Sporting goods retailer Academy Sports & Outdoor (NASDAQ:ASO) fell short of the market’s revenue expectations in Q1 CY2025, with sales flat year on year at $1.35 billion. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $6.12 billion at the midpoint. Its non-GAAP profit of $0.76 per share was 14.7% below analysts’ consensus estimates.
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Academy Sports (ASO) Q1 CY2025 Highlights:
- Revenue: $1.35 billion vs analyst estimates of $1.37 billion (flat year on year, 1.5% miss)
- Adjusted EPS: $0.76 vs analyst expectations of $0.89 (14.7% miss)
- Adjusted EBITDA: $109.8 million vs analyst estimates of $120.7 million (8.1% margin, 9.1% miss)
- The company dropped its revenue guidance for the full year to $6.12 billion at the midpoint from $6.18 billion, a 1% decrease
- Management lowered its full-year Adjusted EPS guidance to $5.85 at the midpoint, a 2.1% decrease
- Operating Margin: 5.1%, down from 7.5% in the same quarter last year
- Free Cash Flow Margin: 7.9%, down from 12.3% in the same quarter last year
- Locations: 303 at quarter end, up from 284 in the same quarter last year
- Same-Store Sales fell 3.7% year on year (-5.7% in the same quarter last year)
- Market Capitalization: $2.95 billion
“During the first quarter we saw continued progress across our strategic initiatives, including the opening of five new stores, and the biggest brand launch in the Company's history with the addition of the Jordan Brand,” said Steve Lawrence, Chief Executive Officer.
Company Overview
Founded in 1938 as a tire shop before expanding into fishing equipment, Academy Sports & Outdoor (NASDAQ:ASO) sells a broad selection of sporting goods but is still known for its outdoor activity merchandise.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
With $5.92 billion in revenue over the past 12 months, Academy Sports is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.
As you can see below, Academy Sports’s 3.8% annualized revenue growth over the last six years (we compare to 2019 to normalize for COVID-19 impacts) was sluggish.
This quarter, Academy Sports missed Wall Street’s estimates and reported a rather uninspiring 0.9% year-on-year revenue decline, generating $1.35 billion of revenue.
Looking ahead, sell-side analysts expect revenue to grow 5.2% over the next 12 months, similar to its six-year rate. This projection is noteworthy and implies its newer products will catalyze better top-line performance.
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Store Performance
Number of Stores
Academy Sports operated 303 locations in the latest quarter. It has opened new stores at a rapid clip over the last two years, averaging 5.3% annual growth, much faster than the broader consumer retail sector. This gives it a chance to become a large, scaled business over time.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
Same-Store Sales
The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales is an industry measure of whether revenue is growing at those existing stores and is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Academy Sports’s demand has been shrinking over the last two years as its same-store sales have averaged 5.4% annual declines. This performance is concerning - it shows Academy Sports artificially boosts its revenue by building new stores. We’d like to see a company’s same-store sales rise before it takes on the costly, capital-intensive endeavor of expanding its store base.
In the latest quarter, Academy Sports’s same-store sales fell by 3.7% year on year. This decrease represents a further deceleration from its historical levels. We hope the business can get back on track.
Key Takeaways from Academy Sports’s Q1 Results
It was encouraging to see Academy Sports beat analysts’ gross margin expectations this quarter. On the other hand, its revenue, EPS, and EBITDA missed and it lowered its full-year guidance. Overall, this was a softer quarter. The stock remained flat at $44.50 immediately following the results.
Is Academy Sports an attractive investment opportunity at the current price? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.