Academy Sports and Outdoors, Inc. (Nasdaq: ASO) (“Academy” or the “Company”) today announced its financial results for the third quarter ended October 30, 2021. Unless otherwise stated, the comparisons relate to the same period in the previous fiscal year.
Results for the third quarter of 2021
Third quarter net sales rose 18.1% to a record $ 1.59 billion in the third quarter. Compared to the third quarter of 2019, sales increased by 39.1%. The comparable sales were 17.9% compared to 16.5% in the previous year, which makes it the ninth quarter in a row with positive comparable sales. The company continued to benefit from strategic initiatives to improve merchandise planning and distribution, operations, customer service and the supply chain. As a result of these measures and the continued strong consumer demand for sports and outdoor products, all four product areas recorded significant growth. E-commerce sales increased 25.9% compared to the same quarter of the previous year and 146.6% compared to the third quarter of 2019.
The gross margin increased 27.3% to $ 560.8 million. The gross margin improved 250 basis points to 35.2%. This growth was primarily driven by higher margins due to effective price and advertising management, a favorable shift in the product mix and fewer sell-offs.
Selling, general, and administrative expenses (“SG&A”) were 21.6% of sales, down 500 basis points. Compared to Q3 2020 adjusted SG&A, which excludes certain IPO costs, SG&A achieved a leverage of 230 basis points, mainly due to human resource management, marketing cost savings, and leverage from the growth of comparable sales.
Income before taxes increased 251.6% to $ 205.3 million compared to $ 58.4 million.
GAAP net income was $ 161.3 million versus $ 59.6 million. Diluted earnings per share rose 132.4% to $ 1.72, compared to $ 0.74 per share last year. Adjusted pro forma net income, which excludes the effect of certain non-cash and exceptional items, increased 122.6% to $ 164.1 million. Pro forma diluted earnings per share rose 92.3% to $ 1.75 compared to $ 0.91 per share.
“The Academy Sports + Outdoors team has again done a great job delivering our ninth straight quarterly revenue and profit increase,” said Ken Hicks, chairman, president and chief executive officer. “We are confident that our strong range and value proposition combined with our great store service, improved omnichannel capabilities and a stable supply chain will enable Academy to achieve great results this Christmas season and beyond.”
Results since the beginning of 2021
Year-to-date net sales rose 21.3% to $ 4.96 billion, while like-for-like sales rose 21.2%. Year-to-date sales increased 43.5% compared to 2019. Ecommerce sales decreased 1.5% from 2020 and increased 203.9% from 2019.
The gross margin increased 43.1% to $ 1.77 billion. The gross margin improved 540 basis points to 35.6%. This growth was mainly driven by higher trade margins from effective price and advertising management, strong inventory productivity, greater product localization, fewer sell-offs and a favorable product mix relocation.
Gross profit and spending leverage growth of 210 basis points increased profit before tax by 208.5% to $ 671.1 million compared to $ 217.6 million.
GAAP net income increased 143.8% to $ 529.6 million compared to $ 217.2 million. Diluted earnings per share were $ 5.55 compared to $ 2.82 per share a year ago. Adjusted pro forma net income, which excludes the effect of certain non-cash and exceptional items, increased 173.8% to $ 571.2 million. Pro forma diluted earnings per share were $ 5.98 compared to $ 2.70 per share a year ago.
Balance sheet update
At the end of the third quarter, the company had cash and cash equivalents of $ 401.3 million and the credit facility had no outstanding balance. Adjusted free cash flow was $ 84.4 million. Inventory was $ 1.3 billion, up 22.4% from the year-ago quarter and 18.9% more than the second quarter of 2021.
As previously reported, Academy’s largest shareholder (“KKR”) sold its remaining stake in the company on September 14, 2021. During that event, Academy bought 4.5 million shares for approximately $ 200 million. In addition, the company bought 1.2 million shares for $ 50 million in the open market during the quarter. Since the beginning of the year, the company has repurchased and canceled 8.9 million common shares for approximately $ 350 million. As of October 31, 2021, the company had approximately $ 254 million remaining as part of its share buyback program.
