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Academy Sports + Outdoors Reports Second Quarter 2023 Results

August 31, 2023 8:00 AM EDT

Second Quarter GAAP Diluted EPS of $2.01, or $2.09 Adjusted Diluted EPS

Net Sales Decline (6.2)%; Comparable Sales Decline (7.5)%

Gross Margin Rate Improves 30 Basis Points to 35.6%

Returned $114 Million to Shareholders Through Repurchases & Dividends

KATY, Texas, Aug. 31, 2023 (GLOBE NEWSWIRE) -- Academy Sports and Outdoors, Inc. (Nasdaq: ASO) ("Academy" or the "Company") today announced its financial results for the second quarter ended July 29, 2023.

"As we continue to move through a challenging economic environment, our priority remains to deliver great value to our customers with our broad and complete assortment and our engaging shopping experience. While sales in the second quarter were down versus last year, they steadily improved each month during the quarter, while also delivering a solid earnings performance," said Chief Executive Officer, Steve Lawrence. "The team is working hard on thoughtfully managing through our short-term challenges and remains focused on delivering against our long range plan objectives. Moving forward, we believe that Academy is well positioned to continue to capture market share as a leader in the sports and outdoors space. We are planting the seeds for future growth by opening 11-12 new stores this Fall, building out our omnichannel capabilities and expanding our portfolio of new and exciting brands that resonate with our core customer.”

Second Quarter Operating Results
13 Weeks EndedChange
($ in millions, except per share data)July 29, 2023July 30, 2022%
Net Sales$1,583.1  $1,686.9  (6.2)%
Comparable Sales (7.5)% (6.0)% 
Income before income tax$203.3  $247.0  (17.7)%
Net Income$157.1  $188.8  (16.8)%
Adjusted net income (1)$163.6  $193.5  (15.5)%
Earnings per common share, diluted$2.01  $2.22  (9.5)%
Adjusted earnings per common share, diluted (1)$2.09  $2.28  (8.3)%


Year-to-Date Operating Results
26 Weeks EndedChange
($ in millions, except per share data)July 29, 2023July 30, 2022%
Net Sales$2,966.7  $3,154.6  (6.0)%
Comparable Sales (7.4)% (6.7)% 
Income before income tax$322.0  $442.3  (27.2)%
Net Income$251.0  $338.6  (25.9)%
Adjusted net income (1)$266.6  $346.0  (22.9)%
Earnings per common share, diluted$3.19  $3.90  (18.2)%
Adjusted earnings per common share, diluted (1)$3.39  $3.99  (15.0)%

(1) Adjusted net income and Adjusted earnings per common share, diluted, are non-GAAP measures. See "Non-GAAP Measures" and "Reconciliations of GAAP to Non-GAAP Financial Measures" below for reconciliations of non-GAAP financial measures to their most directly comparable GAAP financial measures.


  As ofChange
Balance Sheet ($ in millions)July 29, 2023July 30, 2022%
Cash and cash equivalents$311.3  $399.9  (22.2)%
Merchandise inventories, net$1,309.0  $1,304.6  0.3 %
Long-term debt, net$583.7  $683.1  (14.6)%


  26 Weeks EndedChange
Capital Allocation ($ in millions)July 29, 2023July 30, 2022%
Share repurchases$157.6  $288.6  (45.4)%
Dividends paid$13.8  $12.8  7.8 %


Subsequent to the end of the second quarter, on August 30, 2023, Academy announced that its Board of Directors ("Board") declared a quarterly cash dividend of $0.09 per share of common stock. The dividend is payable on October 11, 2023, to stockholders of record as of the close of business on September 13, 2023.

Michael Mullican, President, said, "In the second quarter we made significant progress in aligning our expenses with our current sales trends. Our operating margin improved 420 basis points from the first quarter, driven by higher gross margin, sequential improvement in shrink as a rate to sales and disciplined expense management. We also continued to execute our capital allocation plan in the quarter, while self-funding our long-term growth initiatives."

New Store Openings
During the second quarter, Academy opened one new store, bringing the total quarter-end number of stores to 270 stores. The Company expects to open six stores in the third quarter and five to six in the fourth quarter and a total of 120 to 140 stores over the five fiscal year period ending with fiscal 2027.

2023 Outlook
Academy is reiterating its previous sales and net income guidance for fiscal 2023, while updating its EPS forecast to reflect the share repurchase activity completed in the second quarter.

