Academy Sports + Outdoors again raised its outlook for the year after reporting results for the third quarter ended October 30 easily surpassing Wall Street targets.

Third Quarter 2021 Results
For the third quarter, net sales increased 18.1 percent to a third-quarter record of $1.59 billion. Wall Street’s consensus estimate has been $1.49 billion.

When compared to the third quarter of 2019, sales increased 39.1 percent. Comparable sales were up 17.9 percent on top of 16.5 percent last year, making it the 9th consecutive quarter of positive comparable sales. The company continued to benefit from the strategic initiatives implemented to improve merchandise planning and allocation, operations, customer service and supply chain. As a result of these actions and the continued strong consumer demand for sports and outdoor products, all four product divisions saw significant growth. E-commerce sales grew 25.9 percent compared to the prior-year quarter and 146.6 percent compared to the third quarter of 2019.

Gross margin increased 27.3 percent to $560.8 million. The gross margin rate improved by 250 basis points to 35.2 percent. This growth was primarily driven by higher merchandise margins resulting from effective pricing and promotions management, a favorable product mix shift and fewer clearance sales.

Selling, general and administrative (“SG&A”) expenses were 21.6 percent of sales, a 500 basis point decrease. Compared to the third quarter of 2020 adjusted SG&A, which excludes certain initial public offering costs, SG&A leveraged 230 basis points, primarily attributable to workforce management, marketing cost efficiencies and leveraging expenses from the growth of comparable sales.

Pre-tax income increased 251.6 percent to $205.3 million compared to $58.4 million.

GAAP net income was $161.3 million compared to $59.6 million. Diluted earnings per share increased 132.4 percent to $1.72 compared to $0.74 per share last year. Pro forma adjusted net income, which excludes the impact of certain non-cash and extraordinary items, increased 122.6 percent to $164.1 million. Pro forma diluted earnings per share increased 92.3 percent to $1.75 compared to $0.91 per share. Wall Street’s consensus estimate on an adjusted basis had been $1.11.

“The Academy Sports + Outdoors team did a great job again delivering our 9th consecutive quarterly sales and profit increase,” said Ken Hicks, Chairman, President and CEO. “We are confident that our strong assortment and value offering, coupled with our great store service, enhanced omnichannel capabilities, and resilient supply chain will enable Academy to continue to achieve excellent results through this holiday season and beyond.”

Year-To-Date 2021 Results
Year-to-date, net sales increased 21.3 percent to $4.96 billion, while comparable sales increased 21.2 percent. Year-to-date sales grew 43.5 percent compared to 2019. E-commerce sales declined 1.5 percent versus 2020 and increased 203.9 percent compared to 2019.

Gross margin increased 43.1 percent to $1.77 billion. The gross margin rate improved by 540 basis points to 35.6 percent. This growth was primarily driven by higher merchandise margins resulting from effective pricing and promotions management, strong inventory productivity, greater product localization, fewer clearance sales and a favorable product mix shift.

The growth in gross profit and 210 basis points of expense leverage, resulted in a 208.5 percent increase in pre-tax income to $671.1 million compared to $217.6 million.

GAAP net income increased 143.8 percent to $529.6 million compared to $217.2 million. Diluted earnings per share were $5.55 compared to $2.82 per share in the prior year to date. Pro forma adjusted net income, which excludes the impact of certain non-cash and extraordinary items, increased 173.8 percent to $571.2 million. Pro forma diluted earnings per share were $5.98 compared to $2.70 per share in the prior year to date.

Balance Sheet Update
As of the end of the third quarter, the company’s cash and cash equivalents totaled $401.3 million and the credit facility had no outstanding balance. Adjusted free cash flow was $84.4 million. Merchandise inventories were $1.3 billion, an increase of 22.4 percent compared to the prior-year quarter and 18.9 percent higher than the second quarter of 2021.

As previously reported, on September 14, 2021, Academy’s largest shareholder (“KKR”) sold its remaining ownership of the company. As part of this event, Academy purchased 4.5 million shares for approximately $200 million. Additionally, during the quarter, the company made open market purchases of 1.2 million shares for $50 million. Year-to-date, the company has repurchased and retired 8.9 million shares of its common stock for approximately $350 million. As of October 31, 2021, the company had approximately $254 million remaining under its share repurchase program.

2021 Outlook
Michael Mullican, executive vice president and chief financial officer said, “The ongoing successful execution of our strategic priorities has allowed us to achieve yet another period of record-setting sales and profitability. In addition, the strength of the entire Academy team was apparent as we were able to grow our inventory position in a challenging environment. As our initiatives continue to mature, we believe the best days at Academy are still to come. In light of these exceptional results and expectations, we are raising our annual guidance.”

The company is raising its fiscal 2021 guidance based on the strong third-quarter performance, dynamic consumer trends and current visibility. The new guidance is as follows:

  • Net sales in the range of $6,675 to $6,740 million, representing a gain of 18 percent against 2020 and 39 percent against 2019;
  • Comparable sales in the range of 17.0 percent to 18.0 percent. That compares to a gain of 16.1 percent in 2020 and a decline of 0.7 percent in 2019;
  • Income before taxes in the range of $814 to $827 million, representing a gain of 142 percent against 2020 and 567 percent against 2019;
  • Net income in the range of $638 to $647 million, representing a gain of 108 percent against 2020 and 435 percent against 2019;
  • Reported EPS in the range of $6.75 to $6.85, representing a gain of 79 percent against 2020 and 325 percent against 2019; and
  • Non-GAAP EPS in the range of $7.21 to $7.31, representing a gain of 90 percent against 2020 and 612 percent against 2019.

Under its prior guidance, sales were expected in the range of $6,465 to $6,620 million. Comparable sales were expected to climb in the range of 14.0 percent and 17.0 percent. Reported and non-GAAP EPS was projected to range from $5.45 to $5.80.

Photo courtesy Academy Sports