Academy Sports + Outdoors capped off a strong first full year as a public company, seeing net sales spike 13.2 percent to a record $1.8 billion in its fourth quarter. The sporting goods and apparel seller took in $141.8 million in net income during the period.
In a Nutshell: All four major merchandise divisions at the retailer had positive growth during the fourth quarter and all posted double-digit sales growth for the full year. Apparel saw the largest growth throughout the quarter with 20 percent, while footwear sales jumped 14 percent. The outdoors division saw 10 percent sales growth, while sports and recreation equipment improved 8 percent.
In the fourth quarter, sales of each of Academy’s three largest national brands grew approximately 25 percent, according to Ken Hicks, chairman, president and CEO of Houston-area company. Overall, the Texas-based retailer increased the sales of nine of its top 10 national brands by double digits, Hicks said in the company’s fourth-quarter earnings call.
Chief merchandising officer Steve Lawrence highlighted Academy’s recent spring launches, including the rollouts of brands such as Chubbies and activewear brand Burlebo and expansion of existing brands into new categories, such as private activewear label Freely launching girls’ assortments.
Lawrence said he believes more product and customers will funnel into Academy stores even as major brands like Nike, Adidas and Under Armour continue to pull back on retail distribution in favor of direct sales.
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When asked if he had any concerns that Academy would lose any key brands, Lawrence said, “No…We’re actually seeing the opposite of that, where brands are coming to us and wanting to open up distribution to us. I’ll tell you our relationship with our key partners like Nike, Under Armour, Adidas, North Face, Columbia has never been stronger. We’re really happy with where we’re sitting with those guys today.”
Merchandise inventories were $1.17 billion, an increase of 18.4 percent compared to the $990 million in the comparable period.
“We have better balance and depth of inventory across most categories,” Lawrence said. “And even the areas where the supply is still somewhat constrained, we’re in a much better position than we were all of last year.”
For the fourth quarter, gross profit increased 17 percent to $584.1 million. The gross margin rate improved by 110 basis points (1.1 percentage points) to 32.3 percent. For fiscal 2021, gross profit increased 35.6 percent to a record $2.4 billion. The gross margin rate improved by 420 basis points (4.2 percentage points) to an all-time annual high of 34.7 percent.
Throughout both the quarter and the year, this growth was primarily driven by higher merchandise margins resulting from a greater mix of regular-price sales, higher retail prices and a favorable product mix, which offset elevated freight costs.
Academy expects to average unit retail (AUR) to increase this year, offset by elevated supply chain costs and increased promotions, but the company didn’t say how much prices will increase, or which categories will see price hikes.
“We like our positioning as the value player in our space,” Lawrence said. “We believe that our everyday value price points help active young families stretch their dollars and participate in all the sports and outdoor activities that are important to them without breaking the bank.”
The strong 2021 has resulted in tapered expectations for the upcoming year, with net sales anticipated to decline for fiscal 2022 after last year saw a boost from stimulus spending. Academy expects full-year net sales between $6.56 billion and $6.77 billion, with the midpoint declining an estimated 1.6 percent. As such, comparable sales are expected to dip anywhere between 1 percent and 4 percent.
Net income for this year is expected to be between $590 million and $640 million, down from 2021’s $671.4 million. The projected midpoint in the income range would be an 8.3 percent decline from the year-ago period.
As of Jan. 29, 2022, Academy’s cash and cash equivalents totaled $486 million with no borrowings under the company’s $1 billion credit facility. Adjusted free cash flow was $140.9 million during the fourth quarter and $597.2 million for the full year.
Academy anticipates it will generate $450 million to $500 million of free cash flow in 2022. In total, capital expenditures for 2022 are expected at $140 million.
Net Sales: For the fourth quarter, net sales increased 13.2 percent to a quarterly record of $1.81 billion, up from $1.6 billion a year ago. When compared to the fourth quarter of 2019, net sales increased 32 percent.
Comparable sales jumped 13.1 percent, on top of 16.1 percent in the fourth quarter of 2020, making it the 10th consecutive quarter of positive comparable sales.
During the quarter, e-commerce sales grew 22.7 percent compared to the prior year quarter and 97.2 percent on a two-year basis.
For fiscal 2021, net sales increased 19.1 percent to $6.77 billion. On a two-year basis, net sales increased 40.2 percent. Comparable sales increased 18.9 percent on top of 16.1 percent growth in fiscal 2020.
For the fiscal year, e-commerce sales increased 6.2 percent compared to 2020 and increased 153.1 percent compared to 2019.
Net Earnings: Net income at the sporting goods retailer increased 54.9 percent to $141.8 million in the fourth quarter compared to $91.5 million. Diluted earnings were $1.57 per share compared to the year-ago period’s 97 cents per share.
Adjusted quarterly net income, which excludes the impact of certain non-cash and extraordinary items, increased 40.9 percent to $145.3 million. Adjusted diluted earnings per share were $1.61 compared to $1.09 per share in the 2020 fourth quarter.
For fiscal 2021, net income skyrocketed 117.4 percent to $671.4 million compared to $308.8 million, making it the most profitable year in the company’s history. Diluted earnings per share were $7.12, compared to last year’s $3.79 per share.
Adjusted net income for the full year soared 129.9 percent to $716.5 million. Diluted earnings per share were $7.60 compared to 2020’s $3.83 per share.
CEO’s Take: Academy Sports + Outdoors said it could add 885 new stores in its initial SEC filing upon first going public. With the retailer operating 259 stores and adding eight more in 2022, Hicks revealed that the company plans to open anywhere from 80 to 100 stores over the next five years.
“Approximately half of our e-commerce sales are buy online, pick up in-store and 75 percent of all e-commerce sales are fulfilled through our stores, giving us a growing and profitable omnichannel business,” Hicks said. “We increased our proportion of customer-facing hours in stores, reset the store layout and improved assortments with more localized products with an emphasis on important categories and items.”