Academy Sports and Outdoors, Inc. (Academy) reported second-quarter profits easily topped analyst expectations due to gross margin expansion, disciplined expense management, stock buybacks, and the benefit of tariff refunds. On an analyst conference call, CEO Steve Lawrence said Academy is avoiding pressures affecting some competitors because of its broad product mix, which will soon include Hoka for the first time.
Academy’s Q2 beat came as Dick’s Sporting Goods posted disappointing second-quarter earnings and guidance due to weakness at Foot Locker that was attributed traced to weakness in lifestyle athletic footwear. JD Sports also recently issued a profit warning and Caleres on Wednesday said its Famous Footwear business missed expectations, with both of the declines linked to softness in lifestyle footwear.
Lawrence said footwear was also Academy’s worst performing category in the quarter, with sales down 1 percent. However, footwear only accounts for 20 percent of Academy’s sales and strength in sporting goods and outdoor are helping offset the footwear weakness.
Lawrence said that while Academy overlaps with its bigger competitors in some athletic footwear and apparel offerings, Academy also does a “big outdoor grilling and backyard business” and a “big cooler and drinkware business.”
He added, “We have a big outdoor business that has been really strong through the first half of the year in terms of shooting sports and fishing and camping. So, I think maybe our results are a little different than some of the people out there that are maybe a little more invested in purely footwear or apparel.”
He noted that sometimes the broader focus hurts Academy’s results comparatively when the lifestyle athletic footwear cycle is strong. However, he also noted that Academy also benefits in the footwear category when lifestyle offerings are softer because of its more diversified footwear mix. He noted that despite the category’s decline, Academy was able to gain market share in footwear in the second quarter.
Said Lawrence, “I’d once again point to diversity. We don’t just have an athletic footwear business. We sell cleats, we sell performance running, which did well, but we also sell work boots and work shoes. We do a big seasonal business in spring with sandals and flip-flops. Our Birkenstock business has been really good. Our work and western wear business has been really good with Ariat. I think really what it comes down to is the diversity of our assortment is probably what’s going to set us apart a little bit from some of our competition moving forward.”
Sales Slightly Below Q2 Expectations
Overall sales in the quarter increased 3.0 percent year-over-year to $1.65 billion, compared to $1.60 billion in the year-ago second quarter, just short of analysts’ consensus target of $1.66 billion. Comps were down 0.4 percent versus analysts’ estimate calling for a decline of 0.2 percent.
Dot-com business continued to grow double digits, up 12.8 percent, improving penetration in the channel by 110 basis points versus last year. New stores in the comp base continue to provide a consistent tailwind, with comps up mid-single digits, and they contributed approximately 50 basis points to comp during the quarter.
Lawrence noted that Academy on its first-quarter analyst call noted that the retailer was seeing a sales deceleration heading into the second quarter due to inflationary pressures that were no longer being offset by increased tax refunds. The trend continued into the second quarter, with May and June sales running up 2 percent in total and down 1 percent on a comp basis.
The CEO said the pressures continued to be most seen in traffic trends from the lower-income households making less than 50K annually, which were down high single digits during the quarter, worsening from a low-single-digit decline seen in the first quarter. At the same time, Academy is continuing to see strong traffic trends in the higher-income cohort, with traffic from households greater than 100K annually tracking up high single digits during the quarter, an acceleration versus the first quarter.
In July, sales picked up, rising 3 percent, along with a “modest positive comp,” with a back-to-school shopping boost. Lawrence said July’s sales in back-to-school categories would have been even stronger, but four of Academy’s states – Oklahoma, Missouri, Virginia, and South Carolina – shifted their tax-free weekends from the last week of July into the first week of August. Lawrence said, “While this disadvantaged the tail end of Q2, it did help us get off to a good start to Q3, with sales through Labor Day running up low single-digit comps.”
Lawrence said the quarter showed consumers shopping close to need and during key promotional events. He said, “As we have seen in the past, when the customer is under pressure, they shop episodically and aggregate their purchases around the key events on the calendar as a way to expand their spending power. This held true this past quarter with events such as Memorial Day, Father’s Day, Fourth of July, and back to school performing well. These also happen to be the time periods where the promotions traditionally are at their sharpest.”
Hardgoods Paces Q2 Category Performance
Sports & Recreation was Academy’s top category in the second quarter, up 6 percent, with continued strength in sporting goods. Lawrence said, “Within sporting goods, we are definitely seeing a World Cup effect, with soccer gear sales running up double digits for the quarter. We expect this trend will continue throughout the remainder of the year and into the next. We are also seeing strength in fitness, with treadmills up high-single digits during the quarter as customers continue to prioritize health and wellness. Another area of note is our front-end department, which is somewhat of a catch-all for us. This business continues to benefit from significant investments in trend-right categories such as trading cards and outdoor speakers driven by Turtlebox.”
Outdoor was Academy’s second-best performer, up 4 percent, driven by shooting sports, coolers, and camping.
While apparel sales were flat, strong performances were seen from categories such as World Cup jerseys and tees, outdoor, and work and western apparel. The strength in World Cup merchandise helped offset a decline in NBA championship gear as Oklahoma City Thunder’s title win was anniversaried. Lawrence said, “As we look to comp the World Cup next year, we believe the Women’s World Cup merchandise, coupled with a strengthening assortment and improved localization in our Fan Shop assortment, should allow us to offset the gains from this year.”
In footwear, Lawrence said Academy is remerchandising its mix to help the category return to growth. He said, “The team is focused on moving back to top-line growth in this division by aggressively shifting funding from underperforming styles towards the items and brands that are currently driving the business, such as performance running styles from brands like Nike, Adidas, Brooks, and New Balance, as well as trending lifestyle brands such as Birkenstock and Ariat.”
