Academy Sports + Outdoors, acquired by Kohlberg Kravis Roberts & Co (KKR) in 2011, has confidentially filed paperwork for an initial public offering, according to a report from Bloomberg.

Sources with knowledge of the situation told Bloomberg the offering would debut this year with Credit Suisse and KKR Capital Markets the lead underwriters.

Academy’s EBITDA (earnings before interest, taxes, depreciation, and amortization) for the 12 months ended May 2 were $361 million, one source told Bloomberg. Under KKR’s ownership, Academy’s store footprint has nearly doubled to more than 250 stores in 16 states across the South and Midwest of the U.S., up from 133 stores.

Since 2017, the SEC has allowed all companies to file early IPO paperwork without having to make the details public.

On June 30, Moody’s Investors Service upgraded Academy, Ltd.’s debt ratings, including corporate family rating (CFR), to B3 from Caa2, as Academy’s Q120 comparable sales, earnings and cash flow performance exceeded the rating agency’s expectations.  The upgrade also reflected Moody’s view that the solid operating performance trends are likely to continue over the near term which will significantly reduce risks associated with the company’s ability to refinance its $1.4 billion term loan due July 2022 in a timely and economical manner.

Moody’s wrote in its report, “The B3 CFR is constrained by the company’s high leverage, with debt/EBITDA of 6.4 times (including revolver borrowings to bolster liquidity), and only recent improvement in operating performance driven by turnaround efforts. Further, the credit profile incorporates the highly competitive nature of sporting goods retail, including the increased focus of major apparel and footwear brands on direct-to-consumer distribution and the shift to online shopping. The rating also considers Academy’s aggressive financial strategies, including previously executed debt-financed dividend distributions and discounted debt repurchases, although the company has not undertaken aggressive actions over the past year. In addition, as a retailer, Academy needs to make ongoing investments in its brand and infrastructure, as well as in social and environmental drivers including responsible sourcing, product and supply sustainability, privacy and data protection. Academy’s ongoing offering of firearms and ammunition at a time when several large retailers have pulled back also represents a social consideration.

“At the same time, Academy’s ratings benefit from the company’s good liquidity and Moody’s projections for a decline in debt/EBITDA to 5 times from 6.4 times as of May 2, 2020, driven by revolver repayment and better earnings. Moody’s expects revenue and EBITDA to increase modestly through the balance of fiscal year 2020, driven by the company’s value price points and diversified product assortment, which result in a resilient performance in weak economic conditions. Academy is also benefiting from initiatives in merchandising, private label credit card and digital investment, as well as new customer acquisition during the coronavirus-driven store closures of other retailers that were considered non-essential. In addition, the rating positively considers the company’s scale and solid market position in its regions.”

Photo courtesy Academy Sports + Outdoors