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 indicated, comparisons are to the same period in the prior fiscal year.
Third Quarter 2021 Results
For the third quarter, net sales increased 18.1% to a third quarter record of $1.59 billion. When compared to the third quarter of 2019, sales increased 39.1%. Comparable sales were 17.9% on top of 16.5% last year, making it the 9th consecutive quarter of positive comparable sales. The Company continued to benefit from the strategic initiatives implemented to improve merchandise planning and allocation, operations, customer service and supply chain. As a result of these actions and the continued strong consumer demand for sports and outdoors products, all four product divisions saw significant growth. E-commerce sales grew 25.9% compared to the prior year quarter and 146.6% compared to the third quarter of 2019.
Gross margin increased 27.3% to $560.8 million. The gross margin rate improved by 250 basis points to 35.2%. This growth was primarily driven by higher merchandise margins resulting from effective pricing and promotions management, a favorable product mix shift and fewer clearance sales.
Selling, general and administrative (“SG&A”) expenses were 21.6% of sales, a 500 basis point decrease. Compared to the third quarter of 2020 adjusted SG&A, which excludes certain initial public offering costs, SG&A leveraged 230 basis points, primarily attributable to workforce management, marketing cost efficiencies and leveraging expenses from the growth of comparable sales.
Pre-tax income increased 251.6% to $205.3 million compared to $58.4 million.
GAAP net income was $161.3 million compared to $59.6 million. Diluted earnings per share increased 132.4% to $1.72 compared to $0.74 per share last year. Pro forma adjusted net income, which excludes the impact of certain non-cash and extraordinary items, increased 122.6% to $164.1 million. Pro forma diluted earnings per share increased 92.3% to $1.75 compared to $0.91 per share.
“The Academy Sports + Outdoors team did a great job again delivering our 9th consecutive quarterly sales and profit increase,” said Ken Hicks, Chairman, President and Chief Executive Officer. “We are confident that our strong assortment and value offering, coupled with our great store service, enhanced omnichannel capabilities, and resilient supply chain will enable Academy to continue to achieve excellent results through this holiday season and beyond.”
Year-to-Date 2021 Results
Year-to-date, net sales increased 21.3% to $4.96 billion, while comparable sales increased 21.2%. Year-to-date sales grew 43.5% compared to 2019. E-commerce sales declined 1.5% versus 2020 and increased 203.9% compared to 2019.
Gross margin increased 43.1% to $1.77 billion. The gross margin rate improved by 540 basis points to 35.6%. This growth was primarily driven by higher merchandise margins resulting from effective pricing and promotions management, strong inventory productivity, greater product localization, fewer clearance sales and a favorable product mix shift.
The growth in gross profit and 210 basis points of expense leverage, resulted in a 208.5% increase in pre-tax income 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 in the prior year to date. Pro forma adjusted net income, which excludes the impact of certain non-cash and extraordinary items, increased 173.8% to $571.2 million. Pro forma diluted earnings per share were $5.98 compared to $2.70 per share in the prior year to date.
Balance Sheet Update
As of the end of the third quarter, the Company’s cash and cash equivalents totaled $401.3 million and the credit facility had no outstanding balance. Adjusted free cash flow was $84.4 million. Merchandise inventories were $1.3 billion, an increase of 22.4% compared to the prior year quarter and 18.9% higher than the second quarter of 2021.
As previously reported, on September 14, 2021, Academy’s largest shareholder (“KKR”) sold its remaining ownership of the Company. As part of this event, Academy purchased 4.5 million shares for approximately $200 million. Additionally, during the quarter, the Company made open market purchases of 1.2 million shares for $50 million. Year-to-date, the Company has repurchased and retired 8.9 million shares of its common stock for approximately $350 million. As of October 31, 2021, the Company had approximately $254 million remaining under its share repurchase program.
2021 Outlook
Michael Mullican, Executive Vice President and Chief Financial Officer said, “The ongoing successful execution of our strategic priorities has allowed us to achieve yet another period of record-setting sales and profitability. In addition, the strength of the entire Academy team was apparent as we were able to grow our inventory position in a challenging environment. As our initiatives continue to mature, we believe the best days at Academy are still to come. In light of these exceptional results and expectations, we are raising our annual guidance.”
The Company is raising its fiscal 2021 guidance based on the strong third quarter performance, dynamic consumer trends and current visibility. The new guidance is as follows:
| % change(at mid-point) | ||||||
| Updated Fiscal 2021(e) Guidance | 2020 | 2019 | vs. 2020 | vs. 2019 | ||
| (in millions, except per share amounts) | Low end | High end | ||||
| Net Sales | $6,675 | $6,740 | $5,689 | $4,830 | 18% | 39% |
| Comparable sales | 17.0% | 18.0% | 16.1% | (0.7)% | ||
| Income before taxes | $814 | $827 | $339 | $123 | 142% | 567% |
| Net income * | $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 shares outstanding | 94,500 | 94,500 | 81,431 | 74,795 | ||
*Prior to October 1, 2020, the Company was treated as a flow through entity for U.S. 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 any potential future share repurchases.
Conference Call Info
Academy will host a conference call today at 11:00 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 13725072. 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 13725072. 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 259 stores across 16 contiguous states. 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 20 private label brands, which go well beyond 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 pricing date”), New Academy Holding Company, LLC, a Delaware limited liability company (“NAHC”) and the prior parent holding company for our operations, and its consolidated subsidiaries; and (2) on and after the IPO pricing date, Academy Sports and Outdoors, Inc., a Delaware corporation (“ASO, Inc.”) and the current parent holding company of our operations, and its consolidated subsidiaries.
On the IPO pricing date, we completed a series of reorganization transactions (the “Reorganization Transactions”) that resulted in NAHC being contributed to ASO, Inc. by its members and becoming a wholly owned subsidiary of ASO, Inc. and one share of common stock of ASO, Inc. issued to then-existing members of NAHC for every 3.15 membership units of NAHC contributed to ASO, Inc. (the “Contribution Ratio”). Unless indicated otherwise, the information in this press release has been adjusted to give retrospective effect to the Contribution Ratio.
Non-GAAP Measures
Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income (Loss), Pro Forma Adjusted Net Income (Loss), Pro Forma Adjusted Earnings Per Share, Adjusted Selling, General and Administrative Expenses 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”). These non-GAAP measures have limitations as analytical tools. For information on these limitations, as well as information on why management believes these non-GAAP measures are useful, please see our Annual Report for fiscal year 2020 filed on April 7, 2021 (the “Annual Report”), as such limitations and information 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.
We compensate for these limitations by primarily relying on our GAAP results in addition to using these non-GAAP measures supplementally.
See “Reconciliations of Non-GAAP to GAAP Financial Measures” below for reconciliations of non-GAAP financial measures used in this press release to their most directly comparable GAAP financial measures.
