Academy Sports and Outdoors, Inc.’s earnings in the third quarter came in slightly ahead of analyst targets as improved allocations of Nike and Jordan products helped the nationwide retailer reach a greater number of high-income earners, offsetting continued pressure on lower-income customers.
On an analyst call, Academy officials also noted that the company made progress on its long-term objectives and goals, including accelerated e-commerce growth in the quarter, healthy comps from new stores which it opened over the last three years, assortment upgrades marked by high-single-digit growth from Nike and Jordan combined, and a strong payback from investments in RFID and handheld devices at the store level.
“It is clear that our strategies are not only working but continue to accelerate as they take hold,” Steve Lawrence, CEO, told analysts. He also said that Academy plans to open 20 to 25 stores next year, in addition to the 24 it opened this year, and that management believes it is continuing to gain market share.
However, same-store sales in the third quarter dipped 0.9 percent, due in part to warmer weather in its legacy markets in October, as well as a challenging consumer environment that squeezed lower-income consumers.
The comp declines also reflected continued softness in ammo. Excluding ammo, comps would have increased 0.4 percent.
Lawrence said customers continue to shop during promotional events and natural holidays despite inflationary pressures. “The third quarter played out as we expected with consumers shopping episodically in seeking out value as they look to stretch their buying power in the face of rising prices across the retail landscape,” he said.
Shares of Academy on Tuesday, December 9, closed at $53.07, up $4.22, or 8.6 percent. Looking forward, Academy narrowed its sales guidance for the year and raised the low end of its gross margin guidance. The company’s outlook is now calling for:
- Sales between $6.025 billion and $6.2 billion versus $6 billion and $5.265 billion under previous guidance.
- Comps between a decline of negative 2 percent to flat, versus previous guidance between negative 3 percent and positive 1 percent.
- Gross margins between 34.3 percent and 34.5 percent versus a prior guidance range of 34.0 percent to 34.5 percent.
- Adjusted EPS between $5.65 and $6.15 compared with $5.60 to $6.30 previously.
The guidance implies fourth-quarter comps will be down 3.5 percent to up 3.5 percent, with the wide range due to uncertainty over how consumers will respond to higher prices being used to mitigate tariffs.
So far in the fourth quarter, November comps initially turned positive with the help of cooler weather, softened in the middle of the month as warmer weather returned, and then ended with record Black Friday weekend sales.
Lawrence told analysts, “Our team was well prepared with strong promotional pricing that was fueled by the inventory we pulled forward at pre-accelerated tariff pricing in Q2 and Q3. All this resulted in our largest Black Friday weekend ever, on top of a record Black Friday last year. We still have a lot of business ahead of us for the remaining four weeks.”
Third-Quarter Tops EPS Guidance
In the third quarter, sales rose 3.0 percent to $1.38 billion, below analysts’ consensus estimate of $1.41 billion. The comp decline of 0.9 percent was from sales that were just below the midpoint of its guidance during the quarter, “as we navigated a warm October and a challenging consumer environment,” said Carl Ford, CFO.
The comp decline reflected a 4.1 percent decline in transactions while average selling prices were up 3.3 percent.
Lawrence said Academy was “encouraged by the strong reaction” from customers over the back-to-school season and to its holiday assortment at the tail end of the quarter when cooler temperatures reached its core geographies. He said the retailer was also pleased with the progress toward improving average unit retail to help offset increased tariff-related expenses.
During the quarter, average unit retails (AURs) steadily improved, up mid- to high-single digits versus last year. AURs are expected to be up in the high single to low double-digits for Q4.
Lawrence said, “We’ve been walking this year as we work to steadily raise AURs while also maintaining our value leadership in our space. And I can assure you that we’re continuously monitoring pricing relative to key competitors and are highly confident that we have the right pricing, architecture and promotional plan in place to deliver a strong holiday season.”
Among categories, Sports & Recreation delivered the strongest performance, up 6 percent in the quarter, driven by solid growth in baseball, outdoor, cooking, fitness equipment, and bicycles.
Apparel sales grew 3 percent, driven by strength in key national brands such as Nike, Jordan, Carhartt, Ariat, and Burlebo, as well as solid growth in private brands such as Magellan and Freely. Footwear grew 2 percent, driven by performance running brands such as Nike, Brooks, Asics, and New Balance, which all posted strong comps.
Sales in its Outdoor segment also grew 2 percent for the quarter, with strength in fishing, hunting gear, and firearms offsetting the softness in ammo, as the chain lapped a boost it received last year ahead of the presidential election. While ammo sales still ran slightly negative in early November, the trend showed improvement.