Profitability
Earnings for the quarter jumped 10.0 percent to $137.9 million, or $2.17 per diluted share, topping analysts’ consensus estimate of target of $2.07. EPS growth was higher, up 17.3 percent, due to aggressive stock buybacks.
Gross margins improved 440 basis points to 40.4 percent. The increase was driven by 510 basis points from tariff refunds and was partially offset by a negative 70 basis point impact from merch margin as tariff refund proceeds were reinvested into lower pricing.
SG&A was 25.5 percent of sales, up 20 basis points year over year, primarily driven by investments to open 21 new stores since Q2 FY 2025, tech investments in e-commerce and customer data, the rollout of 55 new Jordan Brand shops in Q2, and the reinvestment of tariff refunds into incremental store labor and marketing. These investments de-leveraged SG&A by 150 basis points. During the quarter, Academy leveraged base expenses by 130 basis points on a negative 0.4 percent comp. Year to date, Academy has leveraged SG&A in total by approximately 20 basis points.
Operating income for the quarter was $246 million, up 42.9 percent, inclusive of tariff refunds year over year.
Excluding stock compensation and the loss on early retirement of debt, adjusted EPS was up 19.1 percent. Tariff refunds net of strategic investments into price, labor, and marketing had a positive net impact on EPS and adjusted EPS by six cents during the quarter.
Outlook
Looking ahead, Academy reaffirmed its full-year sales outlook of $6.23 billion to $6.36 billion, which implies growth of 3 percent to 5 percent. The company also kept its comparable sales guidance at flat to up 2 percent.
Full-year EPS guidance was increased to $6.05 to $6.45, reflecting a lower share count from buybacks. Adjusted EPS is expected to land between $6.50 and $6.90, up from $6.40 to $6.80 previously.
Net income is still expected in the range of $390 million to $415 million while adjusted net income is still expected between $420 million to $450 million.
Second-Half Strategy Calls for Focus on Value and Newness
Lawrence expects to see continued pressure on consumers, particularly lower-income households, to continue in the back half and the retailer will be increasing its emphasis on value. He said, “We know that being able to present our customers with compelling value during the key events on their calendar is critical to driving sales in the back half of the year.”
Among the actions being taken to reinforce value, Academy is reinvesting the majority of proceeds from the tariff refunds it received back into lower prices for customers. Said Lawrence, “We’ve done a thorough review and have adjusted pricing across many of our private brand products to offer customers pre-tariff level prices, which has already stimulated demand, driven traffic, and delivered value to our customers.”
Academy will also be emphasizing “market-leading deals and value on both national and private brands” during key retail marketing events. Lawrence added, “We’ll continue to rationalize promotions during the lulls in the calendar in order to help fund these more aggressive promotions in the peaks.”
Finally, the retailer will also continue to utilize clearance as a way to drive traffic in off-peak months with major deals on end-of-life products. Lawrence said, “This strategy has proved to be particularly valuable with the under $50K a year household who frequently shop out of season as a way to outfit their family in advance for the next year’s needs.”
Academy will be utilizing its relaunched multi-tier myAcademy loyalty program by offering more targeted discounts and offers to loyal customers during key moments on the calendar. During the quarter, Academy completed this relaunch and is seeing a “very strong reaction” from customers. Credit card applications were up 15 percent during the quarter, with approval rates up over 900 basis points for the same time period. Spend on Academy credit cards was also up roughly 20 percent during the quarter.
Said Lawrence, “We’re still in the early innings on this program but are already seeing increased engagement from this initiative.”
Academy is also “doubling down on our commitment to delivering newness and innovation across all of our categories as a way to drive traffic with existing and new customers,” building on similar efforts in recent years. As part of this focus, Hoka will be launched in 15 stores and online this fall.
“Stores that get Hoka will also receive distorted allocations and improved in-store merchandising for all key performance running programs across brands such as Nike, Brooks, Adidas, New Balance, and Asics,” said Lawrence.
He said Academy’s merchandising team has “done a great job of identifying and incubating new brands in smaller door counts and then rapidly expanding them into additional doors and categories once we get a good read on them.” He cited the success of Burlebo, which is now one of Academy’s top-10 apparel brands after being introduced in 25 doors two years ago. The Chubbies running short brand is also performing “well above” expectations after rolling out in 25 stores this spring, with plans to expand to 200 for back-to-school season.
Lawrence also noted that Academy is opening 200 Ariat in-store shops, double the amount cited in the first-quarter analyst call. He said, “This category has been experiencing strong growth over the past couple years. With the partnership we’re building on this front, we expect this growth to continue for the remainder of this year and into next.”
In hard goods, Academy has rolled out suppressors as part of its hunting mix to 85 doors by the end of the second quarter with a goal of reaching 135 doors by the end of the year, ahead of an original plan to reach 100 stores. Said Lawrence, “Ultimately, we expect to see this going to almost all doors in 2027. As a reminder, this business is 100 percent incremental for us.”
Also in hunt, Academy is rolling out private label hunting rifles under its Redfield in the back half of the year, enabling Academy to offer shotguns and scoped hunting rifles that can retail for $100 less than comparable national brand firearms.
“We believe the refinements we’re making to our go-forward strategy will continue to drive both traffic and sales increases by delivering compelling value coupled with a steady diet of new and innovative brands and items,” said Lawrence. “This gives us the confidence to reaffirm our sales guidance for the full year of +3 percent to +5 percent, which would translate into a flat to +2 percent comp for fiscal 2026.”
Image courtesy Academy Sports and Outdoors Inc.