Outlook for 2021
Michael Mullican, Executive Vice President and Chief Financial Officer, said, “The continued successful execution of our strategic priorities has enabled us to have another period of record sales and profitability. In addition, the strength of the entire Academy team was evident, as we were able to expand our existing position in a challenging environment. As our initiatives continue to mature, we believe the best days at the Academy are yet to come. In view of these extraordinary results and expectations, we are raising our forecast for the year. “
The company is increasing its guidance for fiscal year 2021 based on strong third quarter performance, dynamic consumer trends, and current visibility. The new instructions are as follows:
|% Change (towards the middle)|
|Updated guidance for fiscal year 2021 (e)||2020||2019||vs. 2020||vs. 2019|
|(in millions, excluding amounts per share)||Low end||High-quality|
|Net sales||$ 6,675||$ 6,740||$ 5,689||$ 4,830||18%||39%|
|Pre-tax income||$ 814||$ 827||$ 339||$ 123||142%||567%|
|Net result *||$ 638||$ 647||$ 309||$ 120||108%||435%|
|GAAP earnings per share diluted||$ 6.75||$ 6.85||$ 3.79||$ 1.60||79%||325%|
|Non-GAAP earnings per share diluted||$ 7.21||$ 7.31||$ 3.83||$ 1.02||90%||612%|
|Diluted weighted average number of shares outstanding||94,500||94,500||81,431||74,795|
* Prior to October 1, 2020, the company was treated as a flow-through company for US income tax purposes and no federal income tax was recorded.
The earnings per share estimate reflects a tax rate of 22.0% and does not include potential future share buybacks.
Conference call information
The Academy will host a conference call today at 11:00 am Eastern Time to discuss its financial results. Listeners can access the call by dialing 1-877-407-3982 (US) or 1-201-493-6780 (International). The passcode is 13725072. A webcast of the call is available at investoren.academy.com.
A telephone recording of the conference call will be available for approximately 30 days by dialing 1-844-512-2921 (US) or 1-412-317-6671 (International) and entering the passcode 13725072. An archive of the webcast will be available for 30 days at investor.academy.com.
About Academy Sports + Outdoor
Academy is a leading retailer of sporting goods and outdoor recreation in the United States. Originally founded as a family business in Texas in 1938, Academy has grown to 259 stores in 16 contiguous states. Academy’s mission is to provide “Fun For All” and Academy fulfills that mission with a localized merchandising strategy and value proposition that creates a strong connection with a wide range of consumers. The Academy’s product range focuses on the key categories of outdoor, apparel, footwear and sports & leisure through both leading national brands and a portfolio of 20 private labels that go well beyond the traditional sporting goods and apparel offerings.
All references to “Academy”, “Academy Sports + Outdoors”, “we”, “us”, “our” or the “Company” in this press release refer to (1) prior to October 1, 2020 (the “IPO- Prices Date “), New Academy Holding Company, LLC, a Delaware limited liability company (” NAHC “) and the former parent company of our business, and its consolidated subsidiaries; and (2) on and after the IPO date Academy Sports and Outdoors, Inc., a Delaware corporation (“ASO, Inc.”) and the current parent company of our business, and its consolidated subsidiaries.
On the day of going public, we completed a series of reorganization transactions (the “Reorganization Transactions”) that resulted in NAHC being incorporated into ASO, Inc. by its members and becoming a wholly owned subsidiary of ASO, Inc. and common stock of ASO , Inc., issued to then-existing NAHC members for every 3.15 NAHC membership units paid into ASO, Inc. (the “Contribution Ratio”). Unless otherwise stated, the information in this press release has been adjusted to affect the contribution rate retrospectively.
Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income (Loss), Adjusted Pro Forma Net Income (Loss), Adjusted Pro Forma Earnings per Share, Adjusted Selling, General and Administrative Expenses, and Adjusted Free Cash Flow were presented in addition in this press release Financial performance measures that are not required or presented in accordance with generally accepted accounting principles (“GAAP”). These non-GAAP measures have limitations as analysis tools. Information about these limitations, as well as information about why management believes these non-GAAP measures are useful, can be found in our 2020 annual report filed on April 7, 2021 (the “Annual Report”) from time to time Time will be updated in our regular filings with the Securities and Exchange Commission (the “SEC”) which are available on the SEC’s website at www.sec.gov.
We compensate for these limitations by primarily relying on our GAAP results and using these non-GAAP metrics in addition.
See “Reconciliation from Non-GAAP to GAAP Financial Measures” below for the reconciliation of non-GAAP financial measures used in this press release with their most directly comparable GAAP financial measures.