Academy Sports + Outdoors saw year-over-year net sales jump 39.1 percent to a first-quarter record $1.58 billion, with those sales also growing 46.8 percent on a two-year basis. With $177.8 million in quarterly profits, the retailer is feeling optimistic about its 2021 comparable sales and earnings outlook.
In a Nutshell: For the 2021 fiscal year, the sporting goods retailer adjusted expected comparable sales to see anywhere between 6 percent and 9 percent growth, well ahead of prior estimates ranging from a 2 percent loss to a 2 percent gain.
Net income is expected to come in between $400 million and $435 million, instead of initial estimates of $265 million to $290 million. With that, projected diluted earnings per share is $4.15 to $4.50, up from the anticipated $2.70 to $2.95 per share.
For the first quarter, apparel and footwear both drove high double-digit comps as Academy’s two strongest divisions. Apparel sales were up 80 percent versus 2020 and up 38 percent from 2019, while footwear was up 58 percent versus 2020 and up 23 percent over 2019.
Total inventories came in at $1.08 billion, up 6.7 percent from $1.01 billion from the year-ago quarter, and up 9.2 percent from the previous quarter.
Entering the first quarter, inventories were down nearly 10 percent year-over-year, so the retailer managed to procure enough goods to not only cater to shopper demands amid supply chain headwinds, but also set them up for the summer months, chief merchandising officer Steve Lawrence said in an earnings call.
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Academy Sports + Outdoors CEO Ken Hicks told Wall Street analysts that the company had an “acceptable level” of inventory, but noted room for improvement.
“We are not back to where … we want to be,” Hicks said. “We are probably still about $100 million short. But overall, we are in a reasonable position.”
However, Academy praised its vendor base for supporting the company’s growth, noting how the retailer’s strengthening performance has helped to attract high-quality partners. “That’s certainly unlocked a lot of doors for vendors with us,” said chief merchandising officer Steve Lawrence. “And I would say that our partnership is probably the best that it’s ever been. We see this manifested in a couple of different ways. From an availability of product perspective, we’re getting better product offerings from our vendors. We’re getting new brands that are coming into the space for us. We’re seeing the vendors want to invest mutually in building a better in-store presentation along with a better digital footprint on our site.”
On top of that, Lawrence added, Academy is also “getting better allocation of inventories.”
“That certainly helped us build our inventories up this year, and in some cases, we’re getting better terms,” he added. “So I would certainly say that’s been a pretty big impact of the performance.”
Gross profit increased 89.2 percent to $563.7 million, the highest quarter for the metric in the retailer’s history. The gross margin increased 950 basis points (9.5 percentage points) to 35.7 percent. This growth was primarily driven by improved merchandise margins from a favorable mix shift, higher average unit retails, fewer promotions and less clearance activity.
“The supply situation has been and probably will continue to be challenged,” Hicks said. “Historically, as a company, we would be dependent on one element to drive the business. That is not the case now. Our strong performers were footwear and apparel. And we did have good performance in outdoor, but it did not overwhelm [the product mix].”
Hicks also said Academy was committed to opening eight to 10 new stores next year, but could accelerate store openings in the following years. Although the sporting goods retailer currently has 259 stores across 16 states, it identified 885 potential new locations when it went public in September.
The company’s cash and cash equivalents totaled $593.3 million and no amounts were drawn on its credit facility. During the first quarter, net cash provided by operating activities was $219.2 million, compared to $90.8 million.
Academy Sports + Outdoors also has reduced its net debt by 84 percent compared to last year, a decrease of more than $1 billion, according to chief financial officer Michael Mullican.
Net Sales: Net sales at Academy increased 39.1 percent to a first quarter record $1.58 billion from the prior-year quarter’s total of $1.14 billion. On a two-year basis, sales grew 46.8 percent.
Comparable sales increased 38.9 percent year over year. The growth was driven by continued strong, double-digit consumer demand across all product categories, notably in apparel, footwear and team sports.
E-commerce sales declined 21 percent, as the website saw 405 percent growth in the first quarter of 2020. Over the last two years, e-commerce sales have increased 300 percent during the first quarter, with sales penetration rates increasing to 7.4 percent versus 2.8 percent.
Net Earnings: Net income was $177.8 million compared to a loss of $10 million in the first quarter of 2020. Diluted earnings per share were $1.84 compared to a loss of 14 cents in the prior-year quarter.
Pro forma adjusted net income, which excludes the impact of certain non-cash and extraordinary items, increased from approximately $400,000 to $182.5 million. Pro forma diluted earnings per share were $1.89 compared to 1 cent per share in the 2020 first quarter.
CEO’s Take: “I will tell you that within the supply chain right now, and you have probably heard this from everybody, there probably is not an element of it that’s not under pressure, starting from overseas, to the docks overseas to the ships, to the truckers here,” Hicks said. “Our team is working hard to manage the cost as best as we can within the current environment. And we also are looking at other areas at this point to offset how we can do that.”
Hicks said that pay-for-performance incentive programs in Academy’s distribution centers have boosted productivity and helped offset some supply chain costs.