 Previous GuidanceUpdated Guidance
(in millions, except per share data)Low end High endLow endHigh end
Net Sales$6,175.0  $6,365.0   no change   no change  
           
Comparable Sales (7.5)% (4.5)% no change   no change  
           
Gross Margin Rate 34.0 % 34.4 % no change   no change  
           
Income Before Income Taxes$675  $750   no change   no change  
           
Net Income$520  $575   no change   no change  
     
Earnings per Common Share, Diluted$6.50  $7.20  $6.65  $7.35  
     
Adjusted Earnings per Common Share, Diluted (1)$6.80  $7.50  $6.95  $7.65  
     
Diluted Weighted Average Common Shares 79.7   79.7   78.1   78.1  
     
Capital Expenditures$200  $250   no change   no change  
           
Adjusted Free Cash Flow (1)$400  $450   no change   no change  

(1) Adjusted earnings per common share, diluted, and adjusted free cash flow are non-GAAP measures. See "Non-GAAP Measures" and "Reconciliations of GAAP to Non-GAAP Financial Measures" below for reconciliations of non-GAAP financial measures to their most directly comparable GAAP financial measures.


The earnings per common share guidance reflects a tax rate of approximately 23.0% and does not include any potential future share repurchases.

Conference Call Info
Academy will host a conference call today at 10:00 a.m. Eastern Time to discuss its financial results. Listeners may access the call by dialing 1-877-407-3982 (U.S.) or 1-201-493-6780 (International). The passcode is 13740446. A webcast of the call can be accessed at investors.academy.com. A telephonic replay of the conference call will be available for approximately 30 days, by dialing 1-844-512-2921 (U.S.) or 1-412-317-6671 (International) and entering passcode 13738834. An archive of the webcast will be available at investors.academy.com for 30 days.

About Academy Sports + Outdoors
Academy is a leading full-line sporting goods and outdoor recreation retailer in the United States. Originally founded in 1938 as a family business in Texas, Academy has grown to 270 stores across 18 states as of quarter end. Academy’s mission is to provide “Fun for All” and Academy fulfills this mission with a localized merchandising strategy and value proposition that strongly connects with a broad range of consumers. Academy’s product assortment focuses on key categories of outdoor, apparel, footwear and sports & recreation through both leading national brands and a portfolio of private label brands.

Non-GAAP Measures
Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Adjusted Earnings per Common Share, and Adjusted Free Cash Flow have been presented in this press release as supplemental measures of financial performance that are not required by, or presented in accordance with, generally accepted accounting principles (“GAAP”). The Company believes that the presentation of these non-GAAP measures is useful to investors as it provides additional information on comparisons between periods by excluding certain items that affect overall comparability. The Company uses these non-GAAP financial measures for business planning purposes, to consider underlying trends of its business, and in measuring its performance relative to others in the market, and believes presenting these measures also provides information to investors and others for understanding and evaluating trends in the Company’s operating results or measuring performance in the same manner as the Company’s management. Non-GAAP financial measures should be considered in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP. The calculation of these non-GAAP financial measures may differ from similar measures reported by other companies and may not be comparable to other similarly titled measures. For additional information on these non-GAAP financial measures, please see our Annual Report for the fiscal year ended January 28, 2023 (the "Annual Report"), which may be updated from time to time in our periodic filings with the Securities and Exchange Commission (the "SEC"), which are accessible on the SEC's website at www.sec.gov.

See “Reconciliations of GAAP to Non-GAAP Financial Measures” below for reconciliations of non-GAAP financial measures used in this press release to their most directly comparable GAAP financial measures.

Forward Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on Academy’s current expectations and are not guarantees of future performance. forward-looking statements may incorporate words such as “believe,” “expect,” “forward,” “ahead,” “opportunities,” “plans,” “priorities,” “goals,” “future,” “short/long term,” “will,” “should,” or the negative version of these words or other comparable words. The forward-looking statements include, among other things, statements regarding the Company’s fiscal 2023 outlook, the Company’s strategic plans and financial objectives, growth of the Company’s business and operations, the Company’s payment of dividends and declaration of future dividends, including the timing and amount thereof, share repurchases by the Company, the Company's expectations regarding its future performance, and future financial condition, and other such matters, and are subject to various risks, uncertainties, assumptions, or changes in circumstances that are difficult to predict or quantify. Actual results may differ materially from these expectations due to changes in global, regional, or local economic, business, competitive, market, regulatory and other factors that could affect overall consumer spending or our industry, including the possible effects of ongoing macroeconomic challenges, inflation and increases in interest rates, or changes to the financial health of our customers, many of which are beyond Academy's control. These and other important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in Academy's filings with the SEC, including the Annual Report and the Company’s Quarterly Report for the thirteen and twenty-six weeks ended July 29, 2023, under the caption "Risk Factors," as may be updated from time to time in our periodic filings with the SEC. Any forward-looking statement in this press release speaks only as of the date of this release. Academy undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.