Gross margins in the quarter improved 170 basis points to 35.7 percent. The expansion was driven by 130 basis points of merchandise margin, inclusive of tariffs, and a 30-basis-point improvement in freight due to the lapping of last year’s port strike. Academy also saw a 20-basis point improvement in shrink as inventory management and investments in RFID began to pay off.
SG&A expense increased 120 basis points to 28.4 percent of sales, driven by growth investments, including 150 basis points of pressure from new store growth and 10 basis points from technology investments. SG&A expenses in the fourth quarter are expected to be flat to slightly down as Academy laps accelerated store openings from the prior year.
Operating income grew 9.7 percent to approximately $100 million.
Earnings on an adjusted basis improved 9.6 percent to $77.3 million, or $1.14 a share, topping analysts’ consensus target of $1.06. Net income grew 8.8 percent to $71.6 million, or $1.05.
Inventory continued to improve with units on a per-store basis down 0.3 percent from last year, compared to up 4.6 percent at the close of Q2. Said Ford, “We have also seen good sell-through in the product we pulled forward earlier in the year, and we feel good about the composition of our inventory as we finish out holiday and the fourth quarter.”
Market Share Gains
Lawrence said Academy believes it’s gaining share, noting that a store opening in a new or underserved market translates into share gains. The CEO said, “In many cases, these gains come from smaller independents who lack our scale and pricing power, or, in some cases, from larger players that do not offer the value and diversity of assortment we carry.”
He also pointed to Placer.ai data showing that Academy continues to see strong growth in foot traffic and share gains among customers in the top two income quintiles, households making more than $100,000 a year. Traffic from those two cohorts, which now make up approximately 40 percent of Academy’s sales, grew in the high single digits in the quarter. Lawrence cited improved Nike assortments as a factor that has brought higher-income customers to Academy.
Lawrence said, “We’re very happy to see that we continue to drive strong market share growth with this consumer segment, even as we started lapping the double-digit growth experienced last year in the third quarter.”
At the same time, Academy continued to hold share in the middle-income quintile, which includes households making $50,000 to $100,000 a year and represents approximately 30 percent of its customers. Lower-income cohorts, or those making less than $50,000 a year, saw continued traffic declines, though at a lower rate than in the first half of the year, according to Placer.ai data.
Lawrence also pointed to Circana data showing “meaningful share gains” across the chain’s key businesses, including apparel, footwear, sporting goods, outdoor, cooking, fishing, and camping. Finally, Lawrence noted that firearms checks (NICS) show that despite the softness in ammo, Academy’s firearms share has grown for over 18 consecutive months.
Update on Long-Term Objectives
Addressing progress toward long-term objectives and goals, Lawrence noted that new stores are opening successfully. Academy opened 26 stores from 2022 to 2024, and those stores, in aggregate, comped low single-digits in Q1, mid-single-digits in Q2, and high single-digits in Q3.
Eleven stores opened during the third quarter, all in its core geography where the Academy has high brand awareness and has been performing “significantly” ahead of plan. Lawrence said, ‘The success of these stores highlights the opportunity we have to open stores in our legacy and existing markets. They’re experiencing high population migration and growth, in addition to the new states and markets where we currently don’t have a presence.”
Of the 20 to 25 stores planned for next year, roughly 80 percent will open in legacy and existing markets, and 20 percent in newer markets.
Discussing omnichannel expansion, Lawrence noted that Academy’s e-commerce sales grew 10 percent in Q1, 18 percent in Q2, and 22 percent in Q3. Said Lawrence, “The symbiotic relationship is evidenced by the fact that we’re starting to see higher dot.com penetrations in our new markets as we lean with the digital first customer acquisition strategy. An omnichannel shopper is our most productive and profitable customer. We’re laser-focused on getting new customers into our digital ecosystem, engaging with them in ways that support their shopping needs and patterns.”
Overall e-commerce penetration increased 160 basis points year-over-year to 10.4 percent. Lawrence said that the company remains on track to achieve 15 percent penetration in line with its long-term goal.
Addressing efforts to improve the productivity of existing stores, Lawrence noted that one part of that effort is continuing to “refine and expand” assortments to encourage customers to shop more frequently and called out the appeal of its expanding Nike and Jordan assortments.
The Jordan brand was launched at Academy in the back half of April, with Nike brand allocations also improving year over year.
