Academy Sports Keeps Building Through a Flat Quarter

The comp number was the one blemish. Academy Sports + Outdoors reported second-quarter results on September 9, and same-store sales slipped 0.4%. Wall Street shrugged it off, and for good reason: nearly everything else in the report pointed the right way, and the stock jumped more than 7% on the day.

Net sales for the 13 weeks ended August 1 rose 3% to $1.65 billion, carried almost entirely by new stores rather than existing ones. Adjusted earnings per share climbed 19.1% to $2.31. Management felt good enough about the back half to raise its full-year adjusted EPS guidance to a range of $6.50 to $6.90, up from $6.40 to $6.80, while holding the sales outlook steady at $6.23 billion to $6.36 billion.

The growth story here is square footage. Academy ended the quarter with 327 stores across 21 states after opening three locations, one in Altoona, Pennsylvania, and two in Tennessee (Morristown and North Knoxville). Six have opened so far this fiscal year, and the company reaffirmed its plan for 22 to 24 in total, unchanged from last quarter.

The back half gets busy. Eleven stores are slated for the third quarter across six states, a list that runs from Kerrville, Celina, Granbury, Lacy Lakeview and Fairview in Texas to Fayetteville and Statesboro, Georgia; McAlester, Oklahoma; Millington, Tennessee; Roanoke, Virginia; and St. Clairsville, Ohio, at the northern edge of the chain's map. The remaining openings land in November. The company expects the Q3 stores to bring more than 650 jobs with them.

What's notable is where these stores are going. Not into major metros, and mostly not into new territory. "We're heavily weighted to those types of markets... mid-sized, smaller markets in our legacy or existing footprint, underserved customer, low competitive density," CEO Steve Lawrence told analysts on the earnings call.

The math behind that strategy is starting to show up in the numbers. New stores are comping positive in the mid-single digits while the chain overall sits slightly negative, and management says the 2024 and 2025 store classes are outperforming the first batch opened in 2022. By year-end, 63 stores from recent vintages will be in the comparable sales base, which should give the comp line some help it hasn't had.

The longer arc is the five-year plan Academy laid out in April: roughly 125 new stores, plus 30 to 40 remodels a year, funded by $200 million to $240 million in annual capital spending. That works out to unit growth of about 7% a year on the current base.

"Our strategic growth reflects both the strength of the business and our commitment to the families and communities we serve," said Eric Friederich, the company's senior vice president of retail operations, in announcing the third-quarter openings.

A retailer raising profit guidance in this consumer environment, with comps underwater, is essentially making a bet that its real estate engine matters more than its traffic. So far the market agrees.