Investor Contact Media Contact
Matt Hodges Elise Hasbrook
VP, Investor Relations VP, Communications
281-646-5362 281-944-6041
[email protected] [email protected]


ACADEMY SPORTS AND OUTDOORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands, except per share data)
  
 Thirteen Weeks Ended
 July 29, 2023 Percentage of
Sales
(1)
 July 30, 2022 Percentage of
Sales
(1)
Net sales$1,583,077  100.0 % $1,686,915  100.0 %
Cost of goods sold 1,019,631  64.4 %  1,090,852  64.7 %
Gross margin 563,446  35.6 %  596,063  35.3 %
Selling, general and administrative expenses 352,483  22.3 %  339,329  20.1 %
Operating income 210,963  13.3 %  256,734  15.2 %
Interest expense, net 11,313  0.7 %  11,157  0.7 %
Other (income), net (3,623) (0.2)%  (1,441) (0.1)%
Income before income taxes 203,273  12.8 %  247,018  14.6 %
Income tax expense 46,198  2.9 %  58,217  3.5 %
Net income$157,075  9.9 % $188,801  11.2 %
        
Earnings Per Common Share:       
Basic$2.06    $2.28   
Diluted$2.01    $2.22   
        
Weighted Average Common Shares Outstanding:       
Basic 76,104     82,960   
Diluted 78,091     84,906   

(1) Column may not add due to rounding


ACADEMY SPORTS AND OUTDOORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands, except per share data)
 
 Twenty-Six Weeks Ended
 July 29, 2023 Percentage of
Sales
(1)
 July 30, 2022 Percentage of
Sales
(1)
Net sales$2,966,686  100.0 % $3,154,645  100.0 %
Cost of goods sold 1,936,125  65.3 %  2,037,158  64.6 %
Gross margin 1,030,561  34.7 %  1,117,487  35.4 %
Selling, general and administrative expenses 693,402  23.4 %  655,260  20.8 %
Operating income 337,159  11.4 %  462,227  14.7 %
Interest expense, net 22,543  0.8 %  22,077  0.7 %
Other (income), net (7,336) (0.2)%  (2,138) (0.1)%
Income before income taxes 321,952  10.9 %  442,288  14.0 %
Income tax expense 70,907  2.4 %  103,681  3.3 %
Net income$251,045  8.5 % $338,607  10.7 %
        
Earnings Per Common Share:       
Basic$3.28    $3.99   
Diluted$3.19    $3.90   
        
Weighted Average Common Shares Outstanding:       
Basic 76,483     84,809   
Diluted 78,735     86,792   

(1) Column may not add due to rounding


 

ACADEMY SPORTS AND OUTDOORS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
 
  July 29, 2023 January 28, 2023 July 30, 2022
ASSETS      
CURRENT ASSETS:      
Cash and cash equivalents $311,336  $337,145  $399,857 
Accounts receivable - less allowance for doubtful accounts of $2,534, $2,004 and $1,143, respectively  14,625   16,503   14,521 
Merchandise inventories, net  1,309,033   1,283,517   1,304,556 
Prepaid expenses and other current assets  80,490   47,747   46,448 
Assets held for sale     1,763   1,763 
Total current assets  1,715,484   1,686,675   1,767,145 
       
PROPERTY AND EQUIPMENT, NET  404,967   351,424   350,628 
RIGHT-OF-USE ASSETS  1,091,145   1,100,085   1,087,085 
TRADE NAME  577,929   577,716   577,299 
GOODWILL  861,920   861,920   861,920 
OTHER NONCURRENT ASSETS  23,971   17,619   9,892 
Total assets $4,675,416  $4,595,439  $4,653,969 
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
CURRENT LIABILITIES:      
Accounts payable $669,832  $686,472  $778,016 
Accrued expenses and other current liabilities  234,011   240,169   251,569 
Current lease liabilities  112,936   109,075   87,042 
Current maturities of long-term debt  3,000   3,000   3,000 
Total current liabilities  1,019,779   1,038,716   1,119,627 
       
