Academy Sports & Outdoors, Inc. — Form 10-K Summary
Period clarification: The request identifies “2020 Q4,” but the supplied filing is the annual report for the 52-week fiscal year ended January 29, 2022 (“fiscal 2021”), with comparison to the year ended January 30, 2021. It is not a 2020 quarterly filing.
Business context
Academy is a U.S. sporting goods and outdoor recreation retailer operating 259 stores in 16 states, primarily in the South, alongside its e-commerce business. Fiscal 2021 sales were led by outdoors (32%), apparel (27%), sports and recreation (22%), and footwear (19%).
Financial performance
| Metric | Fiscal 2021 | Fiscal 2020 |
|---|---|---|
| Net sales | $6.773 billion | $5.689 billion |
| Comparable sales growth | 18.9% | 16.1% |
| Gross margin | $2.351 billion; 34.7% | $1.734 billion; 30.5% |
| Operating income | $907.9 million; 13.4% of sales | $420.4 million; 7.4% of sales |
| Net income | $671.4 million; 9.9% of sales | $308.8 million; 5.4% of sales |
| Diluted earnings per share | $7.12 | $3.79 |
| Net cash from operating activities | $673.3 million | $1.012 billion |
Gross margin expanded 420 basis points, primarily from improved merchandise margins, higher average unit retails, less promotional activity, and inventory overhead leverage; higher import freight costs partially offset the gains. SG&A rose 9.9% in dollars but declined to 21.3% of sales from 23.1%. Adjusted EBITDA, a non-GAAP measure, was $1.074 billion, versus $607.0 million. E-commerce sales increased 6.2% to approximately $626 million, but fell to 9.3% of merchandise sales from 10.4% as customers shifted back to stores.
Liquidity, debt and capital allocation
- Cash and cash equivalents were $486.0 million at year-end. The company had no ABL borrowings and reported $874.8 million of available ABL capacity, subject to borrowing-base conditions.
- Gross debt was $697.8 million: $297.8 million under the term loan and $400.0 million of 6.00% senior secured notes. The balance-sheet carrying amount of long-term debt, net, was $683.6 million. The company reported compliance with debt covenants.
- Operating cash flow declined $338.3 million year over year, principally due to less favorable changes in accounts payable and inventory, including the prior-year extension of vendor payment terms and inventory reduction.
- Cash used in investing activities was $76.0 million, including $75.8 million of capital expenditures. The company repurchased 10.6 million shares for $411.4 million during fiscal 2021; $188.6 million remained under its repurchase authorization at year-end.
- Operating lease payments totaled $1.825 billion undiscounted; the present value of lease liabilities was $1.161 billion. The board subsequently declared a quarterly dividend of $0.075 per share, payable April 14, 2022.
Outlook, commentary and risks
Management expected to open at least eight stores in 2022 and forecast approximately $140 million in fiscal 2022 capital expenditures: about 50% for corporate, e-commerce and IT programs, 30% for new stores and relocations, and 20% for existing stores and distribution centers. The filing provides no specific fiscal 2022 sales or earnings guidance. Priorities include omnichannel improvements, customer experience, store growth, supply-chain efficiency, talent, and IT capabilities.
Management cited continued supply-chain disruption, labor shortages, port delays, higher freight and inventory costs, and inflationary pressures. It expects supply-chain challenges to continue at least in the near term. COVID-19-related demand shifts toward outdoor and isolated recreation supported results, but management cautioned that the duration of this demand is uncertain. Other significant risks include consumer spending weakness, intense competition, inventory forecasting and markdowns, dependence on foreign sourcing (including China), cybersecurity and IT disruption, regional concentration, labor availability, and regulation and litigation related to firearms. Firearms represented approximately 6% of fiscal 2021 net sales.
Unusual and notable items include the October 2020 IPO and conversion to a taxable corporation, which affects year-over-year tax comparability; a May 2021 term-loan amendment and $99 million paydown; $15.4 million of cash payroll taxes related to equity-award vesting; and share repurchases. The Texas Supreme Court ruled in June 2021 that certain Sutherland Springs shooting-related claims were statutorily barred; the company expected similar remaining claims to be dismissed, but their ultimate outcome was not determined. The auditor issued unqualified opinions on the financial statements and internal controls.
Key investor verification points
- Confirm the correct reporting period: this filing covers fiscal 2021, not 2020 Q4.
- Assess how sustainable the unusually strong comparable-sales growth and margin improvement are, including whether pandemic-related category demand persists.
- Track cash conversion and working-capital movements, particularly inventory, accounts payable, and freight costs.
- Review debt service, ABL availability conditions, lease commitments, and the balance between store/technology investment, dividends, and share repurchases.
- Monitor execution of the 2022 store-opening and capital-expenditure plans, alongside labor and supply-chain constraints.
- Review the full risk disclosures and legal proceedings for developments in firearms regulation, product and liability claims, cybersecurity, and foreign sourcing.