Academy Sports reported earnings in the second quarter came in comfortably ahead of Wall Street expectations. Comps declined 6.0 percent against challenging year-ago comparisons but improved sequentially versus the first quarter. The sporting goods chain reiterated its 2022 full-year net and comparable sales guidance.

Second Quarter 2022 Results
“Our performance this quarter was in line with our expectations as Academy continues to substantially outperform our pre-pandemic levels of sales and profits. 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,” said Ken Hicks, chairman, president and chief executive officer. “This growth is supported by consistent operational excellence, healthy inventory levels, a strong balance sheet, new store expansion and omnichannel advancement. The Academy team remains focused on executing our priorities while delivering a great experience for our customers and creating value for our stakeholders.”

Net sales were $1.69 billion, a decrease of 5.8 percent, compared to $1.79 billion. Comparable sales declined 6.0 percent. The decline in sales was 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. Additionally, e-commerce sales grew 12.1 percent year-over-year and 244.5 percent compared to 2019.

Gross margin was $596.1 million, or 35.3 percent of net sales, compared to a gross margin of $642.5 million, or 35.9 percent of net sales in the prior-year quarter. The 60 basis point decline was driven primarily by an increase in e-commerce shipping and higher freight costs, which were partially offset by an increase in merchandise margins. When compared to 2019, the gross margin rate expanded by 420 basis points.

SG&A expenses were 20.1 percent of sales, a 160 basis point decrease, due to non-recurring stock compensation and payroll expenses associated with the accelerated share vesting, which occurred in the second quarter of 2021. Excluding this non-recurring expense of $40.3 million, SG&A expenses increased 70 basis points compared to last year, primarily due to fixed cost deleverage.

In the second quarter, pre-tax income was $247.0 million compared to $240.9 million. When compared to the second quarter of 2019, pre-tax income increased by more than 400 percent.

GAAP net income decreased 0.9 percent to $188.8 million compared to $190.5 million. Diluted earnings per share 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’s quarter. 

Adjusted net income, which excludes the impact of certain non-cash and extraordinary items, was $195.0 million. Adjusted diluted earnings per share were $2.30 compared to $2.34 per share.

Sales of $1.69 billion were in line with Wall Street’s consensus estimate of $1.7 billion. Adjusted EPS of $2.30 was ahead of Wall Street’s consensus estimate of $2.08.

Year-To-Date 2022 Results
Year-to-date, net sales decreased 6.4 percent to $3.15 billion, while comparable sales decreased 6.7 percent. Year-to-date sales grew 36.3 percent compared to 2019.

Gross margin was $1.1 billion, or 35.4 percent of net sales, compared to a gross margin of $1.2 billion, or 35.8 percent of net sales. When compared to year-to-date 2019, the gross margin rate expanded by 520 basis points.

Pre-tax income was $442.3 million compared to $465.8 million. When compared to year-to-date 2019 results, pre-tax income increased by approximately 490 percent.

GAAP net income decreased 8.1 percent to $338.6 million compared to $368.3 million. Diluted earnings per share were $3.90 compared to $3.82 per share in the prior year to date.

Adjusted net income, which excludes the impact of certain non-cash and extraordinary items, decreased 14.5 percent to $348.2 million. Adjusted diluted earnings per share were $4.01 compared to $4.22 per share in the prior year to date.

Balance Sheet and Capital Allocation Update
At the end of the second quarter, the company’s cash and cash equivalents totaled $399.9 million with no borrowings under the $1.0 billion credit facility. During the quarter, net cash provided by operating activities was $161.3 million. Merchandise inventories were $1.3 billion, an increase of 17.0 percent compared to the second quarter of 2021 and 8.4 percent higher than the second quarter of 2019.

During the second quarter, Academy returned $206.4 million in cash to stockholders through a combination of share repurchases and dividends. The company repurchased 5.6 million shares for $200.1 million. On July 14, 2022, the company paid a quarterly cash dividend of $0.075 per share, or $6.3 million, to stockholders of record as of the close of business on June 16, 2022. As of July 30, 2022, the company had approximately $500 million remaining under its share repurchase program.

Subsequent to the end of the second quarter, on September 1, 2022, Academy announced that its Board of Directors declared a quarterly cash dividend with respect to the quarter ended July 30, 2022, of $0.075 per share of common stock. The dividend is payable on October 13, 2022, to stockholders of record as of the close of business on September 15, 2022.

New Store Openings
During the second quarter, Academy opened one new store, bringing the total number of stores opened as of July 30, 2022, to two, for a total of 261 stores. The company expects to open a total of nine new stores this fiscal year and 80-to-100 stores over the next five years.

2022 Outlook
“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 reiterated its net and comparable sales guidance for fiscal 2022 and updated its EPS forecast calling for:

  • Sales continue to be in the range of 6,430.0 million and $6,630.0 million;
  • Comparable-store sales continue to be in the range of negative 6.0 percent to negative 3.0 percent;
  • Gross margins continue to be between 33.0 percent and 33.5 percent;
  • GAAP income before taxes continues to be between $725.0 million and $805.0 million;
  • GAAP net income continues to be in the range of $550.0 million and $615.0 million;
  • GAAP EPS is in the range of $6.50 to $7.25, up from previous guidance between $6.30 and $7.00;
  • Adjusted EPS between $6.75 and $7.50, up from previous guidance of $6.55 and $7.25; and
  • Diluted weighted average common shares outstanding to be about 85.0 million, down from $88 million previously.

Photo courtesy Academy Sports + Outdoors, Conyers, GA Grand Opening