Academy Sports And Outdoors reported a decline in net sales but exceeded guidance
From Nasdaq: 2025-03-20 17:45:11
Academy Sports And Outdoors (NASDAQ: ASO) held its Q4 2024 Earnings Call on March 20, 2025, reporting a 6.6% decline in net sales to $1.68 billion. Despite this, they exceeded midpoint guidance for net sales and adjusted earnings per share. The company attributed the decline to a compressed holiday calendar and consumer spending constraints. Outdoor was the best-performing category, with net sales up 2%, followed by apparel down 1% and sports and recreation down 1%. The company saw a rebound in sales during the holiday season, driven by promotions and key categories.
Stock Advisor’s analyst team identified 10 best stocks for investors to buy now, but Academy Sports And Outdoors was not on the list. The service has quadrupled the return of the S&P 500 since 2002, offering guidance on portfolio building and regular updates from analysts. The latest top 10 list is available for those who join Stock Advisor. The service has a track record of success, with notable returns on past recommendations, like Nvidia in 2005, which yielded $720,291 on a $1,000 investment. During the holiday season, ASICS, New Balance, and Crocs performed well for Academy Sports, showing strong growth in the private brand portfolio. Despite a slight decline in gross margin, the company took actions to ensure a smooth seasonal transition. Additionally, Academy Sports opened 16 new stores in 2024, with positive results especially in small to midsize markets like Meridian, Mississippi. The company also saw success with loyalty programs and private brands, which made up 23% of total net sales. Looking ahead to 2025, Academy Sports plans to open 20-25 new stores and focus on long-term growth initiatives. In 2025, one-third of new store openings will happen in the first half of the year, a change from previous back half-weighted strategy. Stores will be located in suburbs, exurbs, and midsize markets to target core customers. The company anticipates positive comp sales from new stores added in 2023 and 2024. Plans for online growth include improving site fundamentals, expanding SKU offerings, and enhancing fulfillment options. The company will focus on accelerating new item launches and expanding partnerships with brands like Nike and Jordan. Pricing strategies will emphasize value to accommodate lower- to middle-income consumers. Academy Sports + Outdoors has launched an exclusive Jacob Wheeler line, offering premium products at competitive prices. The company is leveraging its customer file, with over 11 million enrolled in the myAcademy loyalty program. Partnering with an advertising agency, Academy aims to expand brand awareness and resonate in new markets. Additionally, they plan to roll out RFID technology in stores for improved inventory accuracy and customer service. Despite challenges such as higher freight costs, Academy reported strong Q4 results, with net income of $133.6 million and diluted earnings per share of $1.89. In the fourth quarter, SG&A expenses increased by $10 million, excluding last year’s $17 million extra week expense. Deleverage was due to investments in growth initiatives, including new stores and omnichannel business. Despite a slight decrease in store traffic, December saw an increase in traffic growth, especially among higher-income households. Academy ended the quarter with $289 million in cash and $1.3 billion in inventory. In 2024, the company generated $342 million of adjusted free cash flow and returned approximately 3.8% yield to shareholders through dividends and share repurchases. The board approved an 18% increase in dividends, expecting net sales of $6.1 billion to $6.3 billion and gross margin rate of 34% to 34.5% for 2025 amidst macro uncertainties. The company forecasts adjusted net income for 2025 to range from $400 million to $435 million, excluding certain expenses. GAAP diluted earnings per share are estimated to be $5.40 to $5.85, with adjusted diluted earnings per share ranging from $5.75 to $6.20. The company expects Q1 to be challenging but anticipates Q2 to be the strongest quarter. Gross margin guidance for 2025 is expected to increase by 40 basis points at the midpoint, driven by supply chain improvements and softlines penetration.
Consumer trends have softened at the end of January and into February, with uncertainty about whether it’s weather-related or macroeconomic. The company transitioned to spring goods, which helped stabilize the business. Despite challenges, the company is optimistic about the trends seen in late February and early March, with a majority of the quarter still ahead. Academy Sports and Outdoors is optimistic about the business trends despite cautious consumers, with plans to counteract softness in the economy with new brand introductions and technology rollouts. Q2 is expected to be the best quarter of the year, with the Jordan launch in April and new store growth. The company anticipates the back half of the year to be stronger than the first half. New store growth is expected to positively impact comps, with the ’23 stores contributing this year. The launch of Jordan is seen as a significant growth driver and a top 20 brand for Academy Sports and Outdoors. Jordan products will now be available at Academy Sports in 145 stores and online at the end of April. The brand is the most requested by customers and will focus on sports products such as cleats and basketball shoes. Nike footprint will also expand with premium products like the 270s and new apparel. The partnership with Nike is strong, and Academy Sports is excited about the new launches and expansions. The exposure to tariffs is limited, with a diversified sourcing base and efforts to minimize cost impacts on customers. Academy Sports remains focused on providing value to customers through everyday low prices. There is also an increase in higher-income customers shopping at Academy Sports, showing a positive trend in customer demographics. In the fourth quarter, the trend of Quintiles 4 and 5 customers shopping more at a value provider like the company accelerated. Customers making above $100,000 per year are seeking value and turning to the company for sports and outdoor products. Higher basket sizes are being seen across all Quintiles, with larger ticket items seeing an increase. The company has been diversifying its sourcing base to reduce exposure to tariffs, aiming to continue this trend. Categories like outdoor and firearms are performing well, with fitness and bikes stabilizing after experiencing negative comps in previous years. Fishing and camping categories are also showing positive growth. Academy Sports + Outdoors expects negative comps for the year despite initiatives like the launch of Jordan and new stores. The company has seen comp improvement since Q2 2024, but faces macro headwinds like tariffs and a tough economic outlook for 2025. Gross margin recapture will come from supply chain improvements and new vendors like Jordan, which is expected to be margin accretive. Apparel growth and price optimization will help offset tariff impacts. SG&A per store for 2025 is expected to deleverage by under 100 basis points due to investments in new stores and e-commerce. Academy Sports and Outdoors discusses the positive impact of new stores on sales, with estimated benefits contributing to comp growth. Base stores have seen negative comps but are showing improvement quarter over quarter. Initiatives such as new brand launches, technology implementation, and marketing efforts aim to turn base store comps around. Cash flows remain stable and inventory management is strong. The company remains confident in its long-range plan and strategies for future growth, with a focus on returning value to shareholders. Team members are praised for exceeding customer expectations in 2024, with plans for continued success in 2025. 1. The stock market saw a significant increase today, with the S&P 500 hitting a new record high. The Dow Jones Industrial Average also experienced gains, closing at its highest level since February.
2. In economic news, the unemployment rate dropped to 4.2%, the lowest it has been since the start of the pandemic. Job growth exceeded expectations, with over 500,000 new jobs added in the past month.
3. The latest COVID-19 variant, Omicron, has been causing concern among health officials. The variant has been detected in multiple countries and there are fears it could lead to a surge in cases.
4. In sports, the NFL playoffs are set to begin this weekend, with several exciting matchups scheduled. Fans are eagerly anticipating the games, as teams vie for a spot in the Super Bowl.
Read more at Nasdaq: Academy Sports And Outdoors (ASO) Q4 2024 Earnings Call Transcript