Barclays starts coverage on Academy Sports at EW rating

Investing.com -- Barclays initiated coverage on Academy Sports and Outdoors with an Equal Weight rating and a price target of $51, saying the retailer’s expansion plans and private-label strength are offset by inventory challenges and a tough competitive backdrop.

The brokerage said Academy’s strategy to grow from a regional to a national chain through around 160 new store openings over the next four years, along with a portfolio of private-label brands that make up nearly a quarter of sales, position it well to capture long-term industry tailwinds.

But it flagged risks from “inventory growth outpacing sales growth, challenges elevating the footwear brand mix, significant national competition, and sector-wide macro and tariff uncertainty.”

Academy’s sales fell to $5.9 billion in fiscal 2024 from $6.8 billion in 2021 as pandemic-era gains faded. Comparable sales returned to modest growth of 0.2% in the second quarter of 2025 after nine straight quarters of declines.

“This is an encouraging change in trend,” Barclays wrote, but added it wants to see inventory levels move more in line with sales and better visibility on how price increases across U.S. retail in 2026 will affect demand.

Margins have also narrowed due to tariffs and higher investments. Gross margin slipped to 33.9% in FY24 from a peak of 34.7% in FY21, while adjusted EBIT margin fell to 9.5% from 14.2%. Barclays expects FY25 to mark the low point for operating margins.

The bank said evidence of sustained sales acceleration, margin improvement and operating leverage will be key to driving a re-rating toward Academy’s long-term profitability targets.

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