Academy Sports and Outdoors Inc. reported fourth-quarter earnings quadrupled as same-store sales increased 16.1 percent. The sales gains were driven by strong consumer demand across all markets and merchandise divisions, particularly Sports & Recreation.
Net sales increased 16.6 percent in the fourth quarter to a record $1.60 billion. Wall Street’s consensus estimate was $1.58 billion.
Comparable sales increased 16.1 percent, E-commerce sales grew 60.7 percent, led by an increase in website visits and the continued consumer adoption of new fulfillment methods, such as buy online, pick-up in-store, ship-to-store, and curbside pick-up.
Gross profit increased 34.7 percent to $499.1 million. The gross margin rate increased 420 basis points to 31.2 percent. This increase was driven by higher merchandise margins, fewer promotions and a reduction in clearance sales.
Net income was $91.5 million, a 416.0 percent increase over $17.7 million in the prior-year quarter, resulting in diluted earnings per share of 97 cents, compared to 24 cents per share in the prior-year quarter.
Pro forma adjusted net income, which excludes the impact of certain non-cash and extraordinary items, was $103.1 million, a 485.8 percent increase over pro forma adjusted net income of $17.6 million in the prior-year quarter. Pro forma diluted earnings per share were $1.09, compared to 23 cents per share in the prior-year quarter. Results were more than double Wall Street’s consensus estimate of 50 cents.
“I am very proud of everything the Academy Sports + Outdoors team members achieved in 2020 as they faced substantial adversity and uncertainty due to the pandemic. Through collaboration, dedication and innovation, the team produced remarkable results and delivered fun to millions of customers while laying the foundation for future success,” said Ken Hicks, chairman, president and chief executive officer. “With our outstanding team, strong balance sheet and by investing in our key initiatives, such as power merchandising and e-commerce capabilities, Academy is very well positioned to continue to drive top and bottom-line growth for the long term as well as enhance shareholder value.”
Fiscal Year 2020 Results
Net sales increased 17.8 percent to a record $5.69 billion. Comparable sales increased 16.1 percent. This growth was led by a 138.3 percent increase in e-commerce sales and strong demand in the Outdoor and Sports & Recreation categories.
Gross profit increased 21.2 percent to a record $1.73 billion. The gross margin rate was 30.5 percent, a 90 basis point improvement over the prior year.
Net income increased 157.2 percent to a record $308.8 million. This resulted in diluted earnings per share of $3.79, compared to diluted earnings per share of $1.60 for fiscal 2019. Fiscal 2020 pro forma adjusted net income was $311.7 million, a 310.7 percent increase over fiscal 2019 pro forma adjusted net income of $75.9 million. This resulted in pro forma adjusted diluted earnings per share of $3.83, compared to pro forma adjusted diluted earnings per share of $1.02 in fiscal 2019.
Michael Mullican, executive vice president and chief financial officer, said, “Thanks to the tremendous efforts of the team, Academy ended the fiscal year in a very strong financial position. Being able to flow our record sales through to the bottom line allows us to invest in additional initiatives to create efficiencies and fuel future growth and profitability.”
Balance Sheet Update
As of the end of fiscal 2020, the company’s cash and cash equivalents totaled $377.6 million, compared to $149.4 million at the end of fiscal 2019. Net cash provided by operating activities was $1.01 billion for fiscal 2020 compared to $263.7 million in fiscal 2019. Fiscal 2020 adjusted free cash flow was $978.5 million compared to $196.9 million for fiscal 2019.
As a reminder, on November 6, 2020, the company issued $400 million of senior secured notes and entered into a new $400 million term loan facility, both of which mature in 2027. The net proceeds from the notes and the new term loan and cash-on-hand were used to repay in full outstanding borrowings under the company’s existing term loan facility in the amount of $1.43 billion, reducing its debt by $631 million.
The company is providing the following fiscal 2021 guidance for stockholders and analysts:
- Comparable sales in 2021 are expected to range between negative 2 percent to positive 2 percent. That compares to a gain of 16.1 percent versus 2020 and a decline of 0.7 percent versus 2019;
- Net income in 2021 is expected to range between $265.0 million and $290.0 million. That marks a decline of 10 percent at the mid-point versus 2020 and a gain of 131 percent versus 2019; and
- Earnings per share in 2021 on a diluted basis in the range of $2.70 to $2.95., That marks a decline of 25 percent versus 2020 and a gain of 77 percent versus 2019.
Photo courtesy Academy Sports + Outdoors