In its first earnings call since going public on Oct. 2, Academy Sports + Outdoors reported its fifth consecutive quarter of positive comparable sales growth, despite a year-over-year slump in apparel sales.
Speaking on a call with investors Thursday, Academy’s chairman, president and CEO Ken Hicks said e-commerce “continues to drive significant revenue and profit growth, as well as deeper customer relationships.” In the third quarter, Academy’s digital sales grew 95.9 percent compared to a year ago.
In proportion to the company’s total merchandise sales, e-commerce achieved 7.5 percent penetration in the third quarter, compared to 4.5 percent a year ago. Buy online, pick up in-store (BOPIS) and curbside pickup comprised half of the chain’s digital sales, Hicks said.
Academy’s executive vice president and chief financial officer Michael Mullican described the introduction of BOPIS as one of the sporting goods chain’s big moves this year. “We get a bigger ticket with BOPIS, we get more repeat trips and, of course, we don’t bear the shipping costs with it,” he said. “So, we’re happy with it, we think the introduction of BOPIS and how it’s going will be a tailwind for gross margin.”
Sales at Academy’s physical stores are growing too. “Some of the areas are having their own challenges, be it the pandemic or industry issues or things like that, but we’re seeing pretty consistent growth across all of our regions,” Hicks said. The Texas-based company’s newer markets, such as the East Coast, are seeing the greatest growth and highest rates of new customer acquisition, Mullican said.
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Net Sales: Driven by strength in sports and recreation goods, but offset by weakness in apparel, Academy’s third-quarter net sales rose 17.8 percent year over year to $1.35 billion. Comparable sales rose 16.5 percent compared to the third quarter of 2019.
Like many others, the sporting goods chain felt the impact of the abnormal back-to-school season as its apparel division saw net sales decrease in the low, single digits. “It was more spread out, it was later and it wasn’t as big as it had been in the past,” Hicks said.
However, a tough year-on-year comparison in licensed apparel also contributed to the category’s slump. Academy, with roughly 40 percent of its 259 stores located in Texas, saw a boom in apparel sales last year as the Houston Astros fought their way to the World Series. Though Hicks declined to say exactly how much the baseball team’s success raised sales last year, he said absent that boost, the retailer’s apparel segment would have experienced year-over-year growth this quarter.
Meanwhile, Academy’s sports and recreation division—driven by bicycles, outdoor games, outdoor cooking and fitness equipment purchases—saw strong double-digit growth, Hicks said. Increases in the company’s fishing, camping and hunting categories propelled its outdoor division to strong double-digit growth as well.
Footwear experienced low single-digit growth as a result of robust sales in both athletic and work shoes, Hicks added.
For the 39 weeks ended Oct. 31, net sales at Academy Sports + Outdoors totaled $4.1 billion, an 18.3 percent increase compared to the third quarter of 2019. Comparable sales grew 16.1 percent.
Net Earnings: Academy’s net income more than doubled in the third quarter, growing by 109 percent year over year to $59.6 million, or $0.74 per diluted share. Pro forma adjusted net income, which excludes the impact of certain non-cash and extraordinary items, came in at $73.7 million, or $0.91 per diluted share, up 188 percent compared to the third quarter of 2019.
Looking at the 39 weeks ended Oct. 31, net income grew 112.3 percent compared to the same period last year, totaling $217.2 million, or $2.82 per diluted share. Pro forma adjusted net income came in at $208.6 million, or $2.70 per diluted share, a 257.6 percent year-on-year improvement.
Academy’s gross margin inched up 110 basis points to 32.7 percent “driven by strategic merchandising actions, such as lower markdown rates and lower clearance volume, but partially offset by a sales increase in online categories,” Mullican said.
Adjusted earnings before interest, taxes, depreciation and amortization grew from $88.8 million to $145.7 million.
The company’s $359 million in selling, general and administrative expenses took up 26.6 percent of net sales, a 40-basis point improvement from the third quarter of 2019. Excluding nonrecurring expenses associated with the retailer’s October initial public offering, SG&A expenses would have totaled $326.8 million or 24.2 percent of net sales.
CEO’s Take: “Our business has performed strongly during the past several quarters, beginning well before the Covid-19 pandemic,” Hicks said. “We’ve strategically invested in our key initiatives, including our merchandising, omnichannel and our focus on the customer. We saw these efforts continue to pay off in the third quarter of 2020.”