Despite drops in the bottom and top lines last quarter, executives at Academy Sports + Outdoors are feeling good about the company’s performance, citing strong inventory management and cost containment, and success in meeting expectations both internally and with Wall Street.
The company is fueling long-term growth with plans to open 80 to 100 stores over the next five years, and just unveiled a new private label athleisure line for men.
The store expansion is “appropriately aggressive, not overly aggressive,” Steve Lawrence, executive vice president and chief merchandising officer told WWD, after the company reported that its net income slipped 15.7 percent for the quarter ended April 30 to $149.8 million from $177.8 million in the year-ago period.
Pre-tax income was $195.3 million compared to $224.9 million, which the company said was the second highest reported first-quarter pre-tax income in its history. When compared to the first quarter of 2019, it was an increase of more than 650 percent.
Net sales declined 7.1 percent to $1.47 billion from $1.58 billion a year ago. Comparable sales declined 7.5 percent. E-commerce sales grew 18.8 percent.
Lawrence said the decline in overall sales was primarily due to lapping the 38.9 percent comparable sales gain in the prior year quarter, partially driven by the first quarter 2021 release of government stimulus payments. When compared to the first quarter of 2019, net sales last quarter increased 36.3 percent.
Academy cautiously revised its forecast for 2022 downward, expecting total net sales of $6.43 to $6.63 billion, down from a previous forecast of $6.56 billion to $6.77 billion. Comparable sales are seen at a minus 6 to minus 3 percent, from previous forecast of minus 4 to minus 1 percent; and income before taxes are seen at $725 million to $805 million, down from the previous forecast of $780 million to $845 million.
Still, investors were pleased with Academy’s first-quarter results, pushing the retailer’s stock price up 7.5 percent, or $2.65, to $38.22 on Nasdaq Tuesday afternoon.
“Expectations were we were going to drop more than we did, but we did a little better than our peers,” Lawrence said.
“The other piece was inventory management,” Lawrence added. “If you look at our inventory level, it was up 22 percent from last year, but only 8.8 percent from 2019. We worked very hard to control our inventory. We don’t have a big overstock position,” and won’t be required to liquidate at a level that other retailers will later this year.
Gross margin was $521.4 million, or 35.5 percent of sales, compared to gross margin of $563.7 million, or 35.7 of sales in the prior year quarter. An increase in merchandise margins and a decrease in freight costs were offset by an increase in inventory and e-commerce shipping costs.
“In the first quarter, we didn’t see a lot of additional promotions,” he said. “We do believe it’s probably going to get a little more promotional as we get towards the end of the year.”
Asked about the impact of inflation, Lawrence said, “Like everyone, we are seeing inflation creep up, but with us, it’s not as dramatic as grocery or gasoline. We are definitely dealing with it. We are very surgical about where we take price increases. At our core we are an everyday value retailer.”
In April, Academy open a store in Conyers, Ga., its first store opening since 2019. A total of eight openings are planned for this year, though after this year, the expansion accelerates. “The Conyers opening gives us confidence we can ramp it up,” Lawrence said.
Lawrence said the next generation of Academy Sports stores are slightly smaller, at 55,000 to 60,000 square feet, compared to the 65,000 to 70,000 square feet on average for existing stores. He also said the new store format has greater flexibility to expand or shrink categories and products based on sales trends by having fixtures on wheels and no floor pads. “The whole floor is polished concrete so there is a lot of flexibility to move fixtures around,” Lawrence said. He also said the new stores will have longer sightlines, lower fixtures and improved wayfinding, and more intuitive adjacencies for better visibility and easier shopping.
With the store expansion, Academy will be entering new markets and filling in markets where the company already operates stores. The company has 260 stores in 16 states. The assortment focuses outdoor gear, apparel, footwear and sports and recreation equipment. About 20 percent of the total assortment is private label; in apparel, 30 percent is private label.
Last week, Academy started rolling out its new private label for men’s called R.O.W., which stands for Right of Way. “Technically, it’s an athleisure brand but you can workout in it,” said Lawrence, noting the apparel has wicking and stretch characteristics, hidden pockets and is “super comfortable.” For the current summer season, the line, priced from $19.99 to $34.99, offers three pairs of shorts, three pairs of pants, one tee, one polo, one long sleeve and one hoodie.
“We are satisfied with our first-quarter results as the company continued to position itself for long-term growth and expansion as we executed effectively in a highly dynamic environment and against a very strong prior year quarter,” Ken Hicks, chairman, president and chief executive officer, said in a statement.
Added Michael Mullican, executive vice president and chief financial officer: “Academy continues to effectively manage costs through this inflationary environment and generate strong cash flow, allowing us to fund investments in our strategic initiatives and new store growth. While our internal initiatives continue to drive operational improvements and consistent execution, we believe it is prudent to revise our full year outlook to reflect the current macroeconomic challenges.”