Moody’s Ratings changed Academy, Ltd.’s debt ratings outlook to positive from stable due to the retailer’s “continued strong credit metrics, driven by materially lower debt and healthy free cash flow generation.”
Moody’s that since 2020, the company has repaid nearly $1.0 billion of funded debt. As a result, debt to EBITDA was 2.1x and EBIT to interest was 4.2x in 2025. The ratings agency said, “We expect Academy to have very good liquidity, to continue to pursue a balanced financial strategy that supports resilient credit metrics despite ongoing pressure on consumer spending.”
Moody’s also affirmed Academy’s corporate family rating (CFR) at Ba2, its probability of default rating at Ba2-PD, and the rating on the company’s existing senior secured first lien term loan and senior secured notes at Ba2. The speculative grade liquidity rating (“SGL”) remains unchanged at SGL-1.
Academy said in its analysis, “Academy’s Ba2 CFR reflects the company’s scale and solid market position in the regions it serves, as well as management’s ability to preserve profitability despite negative same-store sales since 2022. During this period, the company focused on productivity enhancements, disciplined inventory management, and cost controls. While same-store sales have remained negative, underlying trends have steadily improved, supported by contributions from new store openings. Ongoing improvements in merchandising and continued investment in omnichannel capabilities should further support operating performance over time. Additional earnings growth will be driven by Academy’s store expansion program, launched in 2022, which is expected to add approximately 125 stores over the next 5 years and be funded with free cash flow. Academy maintains strong credit metrics, with leverage of 2.1x and EBIT to interest of 4.2x in 2025. We expect leverage to remain relatively stable over the next 12 months, with modest improvement in coverage as earnings grow.
“Partially offsetting these strengths is a difficult consumer spending environment as consumers continue to face high inflation in key categories such as food, housing and insurance. The company also operates in a highly competitive sporting goods retail market, including direct-to-consumer efforts by major apparel and footwear brands and the continued shift toward online shopping. Sporting goods demand can also fluctuate, in part because of demand cycles in the firearms and ammunition, which we estimate represents roughly 10 percent of Academy’s sales.
“Academy’s SGL-1 reflects its very good liquidity over the next 12 months. The company has a largely available $1.0 billion asset based revolving credit facility (unrated) which expires in 2029. In addition, we estimate that the company will generate roughly $150-$200 million of free cash flow over the next 12 months.”
Image courtesy Academy Sports
