Academy Sports + Outdoors, Inc. is planning to go public in the middle of a pandemic that has rekindled America’s love affair with mountain, river, field and stream.
The sporting goods chain has filed an S-1 registration statement with the U.S. Securities and Exchange Commission (SEC) for a proposed initial public offering (IPO), applying to list its common stock on the Nasdaq under the ticker symbol “ASO.” The number of shares of common stock to be offered and the price range for the proposed offering have not yet been determined.
Academy, which has been owned by U.S. private equity firm KKR & Co. since 2011, operates 259 stores across the U.S. that sell sporting equipment including footwear and apparel as well as products like tents, backpacks and bicycles. KKR & Co. will control more than 50 percent of the voting rights of the company upon the listing, the SEC filing shows.
The company says its net sales rose nearly one percent to $4.8 billion in 2019 from a year earlier, finishing the 12 months ended Aug. 1 with approximately $5.3 billion in sales, $204 million of net income and $449 million in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
Additionally, the retailer indicated that it has seen four consecutive quarters with positive comparable sales, which marks a significant improvement over negative comparable sales for the past three fiscal years. The second quarter of 2020 was Academy’s fourth consecutive quarter of profitable growth and fifth consecutive quarter of cash flow growth, even in the middle of the Covid-19 pandemic.
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The move is an opportunistic one for Academy in an era when its sporting goods and outdoors retail peers are seeing significant rebounds throughout the pandemic. Dick’s Sporting Goods saw net sales in the second quarter jump 20.1 percent to $2.71 billion, surpassing Wall Street expectations of $2.46 billion. The boost occurred even as approximately 15 percent of the company’s stores closed on average throughout the quarter. Hibbett Sports saw net sales for the second quarter increase 74.9 percent to $441.6 million, while comparable store sales leapt 79.2 percent.
Both retailers were powered by banner quarters for their e-commerce sites, and Academy has done much of the same in that department, achieving year-over-year sales growth of 8 percent in 2019 and a massive 284 percent during the first half of 2020. E-commerce sales skyrocketed 406 percent from the prior quarter in the first quarter, and 210 percent from the prior quarter in Q2.
The company has invested approximately $50 million over the past three years in its omnichannel capabilities, launching its BOPIS program in 2019 alongside a new website design, content and functionality. BOPIS accounted for approximately 24 percent of e-commerce sales in 2019, and rose to 50 percent in the first half of 2020 amid the coronavirus crisis.
And in its preparation to go public, Academy has kept its ear to the ground as far as the consumers’ push toward increased outdoor recreation. In the SEC filing, the company cited a survey from Civic Science, stating that 43 percent of Americans expect to be doing more outdoor recreational activities in the future in order to facilitate social distancing.
Academy expects this trend will continue throughout the duration of the pandemic and will steadily augment its customer base over. The industry has seen unprecedented increases in participation across several categories which Academy considers to be its “power categories.” This includes outdoor (comprised of camping, hiking and kayaking), running, fitness and team sports, which saw participation increases of 9 percent, 3 percent, 3 percent and 5 percent, respectively, from 2014 to 2018, well before the pandemic even took place. The company also says it is well positioned to capture the demand from athleisure’s rising popularity.
The retailer is also confident in the industry as a whole, noting an Allied Market Research survey that said sales from 2019 through 2027 in categories such as outdoor, team sports, apparel and footwear are expected to grow approximately 6 percent per year.
Presently, Academy’s product assortment focuses on key categories of outdoor, apparel, footwear and sports and recreation through both national brands and a portfolio of 17 owned brands, which go well beyond traditional sporting goods and apparel offerings. Outdoor is the largest category for Academy, representing 32 percent of net sales, while apparel and footwear comprise 29 percent and 21 percent respectively. Private brands take up approximately 20 percent of Academy’s total net sales.
“We have taken significant actions to improve our merchandise offering, beginning with strengthening our sports and outdoors assortment quality and selection and exiting or reducing categories that were low profit or did not fit, such as toys, electronics and luggage,” Ken Hicks, president, CEO and Chairman of Academy Sports and Outdoors, Inc., wrote in the filing. “We developed and improved our pricing and clearance programs to ensure our value and keep our inventory fresh. In stores, we enhanced our merchandise presentation and signage to make the shopping experience more exciting. We also upgraded our planning and allocation systems to improve our in-stocks and inventory turns and allow us to target markets and stores with the right merchandise.”
As the company has grown, it has sought to optimize its in-store inventory management by implementing automated reordering and labor scheduling, and deploying third-party programs to analyze inventory stock throughout the year at every location. This change has allowed Academy to improve inventory management in stores, increasing the average inventory turns from 2.68X in 2017 to 3.36X for the 12 months ended Aug. 1, and has helped them to identify and exit the unprofitable luggage and toys product categories.
Credit Suisse, JP Morgan, KKR and BofA Securities are among the underwriters for the offering. Evercore ISI, Guggenheim Securities, UBS Investment Bank and Wells Fargo Securities are acting as bookrunners. Stephens Inc., Capital One Securities, Loop Capital Markets, CastleOak Securities, L.P., Blaylock Van, LLC, Cabrera Capital Markets LLC, Ramirez & Co., Inc. and R, Seelaus & Co., LLC are acting as co-managers.