 to $7.25 from $6.70 to $7.25; and
  • Earnings per share estimate reflect a tax rate of 24.0 percent and the share repurchase activity in the first quarter but does not include any potential future share repurchases.

Photo courtesy Academy Sports + Outdoors