As anticipated, Q2 was tough for Academy Sports + Outdoors (ASO, Financial) due to macroeconomic, weather-related, and company-specific headwinds. The retailer missed sales and comp expectations and revised most of its FY25 guidance downward. Reduced spending power from households earning $50,000-$150,000 impacted demand, especially for big-ticket items like trampolines, pools, marine, and fitness products.
- Major weather events, including tornados in Houston and Dallas and Hurricane Beryl in July, impacted the Texas-based company.
- In Georgia, ASO struggled with converting a distribution center to its new warehouse management system, leading to out-of-stock situations and costing the company approximately $32 million in sales during Q2.
- Comps declined by 6.9%, missing expectations and worsening from Q1's -5.7%. A 7.4% drop in transactions due to reduced store traffic was the main factor.
- Footwear saw a 1% year-over-year increase, with strong performance from brands like NIKE (NKE, Financial), New Balance, and ASICS. Team sports categories like baseball, football, and pickleball also showed modest growth, but declines in big-ticket items overshadowed these gains.
- ASO lowered its FY25 EPS guidance to $5.75-$6.50 from $6.05-$7.05, sales outlook to $5.895-$6.075 billion from $6.07-$6.35 billion, and comp forecast to -6% to -3% from -4% to +1%. However, it maintained its gross margin guidance of 34.3-34.7% due to effective inventory management.
- Despite the challenges, ASO is continuing its growth strategy, focusing on store and eCommerce expansion. The company plans to open 15-17 new stores this fiscal year. Its eCommerce business posted its third consecutive quarter of positive growth, with penetration increasing by 30 bps year-over-year to 9.7%. The new loyalty program "My Academy" has shown positive early returns, with daily sign-ups tripling compared to the previous Academy credit card sign-ups.
Expectations were low heading into the Q2 report. Although ASO's results and outlook were soft, investors hope the worst is behind the company as it resolves distribution center issues and leverages its new loyalty program for a sales boost.
