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Academy Eyes 885 Potential New Stores in Public Debut

Academy Sports + Outdoors Inc. has officially launched its initial public offering (IPO), offering 15.6 million shares of its common stock. The IPO price is expected to fall between $15 and $17 per share, enabling Academy to raise an estimated $250 million in the process.

The midpoint of the proposed range would give Academy a fully diluted market value of $1.5 billion.

Academy has applied to list its common stock on the NASDAQ Global Select Market under the ticker symbol “ASO.” It is expected to price on the market on Oct. 1.

The launch was expected to happen this month after the retailer filed an S-1 registration statement with the U.S. Securities and Exchange Commission (SEC) in early September.

Academy operates 259 stores across the U.S. selling sporting equipment including footwear and apparel as well as products like tents, backpacks and bicycles. It is capitalizing on what has been a strong year for outdoor product sales in the midst of the Covid-19 pandemic.

Academy cited a Civic Science survey in its S-1 filing as part of the inspiration for the IPO’s timing, stating that 43 percent of Americans expect to be doing more outdoor recreational activities in the future while social distancing remains the norm.

Allied Market Research’s data supports this finding, with its own numbers showing that sales from 2019 through 2027 in categories such as outdoor, team sports, apparel and footwear are expected to grow approximately 6 percent per year.

At the moment, Academy’s product assortment includes both national brands and a portfolio of 17 private labels, 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 account for approximately 20 percent of Academy’s total net sales.

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The Texas-based retailer was deemed an essential retailer and remained open throughout the Covid-19 crisis.

Academy indicated that it has seen four consecutive quarters with positive comparable sales, a marked improvement over negative comparable sales for the past three fiscal years. And the retailer has managed to stay profitable even in the middle of the pandemic—the second quarter of 2020 was Academy’s fourth consecutive quarter of profitable growth and fifth consecutive quarter of cash flow growth.

For the prior 12 months ended Aug. 1, Academy generated $5.3 billion in sales. During that time, the company reeled in $204 million in net income and $449 million in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). The retailer says it now serves an estimated 30 million unique customers.

For the six months ended Aug. 1, Academy reported profits of $157.7 million and revenues of $2.74 billion, coming in well ahead of the prior-year period’s income of $73.8 million and sales of $2.31 billion.

E-commerce sales skyrocketed 406 percent quarter-over-quarter in Q1, followed by a robust 210 percent in Q2. Digital sales represented 5 percent of total merchandise sales through 2019, then doubled to 11 percent for the first half of 2020.

In its SEC filing, Academy laid out a possible expansion plan that highlighted as many as 885 stores that could be new locations in the future. The retailer identified 120 “in-fill” locations that could accommodate the preferred size of stores in markets the company already occupies, such as Dallas/Fort Worth, Atlanta, Charlotte or New Orleans. Then there are 90 potential locations in adjacent markets that aren’t fully represented.

Finally, the biggest batch of potential new locations resides in the “greenfield” category, in which 675 stores in completely new geographies could be a fit.

As Academy expands, it also wants to ensure its inventory management capabilities are up to speed. From 2017 to 2019, the retailer implemented automated reordering and labor scheduling, as well as other third-party programs tasked with analyzing inventory stock throughout the year at every location.

Under the technology additions, the retailer increased average inventory turns from 2.68X in 2017 to 3.36X for the 12 months ended Aug. 1, and has identified and exited unprofitable categories such as luggage and toys.

“We believe that we have a best-in-class value offering with localized merchandising and marketing, and a new store opening and growth strategy that sets us apart from our competitors,” said Ken Hicks, CEO of Academy Sports + Outdoors. “We have proven that we are much more than a sporting goods store, as we are sought out for our extensive assortment and value by our customers, in all seasons and situations.”

Private equity firm KKR & Co., Academy’s parent company since 2011, will control more than 50 percent of the retailer’s voting rights upon the listing, the SEC filing shows.

With the IPO, Academy expects to grant the underwriters—including Credit Suisse, J.P. Morgan, KKR Capital Markets and BofA Securities—a 30-day option from the date of the prospectus to purchase up to an additional 2.34 million shares to cover any over-allotments. Net proceeds from the offering will go toward general corporate purposes, which could include repayment of certain indebtedness.