Academy Sports & Outdoors, Inc. — Form 10-Q Summary
Period: The filing covers the 13 weeks ended April 30, 2022, compared with the 13 weeks ended May 1, 2021. Although the request metadata says 2021 Q1, the filing itself is for fiscal 2022 Q1.
Business context and results
Academy operated 260 stores in 16 states and sold through its stores and e-commerce platform. It opened one store during the quarter. E-commerce represented 9.5% of merchandise sales, up from 7.4% a year earlier.
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Net sales | $1.468 billion | $1.580 billion | -7.1% |
| Gross margin | $521.4 million; 35.5% | $563.7 million; 35.7% | Margin down 0.2 percentage points |
| SG&A | $315.9 million; 21.5% of sales | $324.6 million; 20.5% of sales | Expense down 2.7%; rate up 1.0 point |
| Operating income | $205.5 million; 14.0% of sales | $239.1 million; 15.1% of sales | -14.0% |
| Net income | $149.8 million | $177.8 million | -15.7% |
| Diluted EPS | $1.69 | $1.84 | -8.2% |
| Operating cash flow | $97.1 million | $219.2 million | Down $122.1 million |
| Adjusted free cash flow (non-GAAP) | $79.8 million | $202.4 million | Down $122.6 million |
Financial position and liquidity
- Cash and cash equivalents were $472.4 million at April 30, 2022, compared with $593.3 million at May 1, 2021. Inventory was $1.324 billion, up from $1.081 billion a year earlier.
- Total debt principal was $697.0 million, comprising a $297.0 million term loan and $400.0 million of notes. There were no ABL borrowings; available ABL capacity was $982.2 million. The company reported compliance with debt covenants.
- Management said cash and ABL availability should be sufficient to meet requirements for at least the next 12 months. Operating lease payments totaled $1.878 billion in scheduled future obligations; these are separate from debt.
- Capital expenditures were $17.3 million in the quarter. The company reported expected fiscal 2022 capital expenditures of approximately $140 million.
Material changes and management commentary
- Comparable sales fell 7.5%, following 38.9% growth in the prior-year quarter. Management attributed the comparison partly to prior-year U.S. stimulus-supported demand and unusually strong pandemic-related recreation and fitness sales. Lower transactions were partly offset by a higher average ticket.
- Sales declined across all merchandise divisions. E-commerce sales increased 18.8% to approximately $143 million, while total sales decreased.
- Gross margin fell 20 basis points: unfavorable inventory valuation adjustments and higher e-commerce shipping costs were partly offset by improved merchandise margins. SG&A as a percentage of sales rose because lower sales reduced expense leverage.
- Interest expense declined 24.9% to $10.9 million, reflecting lower debt balances and the prior-year term-loan repricing.
- Operating cash flow was lower mainly because of increased inventory and accrued expense outflows, lower net income, and fewer non-cash charges.
Outlook, risks, and unusual items
- No earnings or sales forecast was provided in the supplied filing text. Management expected to open at least eight stores in fiscal 2022 and described new stores as a growth driver.
- Management cited supply-chain disruption, freight and inventory cost inflation, labor and product availability constraints, and longer port delays. It said it was ordering earlier, securing transportation capacity, and using different ports to mitigate disruption.
- Other cited risks include weaker consumer discretionary spending, changing consumer preferences, inventory management, competition, e-commerce and technology execution, COVID-19 effects, and variable-rate debt exposure. Management noted that estimates involving inventory valuation and asset impairment remain challenging.
- The company repurchased 2.27 million shares for $88.5 million in the quarter and paid a $0.075-per-share dividend. After quarter-end, the board authorized a new $600 million repurchase program; combined availability under the new and prior programs was approximately $700.2 million.
- Commitments included $73.9 million for freight, technology, construction, and other contracts, plus $19.5 million of sponsorship and intellectual-property commitments. Management did not expect pending routine litigation to have a material effect; the Sutherland Springs-related lawsuits were dismissed with prejudice in April 2022.
Important facts for investors to verify
- Confirm the reporting period: the filing is Q1 fiscal 2022, not Q1 2021.
- Track whether comparable sales and margins stabilize as the unusually strong prior-year comparison fades, and whether elevated inventory leads to markdowns or valuation adjustments.
- Assess cash conversion and working-capital needs, particularly inventory growth, alongside planned capital spending, dividends, and share repurchases.
- Monitor inflation and supply-chain effects, consumer demand, and the company’s ability to execute its store-opening and e-commerce plans.
- Review debt service, floating-rate exposure, lease obligations, and continued covenant compliance. Non-GAAP measures are supplemental and should be considered alongside GAAP results.