Challenging Quarter for Academy Sports + Outdoors
Academy Sports + Outdoors Inc. saw top- and bottom-line declines in the third quarter, yet the results met expectations and the retailer raised its profit projections for the year.
Net income decreased 18.3 percent to $131.7 million compared to $161.3 million. Diluted earnings per share were $1.62, a 5.8 percent decrease compared to $1.72 a share based on a share count of 81.4 million shares, compared to 93.8 million at the end of the third quarter of 2021.
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Adjusted net income, which excludes the impact of certain non-cash and extraordinary items, was $137.9 million compared to $164.14 million. Adjusted diluted earnings per share were $1.69 compared to $1.75 a share.
Net sales were $1.49 billion, a decrease of 6.2 percent, compared to $1.59 billion in the year-ago period. Comparable sales declined 7.2 percent. The decline in sales was primarily due to fewer transactions compared to last year, mainly from a decline in hunting sales within the Outdoors division. When compared to the third quarter of 2019, net sales increased 30.5 percent.
E-commerce sales grew 10.5 percent year-over-year and 173 percent compared to 2019.
“The third quarter was challenging for Academy; however, we delivered a good profit performance that, while below last year, was in line with our expectations,” Ken Hicks, chairman, president and chief executive officer, said Wednesday. “Our team continues to execute at a high level in an uncertain environment, delivering results well above pre-pandemic levels on all measures. Our focus is on our long-term growth opportunities in stores and online through consistent operational excellence, strong financial discipline, and executing our store and omni-channel expansion plans.”
The Katy, Texas-based retailer now expects net income for 2022 of $610 million to $620 million, compared to its previous forecast of $550 million to $615 million. The outlook for increased profits pushed the stock price up 15 percent on Wednesday, to $56.87.
The company also projected 2023 sales of $6.43 billion to $6.49 billion, versus its previous forecast of $6.43 billion to $6.63 billion.
Gross margin was $522.5 million, or 35 percent of net sales, compared to gross margin of $560.8 million, or 35.2 percent of net sales in the prior year quarter. The 20 basis point decline was driven primarily by an increase in inventory shrink and e-commerce shipping costs, and was partially offset by an increase in merchandise margins. When compared to 2019, the gross margin rate expanded by 340 basis points.
Pre-tax income was $169.9 million compared to $205.3 million in the year-ago period. When compared to the third quarter of 2019, pre-tax income increased by more than 480 percent.
Merchandise inventories were $1.5 billion, an increase of 12.8 percent compared to the third quarter 2021. When compared to the third quarter of 2019, inventories were 12.3 percent higher in dollars, while units declined by 10 percent.
During the third quarter, Academy opened four new stores and has since opened three new stores in the fourth quarter, bringing the total number of stores opened in 2022 to nine, for a total of 268 stores. The company expects to open 80 to 100 stores over the next five years.
“Our year-to-date operating income has now surpassed that of fiscal 2019 and 2020 combined. This is a clear indicator that the operational and organizational improvements made over the past few years have structurally changed the earnings power of the company and positioned us for future growth,” said Michael Mullican, executive vice president and chief financial officer. “As we close out the year, we remain focused on providing our customers with excellent service, broad assortments and value offerings.”