LONG-TERM DEBT, NET  583,729   584,456   683,065 
LONG-TERM LEASE LIABILITIES  1,060,996   1,072,192   1,081,790 
DEFERRED TAX LIABILITIES, NET  260,909   259,043   235,187 
OTHER LONG-TERM LIABILITIES  11,964   12,726   13,029 
Total liabilities  2,937,377   2,967,133   3,132,698 
       
COMMITMENTS AND CONTINGENCIES      
       
STOCKHOLDERS' EQUITY :      
Preferred stock, $0.01 par value, authorized 50,000,000 shares; none issued and outstanding         
Common stock, $0.01 par value, authorized 300,000,000 shares; 74,845,563; 76,711,720 and 79,725,034 issued and outstanding as of July 29, 2023, January 28, 2023, and July 30, 2022, respectively.  748   767   797 
Additional paid-in capital  236,789   216,209   196,510 
Retained earnings  1,500,502   1,411,330   1,323,964 
Stockholders' equity  1,738,039   1,628,306   1,521,271 
Total liabilities and stockholders' equity $4,675,416  $4,595,439  $4,653,969 


ACADEMY SPORTS AND OUTDOORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
 
  Twenty-Six Weeks Ended
  July 29, 2023 July 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income $251,045  $338,607 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  52,021   51,852 
Non-cash lease expense  1,604   548 
Equity compensation  19,883   9,657 
Amortization of deferred loan and other costs  1,348   1,552 
Deferred income taxes  1,866   17,976 
Gain on disposal of property and equipment  (361)   
Changes in assets and liabilities:    
Accounts receivable, net  1,878   5,197 
Merchandise inventories, net  (25,516)  (132,748)
Prepaid expenses and other current assets  (37,559)  (9,987)
Other noncurrent assets  (6,924)  (5,788)
Accounts payable  (12,446)  31,596 
Accrued expenses and other current liabilities  (3,316)  (47,447)
Income taxes payable  805   (3,219)
Other long-term liabilities  (762)  610 
   Net cash provided by operating activities  243,566   258,406 
     
CASH FLOWS FROM INVESTING ACTIVITIES:    
Capital expenditures  (109,759)  (48,050)
Purchases of intangible assets  (213)  (84)
Proceeds from the sale of property and equipment  2,126    
   Net cash used in investing activities  (107,846)  (48,134)
     
CASH FLOWS FROM FINANCING ACTIVITIES:    
Repayment of Term Loan  (1,500)  (1,500)
Proceeds from exercise of stock options  11,639   4,683 
Proceeds from issuance of common stock under employee stock purchase program  2,887   2,797 
Taxes paid related to net share settlement of equity awards  (4,283)  (974)
Repurchase of common stock for retirement  (156,447)  (288,612)
Dividends paid  (13,825)  (12,807)
   Net cash used in financing activities  (161,529)  (296,413)
     
NET DECREASE IN CASH AND CASH EQUIVALENTS  (25,809)  (86,141)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD  337,145   485,998 
CASH AND CASH EQUIVALENTS AT END OF PERIOD $311,336  $399,857 


ACADEMY SPORTS AND OUTDOORS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)

Adjusted EBITDA and Adjusted EBIT
We define “Adjusted EBITDA” as net income (loss) before interest expense, net, income tax expense and depreciation, amortization, and impairment, further adjusted to exclude costs such as equity compensation expense, (gain) loss on early retirement of debt, net, payroll taxes associated with a vesting event, as a result of a secondary offering, of certain time and performance-based equity awards, which occurred in May 2021 (the “2021 Vesting Event”) and other adjustments. We define “Adjusted EBIT” as net income (loss) before interest expense, net, and income tax expense, further adjusted to exclude costs such as equity compensation expense, (gain) loss on early retirement of debt, net, payroll taxes associated with the 2021 Vesting Event and other adjustments. We describe these adjustments reconciling net income (loss) to Adjusted EBITDA and Adjusted EBIT in the following table (amounts in thousands):

  Thirteen Weeks Ended Twenty-Six Weeks Ended
  July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022
Net income $157,075  $188,801  $251,045  $338,607 
Interest expense, net  11,313   11,157   22,543   22,077 
Income tax expense  46,198   58,217   70,907   103,681 
Depreciation and amortization  25,760   26,274   52,021   51,852 
Equity compensation (a)  8,501   6,158   19,883   9,657 
Adjusted EBITDA (b) $248,847  $290,607  $416,399  $525,874 
Less: Depreciation and amortization  (25,760)  (26,274)  (52,021)  (51,852)
Adjusted EBIT (b) $223,087  $264,333  $364,378  $474,022 
         
(a) Represents non-cash charges related to equity-based compensation, which vary from period to period depending on certain factors such as timing and valuation of awards, achievement of performance targets and equity award forfeitures.
(b) Effective January 28, 2023, we no longer exclude pre-opening expenses from our computations of Adjusted EBITDA and Adjusted EBIT. Adjusted EBITDA and Adjusted EBIT for the thirteen and twenty-six weeks ended July 30, 2022 have been revised to the current period computation methodology.