“At this point, we’ve expanded elements of the Jordan Brand out to all stores, such as cleats, socks, slides, and backpacks, and expect to further roll out more footwear and apparel in more stores,” said Lawrence. “In 2026, we believe that our improved access to basketball game shoes from Jordan and performance running shoes from Nike, such as the Vomero, when coupled with the expansion of fashion apparel across both these brands, is helping us attract many of these new $100,000 plus households.”
Other assortment upgrades supporting holiday selling include inventory investments in technology gadgets, (Turtlebox speakers and Meta smart glasses from Ray Ban and Oakley) as well as items backing health and wellness trends (weighted vests for running and walking, portable sauna from HoMedics, and clear proteins from Isopure and 1st Phorm to support individuals taking GP-1 weight loss drugs).
For kids, hot holiday sellers are expected to include the Adidas World Cup 2026 Trionda Pro Soccer Ball, baseball gear from Bruce Bolt, Baseball Lifestyle 101, and Dirty Mids, sports toys from Silent Sports, and sports and Pokémon trading cards. Birkenstock has expanded its footwear assortment.
Also aiding store productivity is the rollout of RFID scanners and handheld devices for store associates to improve inventory accuracy and “save a sale” situations, where an associate can locate an item from another store if it is out of stock in-store.
Academy is also seeking to drive in-store traffic by improving targeted marketing to increase customer enrollment and engagement in its “My Academy Awards” program. Said Lawrence, ‘We expect to see this program continue to grow and be a key Traffic and Conversion driver for us and are excited about our opportunity in 2026 to combine my academy awards and our credit card program into one seamless experience for the customer.”
Q&A Insight
In the Q&A session, Lawrence said Nike and Jordan have grown in the high single- and low-double-digits in recent quarters, and the company expects a similar performance in 2026 as more Jordan apparel and footwear reach its doors in the spring and more fashion products from the Nike brand arrive. He said, “It’s going to be a growth driver for us, similar to what we saw this year.”
Asked about the potential benefit of the 2026 World Cup taking place in North America, Lawrence said Academy expects to benefit as “a lot of games and matches” are scheduled in the Dallas and Houston, TX, areas respectively. “We already have some World Cup jerseys on the floor, as well as the Trionda soccer ball at various levels. And the initial reads on both are very, very good,” he said.
However, Lawrence sees a longer-term benefit to the soccer category, saying, “The last time the World Cup was in the United States, the real benefit was not the actual bump from tourism or selling jerseys. It was the participation in soccer afterward. And we think that’s going to provide a big tailwind for the soccer business for us for many years to come, not only in 2026, but 2027 and 2028.”
Many of the Q&A questions concerned the outlook and the impact of increasing AURs.
Lawrence said prices have “gone up a little bit almost across the board,” with the increases higher in hard goods because much of the product is sourced from countries with higher inflation than in apparel and footwear.
He noted that Academy is exploring multiple tactics in increasing prices, including better managing clearance, such as reducing the depth or length of promotions, with “actually physically raising prices” the last resort. Lawrence said, “Certainly, some of that’s happened as the national brands have passed on price increases and raised their MSRPs. We’ve tried to keep in lockstep with that with our private brands. But I would say it’s broad-based. It’s not any one area, but it’s more pronounced in the hard goods side of the business.”
The implied wide same-store guidance of between negative 3.5 percent and positive 3.5 percent for the fourth quarter reflects uncertainty about the fallout from higher prices, as higher average prices have already shown a negative impact on unit sales and traffic. Said Ford, “The downside implies that that elasticity worsens, and the upside is basically just how the consumer responds to that, so that’s really the difference between the high and the low is the unitary offset of AURs going up.”
Lawrence said the fourth quarter will hinge on how consumers respond to promotions.
“We’ve got a lot of thoughtful promotions that we’ve built out there that hopefully will resonate with the consumer,” said Lawrence. “But I think the biggest probable wildcard will be how they react to those promotions and what the take rate on those is as we progress throughout the holiday. I think we’re in a pretty good place from a seasonal [inventory] perspective. We really don’t think there’s going to be a big seasonal liability carryover from that perspective. But I think it’s more just the customer’s appetite to buy and how much they buy in promotion.”
Lawrence also said he does not expect Academy to be significantly impacted by accelerated promotions at the Foot Locker business.
“Our assortment versus theirs, there’s not much overlap,” he said. “They certainly carry Jordan and a lot of basketball shoes. We tend to be more game shoes. They tend to be more limited-edition releases and things like that. So, we don’t expect that to have a big impact on us. Certainly, that’s more of a mall-based customer. Most of our stores are off mall. So, I don’t think it’s going to have a lot of impact on us.”
Image courtesy Academy Sports + Outdoors
