Academy Sports & Outdoors, Inc. — Form 10-Q Summary
Period discrepancy: The request identifies 2021 Q3, but the supplied filing is for the thirteen and thirty-nine weeks ended October 29, 2022, compared with October 30, 2021. This summary reflects the filing provided.
Business context and reporting period
Academy operates sporting goods and outdoor recreation stores and an e-commerce business. At October 29, 2022, it operated 265 stores in 17 states and three distribution centers. The quarter included six more stores than the prior-year quarter; three additional stores opened after quarter-end, bringing 2022 openings to nine at the time of filing.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Year to date 2022 | Year to date 2021 |
|---|---|---|---|---|
| Net sales | $1.494 billion | $1.593 billion | $4.649 billion | $4.965 billion |
| Gross margin | $522.5 million; 35.0% | $560.8 million; 35.2% | $1.640 billion; 35.3% | $1.767 billion; 35.6% |
| Operating income | $179.5 million | $216.1 million | $641.7 million | $709.7 million |
| Net income | $131.7 million | $161.3 million | $470.3 million | $529.6 million |
| Diluted EPS | $1.62 | $1.72 | $5.54 | $5.55 |
| Operating cash flow | Not separately stated here | Not separately stated here | $309.2 million | $515.1 million |
Q3 comparable sales declined 7.2%; e-commerce sales rose 10.5% and were 9.5% of merchandise sales. Year-to-date comparable sales fell 6.9%, while e-commerce sales increased 13.6% to 9.7% of merchandise sales. Q3 diluted EPS declined less than net income, partly alongside a lower weighted-average share count.
For the thirty-nine weeks, investing cash outflow was $79.8 million, primarily capital expenditures, and financing cash outflow was $397.2 million, including $389.4 million of share repurchases and $18.8 million of dividends. Cash declined $167.8 million from $486.0 million at fiscal year-end to $318.2 million.
At October 29, 2022, total debt principal was $695.5 million, comprising a $295.5 million term loan and $400 million of notes; net long-term debt on the balance sheet was $682.8 million. The company had no ABL borrowings and reported $982.6 million of available ABL capacity, after letters of credit. Current assets were $1.876 billion and current liabilities $1.191 billion. Merchandise inventory was $1.495 billion, versus $1.326 billion a year earlier.
Changes versus the prior comparable periods
- Q3 sales fell 6.2% and net income fell 18.3%; year-to-date sales fell 6.4% and net income fell 11.2%.
- Gross margin contracted 20 basis points in Q3 and 30 basis points year to date. Higher shrinkage, e-commerce shipping, freight and inventory-related costs weighed on margins; stronger merchandise margins and higher average unit retails partly offset these pressures.
- Q3 SG&A dollars decreased slightly, but SG&A rose to 23.0% of sales from 21.6%, primarily due to fixed-cost deleverage. Year-to-date SG&A as a share of sales increased to 21.5% from 21.3%.
- Year-to-date operating cash flow was down $205.9 million, reflecting lower net income, working-capital movements and fewer non-cash charges. Capital expenditures increased by $20.9 million year over year.
- Q3 sales weakness was concentrated in outdoors, particularly shooting sports, and in recreation and fitness categories that had benefited from pandemic-era demand. Footwear increased in the quarter; apparel was broadly flat.
Outlook, commentary, and risks
The filing does not provide clear numerical full-year sales or earnings guidance. Management expected fiscal 2022 capital expenditures of approximately $130 million, with about 40% directed to corporate, e-commerce and IT programs, 40% to new stores and relocations, and 20% to existing stores and distribution centers. Management also described plans for significant store expansion through 2026 and continued investment in omnichannel capabilities.
Management said cash and cash equivalents and ABL availability should fund requirements for at least the next 12 months. It cited consumer spending, changing preferences, inventory management, inflation, freight and supply-chain disruption, labor availability, competition, COVID-19 effects, interest-rate exposure and debt obligations among the risks. The term loan’s weighted-average interest rate was 6.88%; management noted recent rate increases had raised quarterly interest expense.
Other items: the company repurchased and retired 10.0 million shares for $389.4 million year to date and had $399.4 million remaining under its $600 million 2022 repurchase authorization. It declared a subsequent quarterly dividend of $0.075 per share. Contractual commitments included $92.0 million for freight, technology, construction and other items, plus $14.9 million of sponsorship and intellectual-property commitments. Management reported no material expected impact from ordinary-course litigation and said disclosure controls were effective.
Important facts for investors to verify
- Confirm the intended reporting year: the supplied filing covers Q3 2022, not Q3 2021.
- Track comparable sales, transaction trends and whether footwear and other categories can offset weakness in outdoors and recreation.
- Assess inventory growth, markdown risk, shrinkage, freight costs and the sustainability of gross margins.
- Reconcile cash generation with substantial buybacks, dividends, planned capital spending and seasonal working-capital needs.
- Review variable-rate debt exposure, ABL availability, debt covenants and the effect of future interest-rate changes.
- Distinguish management’s non-GAAP adjusted measures from GAAP results; the filing notes these measures exclude items and do not represent discretionary cash available.