Adjusted Net Income and Adjusted Earnings Per Common Share

We define “Adjusted Net Income” as net income (loss), plus costs such as equity compensation expense, (gain) loss on early retirement of debt, net, payroll taxes associated with the 2021 Vesting Event and other adjustments, less the tax effect of these adjustments. We define “Adjusted Earnings per Common Share, Basic” as Adjusted Net Income divided by the basic weighted average common shares outstanding during the period and “Adjusted Earnings per Common Share, Diluted” as Adjusted Net Income divided by the diluted weighted average common shares outstanding during the period. We describe these adjustments reconciling net income (loss) to Adjusted Net Income, and Adjusted Earnings Per Common Share in the following table (amounts in thousands, except per share data):

  Thirteen Weeks Ended Twenty-Six Weeks Ended
  July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022
Net income $157,075  $188,801  $251,045  $338,607 
Equity compensation (a)  8,501   6,158   19,883   9,657 
Tax effects of these adjustments (b)  (2,008)  (1,449)  (4,378)  (2,265)
Adjusted Net Income (c) $163,568  $193,510  $266,550  $345,999 
         
Earnings per common share:        
Basic $2.06  $2.28  $3.28  $3.99 
Diluted $2.01  $2.22  $3.19  $3.90 
Adjusted Earnings per Common Share:        
Basic $2.15  $2.33  $3.49  $4.08 
Diluted $2.09  $2.28  $3.39  $3.99 
Weighted average common shares outstanding:        
Basic  76,104   82,960   76,483   84,809 
Diluted  78,091   84,906   78,735   86,792 
         
 
(a) Represents non-cash charges related to equity-based compensation, which vary from period to period depending on certain factors such as timing and valuation of awards, achievement of performance targets and equity award forfeitures.
(b) For the thirteen and twenty-six weeks ended July 29, 2023 and July 30, 2022, this represents the estimated tax effect (by using the projected full year tax rates for the respective years) of the total adjustments made to arrive at Adjusted Net Income.
(c) Effective January 28, 2023, we no longer exclude pre-opening expenses from our computations of Adjusted Net Income. Adjusted Net Income for the thirteen and twenty-six weeks ended July 30, 2022 has been revised to the current period computation methodology.


GAAP to Adjusted Earnings Per Common Share, Diluted, Guidance Reconciliation (amounts in millions, except per share data)

  Low Range* High Range*
  Fiscal Year Ending
February 3, 2024
 Fiscal Year Ending
February 3, 2024
Net Income $520  $575 
Equity compensation (a)  33   33 
Tax effects of these adjustments (a)  (8)  (8)
Adjusted Net Income $545  $600 
     
Earnings Per Common Share, Diluted $6.65  $7.35 
Equity compensation (a)  0.41   0.41 
Tax effects of these adjustments (a)  (0.11)  (0.11)
Adjusted Earnings per Common Share, Diluted $6.95  $7.65 
     
     
* Amounts presented have been rounded.
(a) Adjustments include non-cash charges related to equity-based compensation (as defined above), which may vary from period to period. The tax effect of these adjustments is determined by using the projected full year tax rate for the fiscal year.


Adjusted Free Cash Flow

We define “Adjusted Free Cash Flow” as net cash provided by (used in) operating activities less net cash used in investing activities. We describe these adjustments reconciling net cash provided by operating activities to Adjusted Free Cash Flow in the following table (amounts in thousands):

  Thirteen Weeks Ended Twenty-Six Weeks Ended
  July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022
Net cash provided by operating activities $191,431  $161,309  $243,566  $258,406 
Net cash used in investing activities  (67,299)  (30,822)  (107,846)  (48,134)
Adjusted Free Cash Flow $124,132  $130,487  $135,720  $210,272 


Adjusted Free Cash Flow, Guidance Reconciliation (amounts in millions)

  Low Range* High Range*
  Fiscal Year Ending
February 3, 2024
 Fiscal Year Ending
February 3, 2024
Net cash provided by operating activities $600  $700 
Net cash used in investing activities  (200)  (250)
Adjusted Free Cash Flow $400  $450 
     
* Amounts presented have been rounded.

 




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