Academy Sports + Outdoors, Inc. reported earnings on an adjusted basis increased 12.5 percent in the fourth quarter ended January 28 as lower freight costs and overall operating expenses offset a 5.1 percent decline in same-store sales. EPS easily topped analysts’ consensus estimates while sales were below. 

Adjusted EPS of $2.04 a share was well ahead of Wall Street’s consensus estimate of $1.81. Revenues of $1.75 billion  were below Wall Street’s consensus estimate of $1.81 billion.

“For Academy, 2022 was a year that was both rewarding and challenging. The company accomplished many of the strategic goals we set at the beginning of the year to build a strong foundation for the future, including opening nine new stores,” said Ken Hicks, chairman, president and chief executive officer. “While our business faced pressures from the uncertain macro-economic environment throughout the year, our team effectively executed against our strategic plan, and as a result, we delivered solid earnings, generated and returned a significant amount of free cash flow, and created value for our stakeholders, even though we did not meet our sales expectations. Our focus in 2023 will be investing for growth by opening new stores, building a more powerful omnichannel business, strengthening our current store base, and leveraging and scaling our supply chain.”

Fourth Quarter Results
For the fourth quarter, net sales decreased 3.4 percent to $1.75 billion and comparable sales declined 5.1 percent. Sales were impacted by 6.4 percent fewer transactions, partially offset by a 1.3 percent increase in average ticket size. When compared to the fourth quarter of 2019, net sales increased 27.4 percent.

E-commerce sales grew 1.4 percent compared to the prior year quarter and 100.0 percent compared to the fourth quarter of 2019.

For the fourth quarter, gross margin was $572.5 million, or 32.8 percent of net sales. The gross margin rate improved by 50 basis points compared to the fourth quarter of 2021, primarily driven by a reduction in freight costs.

SG&A expense were reduced to 21.1 percent of sales from 21.3 percent a  year ago.

For the fourth quarter, pre-tax income increased 9.4 percent to $206.1 million compared to $188.4 million.

For the fourth quarter, GAAP net income increased 11.2 percent to $157.7 million compared to $141.8 million. GAAP diluted earnings per share were $1.97, an increase of 25.5 percent compared to $1.57 per share.

Adjusted net income, which excludes the impact of certain non-cash and extraordinary items, increased 12.5 percent to $163.5 million. Adjusted diluted earnings per share were $2.04, an increase of 26.7 percent compared to $1.61 per share.

Fiscal 2022 Results
For fiscal 2022, net sales decreased 5.6 percent to $6.40 billion and comparable sales decreased 6.4 percent. Sales were impacted by 8.2 percent fewer transactions, partially offset by a 2.0 percent increase in average ticket size. When compared to fiscal 2019, net sales increased 32.4 percent.

E-commerce sales increased 9.1 percent compared to 2021 and more than 175 percent compared to 2019. E-commerce sales penetration increased 140 basis points to 10.7 percent for fiscal 2022.

For fiscal 2022, gross margin was $2.2 billion, or 34.6 percent of net sales.

For fiscal 2022, pre-tax income was $818.3 million, a decline of 4.8 percent compared to $859.5 million.

For fiscal 2022, GAAP net income decreased 6.5 percent to $628.0 million compared to $671.4 million. GAAP diluted earnings per share increased 5.2 percent to a record $7.49 per share.

Adjusted net income decreased 9.9 percent to $645.8 million. Adjusted diluted earnings per share were $7.70, an increase of 1.3 percent compared to $7.60 per share.

Balance Sheet and Capital Allocation Update
As of the end of fiscal 2022 (January 28, 2023), the company’s cash and cash equivalents totaled $337.1 million with no borrowings under the $1 billion credit facility. Net cash provided by operating activities was $242.8 million during the fourth quarter and $552.0 million for the full year. Merchandise inventories were $1.28 billion, an increase of 9.5 percent compared to the end of fiscal 2021.

During the fourth quarter, Academy returned $105.9 million to stockholders through a combination of share repurchases and dividends. The company repurchased 1.9 million shares for $100 million and paid a quarterly cash dividend of $0.075 per share, or $5.9 million. In addition, Academy utilized cash on hand to voluntarily prepay $100 million of outstanding borrowings under its senior secured term loan.

For the full year, Academy returned $614.1 million to stakeholders, which consisted of share repurchases totaling $489.5 million, $24.6 million in dividend payments and $100 million of debt reduction. As of the end of the fiscal year, Academy has approximately $300 million remaining under its share repurchase program.

Subsequent to the end of fiscal 2022, on March 2, 2023, Academy announced that its Board of Directors declared a quarterly cash dividend with respect to the quarter ended January 28, 2023, of $0.09 per share of common stock. This is a 20 percent increase from the previous dividend payment. The dividend is payable on April 13, 2023, to stockholders of record as of the close of business on March 23, 2023.

2023 Outlook
Michael Mullican, executive vice president and chief financial officer said, “Academy’s operational and financial transformation continues to deliver solid financial results. For the second consecutive year, the company delivered gross margins greater than 34 percent and an operating margin above 13 percent. Since the beginning of 2021, we have returned over $1.1 billion to our stakeholders through stock buybacks, dividend payments and debt reduction. In 2023, our goal is to accelerate sales and profit growth through new store openings, omnichannel expansion and increasing the productivity of existing stores, all while generating significant free cash flow.”

Academy is providing the following initial guidance for fiscal 2023 (year ending February 3, 2024). This guidance takes into account various factors, both internal and external, such as the expected benefits of the company’s sales and profit growth initiatives, current consumer demand, the competitive environment as well as the potential impacts from inflation and other economic risks. It also includes the investments being made in new stores, omnichannel, supply chain and existing stores.

The outlook for 2023 calls for:

  • Sales in the range of $6.5 billion to $6.7 billion compared with $6.4 billion a year ago, representing a gain of 3.2 percent at the midpoint;
  • Comparable sales to be negative 2 percent to positive 1 percent against a decline of 6.4 percent in 2022, representing an improvement of 590 basis points at the midpoint;
  • Gross margin rate in the range of 34.0 percent to 34.4 percent against 34.6 percent in 2022, down 40 basis points at the midpoint;
  • GAAP income before taxes in the range of $705 million to $780 million against $818 million in 2022, down 9.2 percent at the midpoint;
  • GAAP net income in the range of $535 million to $595 million, against $628 million in 2022, representing a decline of 10.0 percent;
  • GAAP earnings per common share, diluted in the range of $6.70 to $7.45 against $7.49 in 2022, representing a decline of 5.6 percent at the midpoint; and
  • Adjusted earnings per common share, diluted in the range of $7.00 to $7.75 against $7.70 a year ago, representing a decline of 4.2 percent at the midpoint.
  • Diluted weighted average common shares outstanding to be 80.2 million, down from 83.9 million in 2022, representing a decline of 4.4 percent.
  • New store openings are expected in the range of 13 to 15 compared with 9 openings in 2022.

Wall Street’s consensus 2023 estimate had called for EPS of $7.65 and sales at $6.68 billion.

Photo courtesy Academy Sports + Outdoors